Legal Proceedings
−Removed: From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business.
−Removed: On October 14, 2021, the Company was named as a defendant in a putative class action complaint filed in the District Court for the District of Colorado on behalf of individuals who purchased or acquired shares of the Company’s common stock during a specified period.
−Removed: Through the complaint, plaintiffs are asserting claims against the Company, certain of the Company’s officers and the underwriters in the Company’s IPO, alleging violations of Sections 11 and 15 of the Securities Act of 1933 for making allegedly inaccurate and misleading statements and omissions in connection with the Company’s IPO and seeking compensatory damages, among other things.
−Removed: In July 2021, the Company received a civil investigative demand from the Attorney General for the State of Colorado under the Colorado Medicaid False Claims Act.
−Removed: The demand requests information and documents regarding Medicaid billing, patient services and referrals in connection with the Company’s PACE program in Colorado.
−Removed: We continue to fully cooperate with the Attorney General and produce the requested information and documentation.
−Removed: We are currently unable to predict the outcome of this investigation.
−Removed: In February 2022, the Company received a civil investigative demand from the Department of Justice (“DOJ”) under the Federal False Claims Act on similar subject matter.
−Removed: The demand requests information and documents regarding audits, billing, orders tracking, and quality and timeliness of patient services in connection with the Company’s PACE programs in the states where the Company operates (California, Colorado, New Mexico, Pennsylvania, and Virginia).
−Removed: The Company is fully cooperating with the DOJ to produce the requested information and documentation.
−Removed: We are currently unable to predict the outcome of this investigation.
−Removed: Although the results of legal proceedings and claims are inherently unpredictable and uncertain, we do not believe that any of the legal proceedings with which we are currently involved would , if determined adversely to us, either individually or in the aggregate, have a material adverse effect on our business, operating results, cash flows or financial condition.
−Removed: Regardless of the outcome, litigation has the potential to have an adverse impact on us due to any related defense and settlement costs, diversion of management resources, and other factors.
+Added: For information regarding our material pending legal proceedings, refer to Note 9 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Item 1.A Risk Factors
−Removed: Other than the updates to the risk factor set forth below, there have been no material changes to the risk factors disclosed in the “Risk factors” section of our 2021 10-K .
+Added: Other than the updates to the risk factors set forth below, there have been no material changes to the risk factors disclosed in the “Risk factors” section of our 2021 10-K .
Risks Related to our Business
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We are currently unable to predict the outcome of this proceeding.
−Removed: See Item 1, Legal Proceedings.
+Added: In addition, on April 20, 2022, the Board of Directors of the Company received a books and records demand pursuant to Section 220 of the Delaware General Corporation Law, from a purported stockholder of the Company, in connection with the stockholder’s investigation of, among other matters, potential breaches of fiduciary duty, mismanagement, self-dealing, corporate waste or other violations of law by the Company’s Board with respect to these matters.
+Added: We are currently unable to predict the outcome of this matter.
Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict.
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Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties, fines and sanctions.
−Removed: In the event of compliance issues, sanctions could include civil monetary penalties, corrective action plans, monitoring, contract termination, and/or CMS and/or Medicaid agencies suspending or restricting enrollment with us (as is the case currently with respect to our Sacramento, California center, and our centers in the State of
−Removed: Colorado), which could negatively impact our geographical expansion and revenue growth.
+Added: In the event of compliance issues, sanctions could include civil monetary penalties, corrective action plans, monitoring, contract termination, and/or CMS and/or Medicaid agencies suspending or restricting enrollment with us (as is the case currently with respect to our Sacramento, California center, and our centers in the State of Colorado), which could negatively impact our geographical expansion and revenue growth.
We are also subject to periodic audits, which have and may continue to increase our regulatory compliance costs and may require us to change our business practices, which could negatively impact our revenue growth.
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We are also subject to lawsuits under the FCA and comparable state laws for submitting allegedly fraudulent, inadequately supported or otherwise inappropriate bills for services to the Medicare and Medicaid programs.
−Removed: These lawsuits, which may be initiated by government authorities as well as private party relators, can involve significant monetary damages, fines, attorney fees and the award of bounties to private plaintiffs who successfully bring these suits, as well as to the government programs.
+Added: lawsuits, which may be initiated by government authorities as well as private party relators, can involve significant monetary damages, fines, attorney fees and the award of bounties to private plaintiffs who successfully bring these suits, as well as to the government programs.
In recent years, government oversight and law enforcement have become increasingly active and aggressive in investigating and taking legal action against potential fraud and abuse.
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In addition, our employment agreements with our executive officers and other key personnel do not require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time.
−Removed: The loss, whether as a result of voluntary termination or illness, of one or more of the members of our senior management team, or other key employees, could harm our business.
+Added: The loss, whether as a result of voluntary termination or illness, of one or more of the members of our senior management
+Added: team, or other key employees, could harm our business.
Changes in our executive management team may also cause disruptions in, and harm to, our business.
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In conjunction with providing validation results, the agencies referred our case to the Compliance and Enforcement Division of CMS for review and possible further action.
−Removed: Effective December 23, 2021, CMS suspended new enrollments at the Company’s Colorado centers, based on deficiencies detected in the joint audit related to participant quality of care.
+Added: Effective December 23, 2021, CMS suspended new enrollments at the Company’s Colorado centers, based on deficiencies detected in the joint audit related to participant provision of services, which can be categorized as care delivery and management, care coordination and documentation of care.
The suspension will remain in effect until CMS determines that we have remediated the deficiencies to their satisfaction.
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On January 17, 2022 and February 5, 2022, we submitted a CAP to each of CDPHE and CMS, respectively.
−Removed: A separate CAP for HCPF is due on February 22, 2022.
−Removed: We cannot guarantee that these agencies will accept our CAPs, that if accepted, we will be able to implement the CAPs, or that we will be able to remedy the deficiencies specified by each of the agencies.
+Added: A separate CAP for HCPF was submitted on February 22, 2022.
+Added: CDPHE and CMS have accepted the CAPs, and as a result, we are currently monitoring the implementation of these CAPs.
+Added: We cannot guarantee that HCPF will accept the CAP we submitted, that we will be able to implement the CAPs, or that we will be able to remedy the deficiencies specified by each of the agencies.
In addition, although these agencies coordinate many of the actions taken with respect to these audits, they each have separate mandates and are not obligated to act together or reach the same decisions.
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On May 10, 2021, CMS began a routine, scheduled audit of our Sacramento, California center.
−Removed: On September 17, 2021, we were notified that CMS had determined to suspend new enrollments at our Sacramento center based on deficiencies detected in the audit related to participant quality of care, and on September 30, 2021, we were further notified that the Department of Health Care Services (“DHCS”) of the State of California had reached the same determination.
+Added: On September 17, 2021, we were notified that CMS had determined to suspend new enrollments at our Sacramento center based on deficiencies detected in the audit related to participant provision of services, which can be categorized as care delivery and management, care coordination and documentation of care, and on September 30, 2021, we were further notified that the Department of Health Care Services (“DHCS”) of the State of California had reached the same determination.
The suspension will remain in effect until CMS and DHCS determine that we have remediated the deficiencies to their satisfaction.
−Removed: We submitted a CAP on October 15, 2021, which has been accepted by both CMS
+Added: We submitted a CAP on October 15, 2021, which has been accepted by both CMS and DHCS.
As a result, both agencies are currently monitoring the implementation of the CAP.
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As a result of the suspension, we will be unable to open one of the de novo centers we had identified in California within our planned timeline.
−Removed: In addition, on February 9, 2022, we received notice from the Cabinet for Health and Family Services of the State of Kentucky informing us that they no longer intend to enter into an agreement with us to be a PACE provider in the State of Kentucky.
−Removed: We intend to work closely with the Cabinet to attempt to address any issues that may have prompted the notification.
−Removed: As previously disclosed, in November 2021, CMS began a routine audit of our Albuquerque, New Mexico center.
−Removed: On November 23, 2021, we received preliminary results identifying certain deficiencies related to participant quality of care.
+Added: In March 2022, CMS and DHCS began separate audits of our San Bernadino, California center.
+Added: Both agencies have finalized their field work and recently issued preliminary results identifying certain deficiencies related to participant provision of services, which can be categorized as care delivery and management, care coordination and
+Added: documentation of care.
We are currently in the audit validation process, which entails provision of various participant records.
−Removed: Following such process, we expect to receive final results from the audit.
+Added: Following such process, we expect to receive results from the audit.
At this time, we cannot guarantee the outcome of this audit, including whether or not sanctions will be imposed.
+Added: As previously disclosed, in November 2021, CMS began an audit of our Albuquerque, New Mexico center.
+Added: On November 23, 2021, we received preliminary results identifying certain deficiencies related to participant provision of services, which can be categorized as care delivery and management, care coordination and documentation of care.
+Added: Validation results were received in March 2022 and in conjunction with providing validation results, the agency referred our case to the Compliance and Enforcement Division of CMS for review and possible further action.
+Added: At this time, we cannot guarantee the final outcome of this audit.
If CMS were to suspend enrollments at, or otherwise curtail, our center or impose other sanctions, such actions could have a material adverse effect on our business operations, financial results and reputation.
−Removed: At this time, we cannot guarantee the outcome of any of the audits and processes described above.
+Added: On February 9, 2022, we received notice from the Cabinet for Health and Family Services of the State of Kentucky informing us that they no longer intend to enter into an agreement with us to be a PACE provider in the State of Kentucky.
+Added: On February 14, 2022, CMS denied our initial application to develop the previously announced PACE center in Terre Haute, Indiana, based on deficiencies detected during CMS’ 2021 audits of our Sacramento and Colorado PACE programs.
+Added: We have committed to CMS and the Agency for Healthcare Administration in the State of Florida, that we will proactively pause remaining steps with respect to planned de novo centers in the State of Florida, to focus on remediating deficiencies raised in the audit processes.
+Added: At this time, we cannot guarantee the final outcome of any of the audits and processes described above.
If we are unable to effectively remediate the deficiencies raised by the audits, implement the CAPs we have submitted, will submit or may be required to submit, or otherwise satisfy the agencies’ concerns, we could be subject to additional sanctions and our business plan, including our growth strategy (including with respect to enrollment growth and de novo openings), would continue to be adversely impacted.
+Added: Our management has been working collaboratively with the various agencies, including CMS.
In general, inspections, reviews, audits, requests for information or investigations with adverse findings, and in particular the audits described above, have resulted in and may further result in:
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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.