What changed in this filing

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Item 1A. Risk Factors

2025-03-03 compared with 2024-02-29 · 141 added, 22 removed, 325 unchanged (33% of the section changed)

You should consider and read carefully all of the risks and uncertainties described below, as well as the other information included in this Annual Report, including our consolidated financial statements and related notes.

The risks described below have been organized under headings that are provided for convenience and intended to organize the risks and uncertainties into related categories to improve readability for investors;

no inference should be drawn, however, that the placement of a risk factor under a particular category means that it is not applicable to another category of risks or that it may be more or less material than another risk factor.

Regardless, they are also not the only risks and uncertainties facing us.

The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition and results of operations.

This Annual Report also contains forward-looking statements and estimates that involve risks and uncertainties, as discussed above under the caption “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in any forward‑looking statements as a result of many factors, including the risk factors and uncertainties described below.

General Economic and Industry Risks

Adverse changes in general domestic and worldwide economic conditions could adversely affect our operating results, financial condition, and liquidity.

We are subject to risk arising from adverse changes in general domestic and global economic conditions, including recession or economic slowdown and disruption of credit markets.

Our business has in the past been, and may continue to be, affected by a number of factors that are beyond our control, such as general macroeconomic conditions, conditions in the financial services markets, geopolitical conditions and other general political and economic developments, and can continue to be affected by such factors in the future.

Concerns about the systemic impact of potential long-term and wide-spread recession, inflation, energy costs, geopolitical issues, the availability and cost of credit have contributed to increased market volatility and diminished expectations for near-term growth in the United States and many global economies.

Additionally, general political uncertainty, including any actions from a new administration in the United States could impact the healthcare industries in the United States.

Continued turbulence in domestic and international markets and economies may adversely affect our liquidity and financial condition.

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These and other economic events could materially adversely affect our business, results of operations, financial condition and stock price.

Increasing interest rates or disruption of credit markets could adversely affect our financial condition and liquidity.

A worsening of the economic and employment conditions in the geographies in which we operate could materially affect our business and future results of operations.

During periods of high unemployment, governmental entities often experience budget deficits as a result of increased costs and lower than expected tax collections.

These budget deficits at the federal, state and local levels have decreased, and may continue to decrease, spending for health and human service programs, including Medicare and Medicaid, which are significant payor sources for our facilities.

In periods of high unemployment, we have faced and could continue to face the risk of potential declines in the population covered under private insurance, patient decisions to postpone or decide against receiving services, potential increases in the uninsured and underinsured populations we serve and further difficulties in collecting patient co-payment and deductible receivables.

Increases in inflation and rising interest rates or disruption of credit markets could adversely affect our financial condition and liquidity.

Inflation in the U.S.

has recently accelerated and is currently expected to continue at an elevated level in the near-term.

Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability.

In response to recent macroeconomic concerns, the United States and other western countries have implemented monetary policies focused on suppressing inflation, including increasing interest rates.

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As minimum wage rates increase, related laws and regulations change, and/or inflationary or other pressures increase wage rates, we and our partners may need to increase not only the wage rates of minimum wage employees, but also the wages paid to other hourly or salaried employees.

If other states adopt similar minimum wage increases, the effect on our cost of operations would be compounded.

If other states

adopt similar minimum wage increases, the effect on our cost of operations would be compounded.

In addition, we expect that inflationary pressures will continue to impact our salaries, wages, benefits and other costs.

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• volatility in the global capital markets may result in a decrease in the price of our common stock, or an increase in our cost of capital.

Business interruptions due to natural disasters or other external events beyond our control can adversely affect our business, financial condition or results of operations.

Business interruptions due to natural disasters to include but not limited to earthquakes, floods, fires hurricanes and severe winter storms or other external events beyond our control can adversely affect our business, financial condition or results of operations.

Our operations can be impacted by external events beyond our control, such as the effects of earthquakes, fires, floods, severe weather, public health issues, power failures, telecommunication loss, and other natural and man-made events, some of which may be intensified by the effects of climate change and changing weather patterns.

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These or other similar events could cause disruption or interruption to our operations and significantly impact our employees.

Additionally, long-term adverse weather conditions, whether caused by global climate change or otherwise, could cause an outmigration of people from the communities where our facilities are located.

If any of the circumstances described above, or other similar events, occur, our business, financial condition or results of operations could be adversely affected.

Any disruption to our services may result in decreases in revenues or increased operating and capital expenses.

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From time to time those programs implement changes designed to contain healthcare costs, some of which have resulted in decreased reimbursement rates for diagnostic imaging services that impact our business.

On November 16, 2023, Centers for Medicare and Medicaid Services (“CMS”) released the 2023 Medicare Physician Fee Schedule final rule, which contained significant payment reductions for radiology services, effective January 1, 2024, largely as a result of changes to relative value units, redistributive effects of the CMS proposed clinical labor pricing update and statutorily mandated budget neutrality rules.

The January 18, 2024 continuing resolution passed by Congress and signed into law by President Biden did not contain provisions to stop or mitigate these reimbursement cuts.

Furthermore, absent further and more permanent intervention from Congress, CMS could propose and impose similar or more significant reimbursement cuts in the months and years ahead .

On November 1, 2024, CMS released the calendar year 2025 Medicare Physician Fee Schedule final rule, which governs Medicare payment for Radnet's services in CY 2025.

Medicare payment and coverage policies in the final rule could result in reimbursement reductions or reduced volume of diagnostic imaging services at our imaging centers.

One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services.

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The expansion of health maintenance organizations, preferred provider organizations and other managed care organizations within the geographic areas covered by our network could have a negative impact on the utilization and pricing of our services, because these organizations will exert greater control over patients’ access to diagnostic imaging services, the selections of the provider of such services and reimbursement rates for those services.

Relatedly, reimbursement rate cuts may be pursued as a cost-saving measure by third party payors resulting from the implementation of the federal No Surprises Act (H.R.

Relatedly, reimbursement rate cuts may be pursued as a cost-saving measure by third party payors resulting from the implementation of

the federal No Surprises Act (H.R.

133) and similar insurer-provider payment dispute laws, which also may negatively impact our revenue.

Certain of our services may require patients to pay out-of-pocket fees.

Our ability to collect these out-of-pocket fees is subject to various coverage and reimbursement policies of third-party payors that may change over time and may be open to a variety of interpretations and applications.

Changes in coverage policies or errors in our billing and collections procedures could adversely affect our revenue and business.

Any reduction in the rate that we can charge for our imaging services under these programs will reduce our net revenues and our operating margins per procedure under those reimbursement programs.

Unless we can secure additional procedure volumes, increase utilization of our equipment, or change the overall mix of service procedures that we provide, a decline in reimbursement rates will reduce our net revenues and results of operations.

If we fail to manage the complex and lengthy reimbursement process, our revenue, financial condition and results of operations could suffer.

Because our business depends upon reimbursement from Medicare, Medicaid and third-party payors for a significant majority of its revenues, our revenue, financial condition and results of operations may be affected by the reimbursement process, which in the healthcare industry is complex and can involve lengthy delays between the time that services are rendered and the time that the reimbursement amounts are settled.

Depending on the payor, we may be required to obtain certain payor-specific documentation from physicians and other healthcare providers before submitting claims for reimbursement.

Certain payors have filing deadlines and will not pay claims submitted after such deadlines.

We cannot ensure that we will be able to effectively manage the reimbursement process and collect payments for its equipment and services promptly.

We experience competition from other diagnostic imaging companies and hospitals, and this competition could adversely affect our revenue and business.

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Business Risks

Our results of operations may fluctuate significantly from period to period and can be difficult to predict.

Our results of operations have experienced fluctuations from period to period, which we expect may continue in the future.

These fluctuations can occur because of a variety of factors, including, among others, the prices we charge for our services, customer or payor mix, the rate and timing of our billings and collections, our ability to obtain reimbursement for our services from third-party payors, the timing and amount of our commitments and other payments, as well as the other risk factors discussed in this report.

The fluctuations in our operating results may render period-to-period comparisons less meaningful, and investors should not rely on the results of any one period as an indicator of future performance.

These fluctuations in our

operating results could cause our performance in any particular period to fall below the expectations of securities analysts or investors or guidance we have provided to the public, which could negatively affect the price of our common stock.

If our contracted radiology practices terminate their agreements with us, our business could substantially diminish.

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Further, commercial third-party payors have implemented managed care programs that could limit the ability of physicians to refer patients to us.

For example, health maintenance organizations sometimes contract directly with providers

and require their enrollees to obtain these services exclusively from those contracted providers.

For example, health maintenance organizations sometimes contract directly with providers and require their enrollees to obtain these services exclusively from those contracted providers.

Some insurance companies and self-insured employers also limit these services to contracted providers.

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Extortion payments may alleviate the negative impact of a ransomware attack, but there is the risk that the threat actor may not destroy the stolen information and we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Any such interruption in access, improper access, disclosure, modification, or other loss of information could result in legal claims or proceedings, liability or penalties under laws and regulations that protect the privacy of personal information, such as HIPAA, European data privacy regulations, such as the General Data Protection Regulation, or GDPR, or state privacy regulations, such as the California Consumer Privacy Act.

Recent cyberattacks in the healthcare sector, such as the February 2024 incident affecting Change Healthcare, have underscored critical cybersecurity risks which extend beyond internal systems to encompass third-party service providers and interconnected supply chains.

Attacks targeting these areas can lead to significant disruptions in critical healthcare functions, exposure of sensitive patient data, and substantial financial losses.

The impact of such breaches can be severe and are similar to those we face with ransomware.

Our organization prioritizes comprehensive risk management strategies that include robust vetting and monitoring of third-party vendors, regular security assessments of supply chain partners, and implementation of strong authentication and access control measures throughout the entire ecosystem.

However, while management is not aware of a cybersecurity incident through third-party service providers that has had a material effect on our operations, there can be no assurances that a cybersecurity incident through third-party service providers that could have a material impact on us will not occur in the future.

Any such interruption in access, improper access, disclosure, modification, or other loss of information could result in legal claims or proceedings, liability or penalties under laws and regulations that protect the privacy of personal information, such as HIPAA, European data privacy regulations, such as the General Data Protection Regulation, or GDPR, US state privacy regulations, such as the California Consumer Privacy Act, or newly emerging US state health information privacy laws, such as those in Washington, Oregon, and Texas.

We may be required to comply with state breach notification laws or become subject to mandatory corrective action.

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While we maintain cyber liability insurance, our insurance may not be sufficient to protect against all losses we may incur if we suffer significant or multiple attacks.

Additionally, if and as our business grows, we will need to continually improve and expand the scope of our technology systems in order to maintain their adequacy for the scale of our operations.

Any failure to make such improvements or any significant delay in the planned implementation of new or enhanced systems could render our systems obsolete or inadequate, in which case our service to our customers and our other business activities could suffer, and we could be more vulnerable to electronic breaches from outside sources.

Our success depends in part on our key personnel and loss of key executives could adversely affect our operations.

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Integrating operations requires significant efforts and expense on our part.

management may have its attention diverted while trying to integrate an acquisition.

Our management may have its attention diverted while trying to integrate an acquisition.

Personnel may leave or be terminated because of an acquisition.

If these factors limit our ability to integrate the operations of an acquisition successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies as a result of the acquisition, may not be met.

We may not generate the expected benefits from our investment in AI technologies or other new lines of business.

Acquisitions are also accompanied by the risk that obligations and liabilities of an acquired business may not be adequately reflected in the historical financial statements of that business and the risk that historical financial statements may be based on assumptions, which are incorrect or inconsistent with our assumptions or approach to accounting policies.

Further, integration of an acquired business or technology could involve significant difficulties and could require management and capital resources that otherwise would be available for ongoing development of our existing business or pursuit of other opportunities.

We may also acquire contingent liabilities in connection with the acquisitions of a business, which may be material, and any estimates we might make regarding any acquired contingent liabilities and the likelihood that these liabilities will materialize could differ materially from the liabilities actually incurred.

These circumstances could materially harm our business, results of operations, and prospects.

We may not generate the expected benefits from our investment in AI technologies or other new lines of business and the use of AI and machine learning tools in our operations and the services of our third-parties may introduce risks that could adversely affect our business, financial condition, and reputation.

We believe that technology advancements including AI will significantly impact diagnostic imaging services in the future.

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• our ability to effectively integrate the operations of the acquired companies, including retaining key personnel;

• the timeline and related expenses associated with applying for regulatory approvals necessary for commercialization;

• the timeline and related expenses associated with applying for regulatory authorizations necessary for commercialization;

• whether any of our existing or future AI products will receive European CE or U.S.

FDA 510(k) clearance or other clearances and or regulatory approvals necessary for commercialization;

FDA 510(k) clearance or other clearances and or regulatory authorizations necessary for commercialization;

• whether our AI solutions will prove effective for improving health care quality, patient services or business procedures;

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The failure to successfully manage these risks in the development and implementation of new lines of business could have a material, adverse effect on our business, financial condition, and results of operations.

Additionally, we and our third parties leverage AI and machine learning tools to increase productivity and innovation.

We also face potential risks from the use of AI and machine learning tools.

Our, or our customers’ sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with employees’ or vendors’ use of generative AI technologies.

In addition, we may use AI outputs to inform certain decisions, and AI models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct.

Due to the potential flaws in the use of AI, we could make incorrect decisions, including decisions that could bias certain individuals or classes of individuals and adversely impact their rights.

The rapid development of AI tools could render obsolete certain technologies or tools we currently use, or otherwise provide competitors with a technological edge.

New or evolving legislation or regulations might impose restrictions on how AI and machine learning tools can be used, requiring us to adapt our tools or face various penalties for non-compliance, including potential disgorgement of data and associated capabilities.

As a result, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liabilities.

The AI tools may also be subject to additional, and as yet unidentified, security threats.

Healthcare and Regulatory Risks

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We cannot assure you, however, that we will be able to adapt our operations to address new regulations or that new regulations will not adversely affect our business.

In particular, the new administration in 2025 is expected to make significant changes to the operations of the Department of Health and Human Services, and other regulatory agencies such as FDA and CMS, each of which regulates certain aspects of our business.

It is not clear what changes will be implemented by such agencies in terms of legal or regulatory requirements, or policies, or whether we will be able to comply with such changes in terms of legal or regulatory requirements, or policies.

Certain states have enacted statutes or adopted regulations affecting risk assumption in the healthcare industry, including statutes and regulations that subject any physician or physician network engaged in risk-based managed care contracting to comply with applicable insurance laws.

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Implementing additional regulations or compliance requirements could result in substantial costs to us and the contracted radiology practices and limit our ability to enter into capitation or other risk-sharing managed care arrangements.

If we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S.

healthcare reform, our business could be harmed.

Due to the importance of the healthcare industry in the lives of all Americans, federal, state, and local legislative bodies frequently pass legislation and administrative agencies promulgate regulations relating to healthcare reform or that affect the healthcare industry.

As has been the trend in recent years, it is reasonable to assume that there will continue to be increased government oversight and regulation of the healthcare industry in the future.

We cannot assure our stockholders as to the ultimate content, timing or effect of any new healthcare legislation or regulations, nor is it possible at this time to estimate the impact of potential new legislation or regulations on our business.

Since a portion of our revenue is derived from government payors, we are subject to regulatory changes.

Federal and state legislators routinely introduce and consider proposed legislation that would impact Medicare, Medicaid, and PACE funding and operations, and state and federal agencies also consider and implement regulations and guidance that impact our business.

Similarly, changes in private payor reimbursement policies could have a material adverse effect on our business, financial condition and result of operations.

We cannot predict with certainty the impact that any particular federal and state

healthcare legislation or regulation will have on us, but such changes could impose new and/or more stringent regulatory requirements on our activities or result in reduced payment rates, any of which could adversely affect our business, financial condition, and results of operations.

While we believe that we have structured our agreements and operations in material compliance with applicable healthcare laws and regulations, there can be no assurance that regulators will agree with our approach or that we will be able to successfully address changes in the current legislative and regulatory environment.

Moreover, some of the healthcare laws and regulations applicable to us are subject to limited or evolving interpretations, and a review of our business or operations by a court, law enforcement or a regulatory authority might result in a determination that could have a material adverse effect on us.

Furthermore, the healthcare laws and regulations applicable to us may be amended or interpreted in a manner that could have a material adverse effect on our business, prospects, results of operations and financial condition.

We may be impacted by eligibility changes to government and private insurance programs.

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Any action brought against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

There may be changes in FDA’s regulatory requirements and policies, and we may not be able to comply with them.

FDA’s policies regarding regulation of AI-ML-enabled software products are constantly evolving and developing.

FDA typically communicates with the industry and the public through occasions such as presentations to the industry, or through FDA’s guidance documents.

At times, such policies may involve significant changes, and we may not be able to comply with all of such policies, and in particular, policies relating to the regulation of AI-ML-enabled software products.

Non-compliance may result in significant enforcement actions, including but not limited to recalls, Form 483s, warning letters, untitled letters, it-has-come-to-our-attention letters, detention or seizure of adulterated or misbranded products, or other forms of enforcement.

We may be forced to remove our products from the market entirely.

Any adverse regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling our products and limit our ability to obtain future pre-market authorization, and could result in a substantial modification to our business practices and operations.

State and federal anti-kickback and anti-self-referral laws may adversely affect income.

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Although we believe our operations do not violate the Stark Law, our activities may be challenged.

challenge is successful, it could have an adverse effect on our operations.

If a challenge is successful, it could have an adverse effect on our operations.

In addition, legislation may be enacted in the future that further addresses Medicare and Medicaid fraud and abuse or imposes additional regulatory burdens on us.

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Our MRI, CT, nuclear medicine, ultrasound and mammography centers are currently accredited by the American College of Radiology.

We may not be able to receive the required regulatory approvals or accreditation for any future acquisitions, expansions or replacements, and the failure to obtain these approvals could limit the opportunity to expand our services.

We may not be able to receive the required regulatory authorizations or accreditation for any future acquisitions, expansions or replacements, and the failure to obtain these authorizations could limit the opportunity to expand our services.

Our payors required that the physicians providing imaging services are credentialed, before the payor will commence payment.

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Our centers are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensure and certification.

If any facility loses its certification under the Medicare program, then the facility will be ineligible to receive reimbursement from the Medicare and Medicaid programs.

If any facility loses its certification under the Medicare

program, then the facility will be ineligible to receive reimbursement from the Medicare and Medicaid programs.

For the year ended December 31, 2024, approximately 24% and 3% of our net service fee revenue came from Medicare and various state Medicaid programs, respectively.

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Any violation would subject us to potential damages, injunction and/or civil and criminal penalties or require us to restructure our arrangements in a way that would affect the control or quality of our services and/or change the amounts we receive under our management agreements.

Our software products could be regulated as medical devices by regulatory agencies, and we may be subject to such agencies’ regulatory or enforcement activities .

Certain of the products that we develop are or are likely to be regulated by FDA or other regulatory agencies as medical devices.

Regulatory bodies in the United States and abroad, such as the FDA, impose significant legal and regulatory requirements on our operations.

Such agencies regulate and oversee our design and manufacturing processes, labeling, record-keeping, and mandatory reporting of adverse events and other information to identify potential issues with marketed products.

Our facilities are or may become subject to periodic inspections to ensure adherence to applicable quality system regulations, which dictate the methods, facilities, and controls used in the design, manufacture, and servicing of finished medical devices for human use.

Furthermore, FDA and other regulatory agencies, both domestic and international, oversee the promotion and advertising of our products.

If FDA or other regulatory agencies were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical products are ineffective or pose an unreasonable health risk, such agencies could order a recall, repair, replacement, or refund of such products, refuse to grant pending pre-market authorization applications, and/or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health, and in certain rare circumstances, ban such products.

Such non-compliance could also result in inspectional observations on the U.S.

FDA’s Form 483, warning letters, untitled letters, it-has-come-to-our-attention letters, detention or seizure of adulterated or misbranded products, or other forms of enforcement, such as a consent decree.

FDA and other non-U.S.

government agencies may also assess civil or criminal penalties against us, our officers or employees.

Any unfavorable legal or regulatory enforcement action, depending on its severity, could restrict our ability to effectively market and sell our products, hinder future pre-market authorizations, or necessitate substantial changes to our business practices and operations.

If we fail to comply with federal and state privacy and information security laws mandating protection of certain confidential data against disclosure, including cybersecurity attacks, we may be subject to government or private actions.

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Storage, use and disposal of these materials and waste products present the risk of accidental environmental contamination and physical injury.

Although we typically use licensed or otherwise qualified outside vendors to dispose of this waste, applicable laws and regulations could hold us liable for damages and fines if our or others’ business operations or other actions result in contamination to the environment or personal injury due to exposure to hazardous materials.

We cannot eliminate the risk of contamination or injury, and any liability imposed on us for any resulting damages or injury could exceed our resources or any applicable insurance coverage.

We are subject to federal, state and local regulations governing storage, handling and disposal of these materials.

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Although we maintain professional liability insurance coverage in amounts we believe is consistent with industry practice in the event of an accident, we could be held liable for any resulting damages, and any liability could exceed the limits of or fall outside the coverage of our professional liability insurance.

If CMS ends its current policy permitting professionals to provide direct supervision of diagnostic imaging to be immediately available through virtual presence using two-way, real-time audio/video technology, instead of requiring their physical presence, we may be subject to additional costs and a shortage of professionals to provide such supervision.

On November 1, 2024, CMS released the calendar year 2025 Medicare Physician Fee Schedule final rule, which extended through December 31, 2025 the Medicare policy permitting supervising professionals to be immediately available through virtual presence using two-way, real-time audio/video technology, instead of requiring their physical presence.

In comments to the final rule, CMS indicated that it may address the most appropriate way to balance patient safety concerns with the interest of supporting access in future rulemaking.

If CMS changes the current policy to require in-person supervision of diagnostic imaging that requires direct supervision, we may be required to add professional staff to our diagnostic imaging centers and/or decrease the volume of imaging services that require direct supervision of a professional.

Financial Risks

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We incur capital expenditures to, among other things, upgrade and replace equipment for existing centers and expand within our existing markets and enter new markets.

If we open or acquire

additional imaging centers, we may have to incur material capital lease obligations.

To the extent we are unable to generate sufficient cash from our operations, funds are not available under our credit facilities or we are unable to structure or obtain financing through operating leases, finance leases or long-term installment notes, we may be unable to meet the capital expenditure requirements necessary to support the maintenance and continued growth of our operations.

If we open or acquire additional imaging centers, we may have to incur material capital lease obligations.

To the extent we are unable to generate sufficient cash from our operations, funds are not available under our credit facilities or we are unable to structure or obtain financing through operating leases or long-term installment notes, we may be unable to meet the capital expenditure requirements necessary to support the maintenance and continued growth of our operations.

We may be required to recognize an impairment of our goodwill, other intangible assets, or other long-lived assets, which could have an adverse effect on our financial position and results of operations.

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We have been required to recognize impairment charges in the past, and may again.

In September 2023, we determined that an In-process Research and Development ("IPR&D") indefinite-lived intangible asset related to Aidence Holding B.V.'s Ai Veye Lung Nodule and Veye Clinic would not receive FDA approval for sale in the US without a new submission and additional expenditures for rework in the original projected timeline.

In September 2023, we determined that an In-process Research and Development ("IPR&D") indefinite-lived intangible asset related to Aidence Holding B.V.'s Ai Veye Lung Nodule and Veye Clinic would not receive FDA authorization for sale in the US without a new submission and additional expenditures for rework in the original projected timeline.

The additional expenditures, delay and reduction of US sales affected the estimated fair value of the related IPR&D intangible asset and resulted in impairment charges of $3.9 million.

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If the indebtedness under our credit facilities is accelerated, we may not have sufficient assets to repay amounts due under the credit facilities or on other indebtedness then outstanding.

If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected.

It may become more difficult and costly for us to obtain coverage liabilities and other risks, including property, automobile and casualty insurance.

For example, the following circumstances may adversely affect our ability to obtain insurance at favorable rates:

• we experience higher-than-expected professional liability, property and casualty, or other types of claims or losses;

• we receive survey deficiencies or citations of higher-than-normal scope or severity;

• we acquire especially troubled operations or facilities that present unattractive risks to current or prospective insurers;

• insurers choose to stop operating or offering policies in certain states due to changes in economic conditions or laws;

• insurers tighten underwriting standards applicable to us or our industry;

• insurers or reinsurers are unable or unwilling to insure us or the industry at historical premiums and coverage levels.

If any of these potential circumstances were to occur, our insurance carriers may cancel or not renew our policies, or require us to significantly increase our self-insured retention levels or pay substantially higher premiums for the same or reduced coverage for insurance, including workers compensation, property and casualty, automobile, employment practices liability, directors and officers liability, employee healthcare and general and professional liability coverages.

In some states, the law prohibits or limits insurance coverage for the risk of punitive damages arising from professional liability and general liability claims or litigation.

Coverage for punitive damages is also excluded under some insurance policies.

As a result, we may be liable for punitive damage awards in these states that either are not covered or are in excess of our insurance policy limits.

Claims against us, regardless of their merit or eventual outcome, could also inhibit our ability to attract patients or expand our business and could require our management to devote time to matters unrelated to the day-to-day operation of our business.

With few exceptions, workers compensation and employee health insurance costs have also increased markedly in recent years and are expected to increase in the future.

If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, or if the coverage levels we can economically obtain decline, our business may be adversely affected.

Capital Markets Risks

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The institution of similar litigation against us could result in substantial costs and a diversion of management’s attention and resources, which could negatively affect our business, results of operations or financial condition.

Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could cause the price of our common stock to fall.

Sales of a substantial number of shares of our common stock in the public market could occur at any time.

Any such sales, or the perception in the market that sales are pending or could occur, could reduce the market price of our common stock.

The vast majority of the outstanding shares of our common stock are freely tradable without restriction in the public market, subject to certain volume and manner of sale limitations applicable to shares held by our affiliates, as that term is defined in the Securities Act.

In addition, subject to similar limitations and any other applicable legal and contractual limitations, all of the shares of our common stock subject to outstanding equity-based awards or reserved for issuance pursuant to such awards we may grant in the future are registered under the Securities Act or are otherwise eligible under applicable securities laws for free trading in the public market upon their issuance.

Future issuances of our common stock or rights to purchase our common stock could result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to fall.

To raise capital or for other strategic purposes, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time.

If we issue common stock, convertible securities or other equity securities, our then-existing stockholders could be materially diluted by such issuances and, if we otherwise issue preferred stock, new investors could gain rights, preferences and privileges senior to the holders of our common stock, any of which could cause the price of our common stock to decline.

We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our common stock.

We currently anticipate that we will retain any future earnings to finance the continued development, operation and expansion of our business.

As a result, we do not anticipate declaring or paying any cash dividends or other distributions in the foreseeable future.

Further, if we were to enter into a credit facility or issue debt securities or preferred stock in the future, we may become contractually restricted from paying dividends.

If we do not pay dividends, our common stock may be less valuable because stockholders must rely on sales of their common stock after price appreciation, which may never occur, to realize any gains on their investment.

Provisions of the Delaware General Corporation Law and our organizational documents may discourage an acquisition of us.

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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