1063561--12/28/2006--PROSPECT_MEDICAL_HOLDINGS

related topics

{regulation, government, change}

{debt, indebtedness, cash}

{tax, income, asset}

{stock, price, share}

{acquisition, growth, future}

{system, service, information}

{loss, insurance, financial}

{personnel, key, retain}

{cost, contract, operation}

{product, liability, claim}

{capital, credit, financial}

{financial, litigation, operation}

{stock, price, operating}

{competitive, industry, competition}

{loan, real, estate}

Decreases in the number of HMO enrollees using our provider networks reduce our profitability an d inhibit future growth. Our working capital deficit could adversely affect our ability to satisfy our obligations as they come due. If the value of our goodwill and intangible assets with indefinite useful lives becomes impaired, the impaired portion will have to be written off, which could materially reduce the value of our assets and reduce our net income for the year in which the write-off occurs. We may not be able to make any additional significant acquisitions without first obtaining additiona l financing and obtaining the consent of our commercial lender. If we are not able to comply with the financial covenants and other conditions required by our loa n agreement with our commercial lender, our lender could require full repayment of the loan, which would negatively impact our liquidity and preclude us from making further acquisitions. Substantially all of our revenues are generated from contracts with a limited number of HMOs, and if ou r affiliated physician organizations were to lose HMO contracts or to renew HMO contracts on less favorable terms, our revenues and profitability could be significantly reduced. Our profitability may be reduced or eliminated if we are not able to manage health care costs of ou r affiliated physician organizations effectively. Our revenue and profitability could be significantly reduced and could also fluctuate significantly from period to period under Medicare s new Risk Adjusted payment methodology. Our operating results could be adversely affected if our actual health care claims exceed our reserves. We may be exposed to liability or fail to estimate IBNR claims accurately if we cannot process ou r increased volume of claims accurately and timely. Medicare and private third-party payer cost containment efforts and reductions in reimbursement rate s could reduce our revenue and our cash flow. Risk-sharing arrangements that our affiliated physician organizations have with HMOs and hospital s could result in their costs exceeding the corresponding revenues, which could reduce or eliminate any shared risk profitability. If we do not successfully integrate the operations of acquired physician organizations into our servic e network, our costs could increase, our business could be disrupted, and we may not be able to realize the anticipated benefits from those acquisitions. When we acquire operations that have historically operated at a loss, we may not be able to reverse thos e losses and operate those businesses at a profit, which could reduce our earnings. If we are unable to identify suitable acquisition candidates or to negotiate or complete acquisitions o n favorable terms, our prospects for growth could be limited. Any acquisitions we complete in the future could potentially dilute the equity interests of our curren t stockholders or could increase our indebtedness and cost of debt service, thereby reducing our net income and profitability. We operate in a competitive market; increased competition could adversely affect our revenues. Failure to comply with federal and state regulations could result in substantial penalties and changes i n business operations. Future reforms in health care legislation and regulation could reduce our revenues and profitability. Whenever we seek to acquire an IPA, an HMO that has a contract with that IPA could potentially refus e to consent to the transfer of its contract, and this could deter us from completing the acquisition or could deprive us of the enrollees and revenues associated with that HMO contract if we chose to complete the acquisition without the HMO s consent. Our profitability could be adversely affected by any changes that would reduce payments to HMOs unde r government-sponsored health care programs. Our revenues and profits could be diminished if we lose the services of key physicians in our affiliate d physician organizations. Because our business is currently limited to the Southern California area, any reduction in our revenue s and profitability from a local economic downturn would not be offset by operations in other geographic areas. We are required to upgrade and modify our management information systems to accommodate growth i n our business and changes in technology and to satisfy new government regulations. As we seek to implement these changes, we may experience complications, delays and increasing costs, which could disrupt our business and reduce our profitability. If we were to lose the services of Dr. Terner or other key members of management, we might not be able t o replace them in a timely manner with qualified personnel, which could disrupt our business and reduce our profitability and revenue growth. We and our affiliated physician organizations may become subject to claims of medical malpractice o r HMO bad-faith liability claims for which our insurance coverage may not be adequate. Such claims could materially increase our costs and reduce our profitability. Fluctuations in our quarterly operating results may make it difficult to predict our future results o f operations, which could decrease the market value of our common stock. The NASD has conducted an informal inquiry regarding trading in our common stock. If we are not able to develop or sustain an active trading market for our common stock, it may be difficul t for stockholders to dispose of their common stock. Even if an active market develops for our common stock, the market price of our stock is likely to b e volatile. If our common stock becomes subject to the SEC s penny stock rules, our stockholders may find it difficul t to sell their stock.

Full 10-K form ▸

1063561--12/28/2006--PROSPECT_MEDICAL_HOLDINGS_INC