1063561--6/2/2008--PROSPECT_MEDICAL_HOLDINGS

related topics

{regulation, government, change}

{cost, operation, labor}

{cost, contract, operation}

{debt, indebtedness, cash}

{acquisition, growth, future}

{capital, credit, financial}

{financial, litigation, operation}

{stock, price, share}

{tax, income, asset}

{system, service, information}

{loss, insurance, financial}

{product, liability, claim}

{personnel, key, retain}

{product, market, service}

{operation, natural, condition}

{regulation, change, law}

{stock, price, operating}

{competitive, industry, competition}

{loan, real, estate}

Decreases in the number of HMO enrollees using our provider networks reduce our profitability and inhibit future growth. Our working capital deficit could adversely affect our ability to satisfy our obligations as they come due. When our remaining goodwill and intangible assets with indefinite useful lives becomes impaired, the impaired portion has to be written off, which materially reduces the value of our assets and reduces our net income for the year in which the write-off occurs. We may not be able to make any additional acquisitions without first obtaining additional financing and obtaining the consent of our lenders. Substantially all of our IPA revenues are generated from contracts with a limited number of HMOs, and if our 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 our 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 any increased volume of claims accurately and timely. Medicare, Medi-Cal and private third-party payer cost containment efforts and reductions in reimbursement rates could reduce our hospital revenue and our cash flow. Risk-sharing arrangements that our affiliated physician organizations have with HMOs and hospitals 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, our costs could increase, our business could be disrupted, and we may not be able to realize the desired benefits from those acquisitions. The acquisition of hospitals and subsequent integration with our core business of managing physician organizations may prove to be difficult and may outweigh the synergistic benefits anticipated in the marketplace. Hospitals with union contracts could experience setbacks from unfavorable negotiations with union members. Hospital operations are capital intensive and could prove to be a drain on cash. If we do not continually enhance our hospitals with the most recent technological advances in diagnostic and surgical equipment, our ability to maintain and expand our markets will be adversely affected. The continued growth of uninsured and underinsured patients or further deterioration in the collectability of the accounts of such patients could harm our results of operations. Because we are obligated to provide care in certain circumstances regardless of whether we will get paid for providing such care, if the number of uninsured patients treated at our hospitals increases, our results of operations may be harmed. Controls designed to reduce inpatient services may reduce our hospital revenue. Our hospital revenues and volume trends may be adversely affected by certain factors over which we have no control, including weather conditions, severity of annual flu seasons and other factors. An increasing portion of our IPA revenue is "at risk" and difficult to project, which increases uncertainty regarding future revenues, cash flow projections, and profitability. If we are unable to identify suitable acquisition candidates or to negotiate or complete acquisitions on favorable terms, our prospects for growth could be limited. Any acquisitions we complete in the future could potentially dilute the equity interests of our current stockholders or could increase our indebtedness and cost of debt service, thereby reducing our profitability. Our acquisition initiatives may be put on hold until such time that we achieve a lower financial leverage. We operate in a highly competitive market; increased competition could adversely affect our revenues. We are subject to extensive government regulation regarding the conduct of our operations. If we fail to comply with any existing or new regulations, we could suffer civil or criminal penalties or be required to make significant changes to our operations. Providers in the hospital industry have been the subject of federal and state investigations and we could become subject to such investigations in the future. The health care industry is subject to many laws and regulations designed to deter and prevent practices deemed by the government to be fraudulent or abusive. We may be subjected to actions brought by the government under anti-fraud and abuse provisions or by individuals on the government's behalf under the False Claims Act's "qui tam" or whistleblower provisions. 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 refuse to consent to the transfer of its contract, and this could effectively stop the acquisition or potentially 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 under government-sponsored health care programs. If any of our hospitals lose their accreditation, such hospitals could become ineligible to receive reimbursement under Medicare or Medicaid. Our revenues and profits could be diminished if we lose the services of key physicians in our affiliated physician organizations. Our hospitals face competition for medical support staff, including nurses, pharmacists, medical technicians and other personnel, which may increase our labor costs and harm our results of operations If we were to lose the services of Sam Lee or other key members of management, we might not be able to replace them in a timely manner with qualified personnel, which could disrupt our business and reduce our profitability and revenue growth. Because our business is currently limited to the Southern California area, any reduction in our revenues 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 in 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. Our ability to control labor and employee benefit costs could be hindered by continued acquisition activity. We and our hospitals and affiliated physician organizations may become subject to claims of medical malpractice or 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 of operations, which could decrease the market value of our common stock. The NASD has conducted an informal inquiry regarding trading in our common stock. Trading in our common stock was suspended effective January 16, 2008. If we are not able to develop or sustain an active trading market for our common stock, it may be difficult 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 be volatile.

Full 10-K form ▸

1063561--6/2/2008--PROSPECT_MEDICAL_HOLDINGS_INC