1356200--3/13/2007--Health_Finance

related topics

{regulation, government, change}

{debt, indebtedness, cash}

{acquisition, growth, future}

{personnel, key, retain}

{system, service, information}

{investment, property, distribution}

{capital, credit, financial}

{stock, price, operating}

{financial, litigation, operation}

{loss, insurance, financial}

{control, financial, internal}

{tax, income, asset}

{competitive, industry, competition}

{condition, economic, financial}

{regulation, change, law}

{cost, contract, operation}

{property, intellectual, protect}

Risks related to our business Laws and regulations that regulate payments for medical services made by government sponsored healthcare programs could cause our revenues to decrease. If governmental authorities determine that we violate Medicare, Medicaid or TRICARE reimbursement laws or regulations, our revenues may decrease and we may have to restructure our method of billing and collecting Medicare, Medicaid or TRICARE payments, respectively. We are subject to complex rules and regulations that govern our licensing and certification, and the failure to comply with these rules can result in delays in or loss of reimbursement or civil or criminal sanctions. We could be subject to professional liability lawsuits, some of which we may not be fully insured against or reserved for. The reserves that we have established in respect of our professional liability losses are subject to inherent uncertainties and if a deficiency is determined this may lead to a reduction in our net earnings. We depend on reimbursements by third-party payers, as well as payments by individuals, which could lead to delays and uncertainties in the reimbursement process. We are subject to the financial risks associated with our fee-for-service contracts which could decrease our revenue, including changes in patient volume, mix of insured and uninsured patients and patients covered by government sponsored healthcare programs and third party reimbursement rates. Failure to timely or accurately bill for our services could have a negative impact on our net revenues, bad debt expense and cash flow. A reclassification of our independent contractor physicians by tax authorities could require us to pay retroactive taxes and penalties. A significant number of our programs are concentrated in certain states, particularly Florida and Tennessee, which makes us particularly sensitive to regulatory, economic and other conditions in those states. We derive a portion of our net revenues less provision for uncollectibles from services provided to the Department of Defense within the Military Health System (MHS) ($157.8 million in 2006). The MHS transitioned a portion of its healthcare starting in 2004 which has had a material impact on our revenues and profits derived from such services. We are subject to billing investigations by federal and state authorities. We may become involved in litigation which could harm the value of our business. Our quarterly operating results may fluctuate significantly and may cause the value of our common units to decline, which could affect our ability to raise new capital for our business. Our revenue could be adversely affected by a net loss of contracts. We may not accurately assess the costs we will incur under new contracts. We may not be able to find suitable acquisition candidates or successfully integrate completed acquisitions into our current operations in order to profitably operate our consolidated company. Our Sponsor controls us and may have conflicts of interest with us or you in the future. We may be required to seek additional financing to meet our future capital needs, which we may not be able to secure on favorable terms, or at all. If we fail to implement our business strategy, our business, financial condition and results of operations could be materially and adversely affected. Our success depends on our ability to manage growth effectively. We may not be able to successfully recruit and retain qualified physicians and nurses to serve as our independent contractors or employees. The high level of competition in our industry could adversely affect our contract and revenue base. Our business depends on numerous complex information systems, some of which are licensed from third parties, and any failure to successfully maintain these systems or implement new systems could materially harm our operations. If we are unable to protect our proprietary technology and services, which form the basis of our complex information systems, our business could be adversely affected. Loss of key personnel and/or failure to attract and retain highly qualified personnel could make it more difficult for us to generate cash flow from operations and service our debt. We will be exposed to risks relating to the evaluation of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act and increased costs associated with corporate governance compliance. We may incur substantial costs defending our interpretations of federal and state government regulations and if we lose, the government could force us to restructure and subject us to fines, monetary penalties and exclusion from participation in government-sponsored programs such as Medicare and Medicaid. Our use and disclosure of patient information is subject to privacy regulations. If we fail to comply with the federal anti-kickback statute, we could be subject to criminal and civil penalties, loss of licenses and exclusion from the Medicare and Medicaid and other federal and state healthcare programs, which could have a material adverse effect on our business, financial condition and results of operations. If future regulation forces us to restructure our operations, including our arrangements with physicians, professional corporations, hospitals and other facilities, we may incur additional costs, lose contracts and suffer a reduction in revenue under existing contracts and we may need to refinance our debt or obtain debt holder consent. If we fail to comply with physician self-referral laws as they are currently interpreted or may be interpreted in the future, or if other legislative restrictions are issued, we could incur a significant loss of reimbursement revenue and be subject to significant monetary penalties, which could have a material adverse effect on our business, financial condition and results of operations. We could experience a loss of contracts with our physicians or be required to sever relationships with our affiliated professional corporations in order to comply with antitrust laws. Risks related to our indebtedness Our substantial indebtedness could adversely affect our financial condition, our ability to operate our business, react to changes in the economy or industry, pay our debts and meet our obligations under the notes and could divert our cash flow from operations for debt payments. Servicing our debt will require a significant amount of cash. Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations. Restrictive covenants in our senior secured credit facilities and the indenture governing our notes may restrict our ability to pursue our business strategies, and failure to comply with any of these restrictions could result in acceleration of our debt. Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage. A decline in our operating results or available cash could cause us to experience difficulties in complying with covenants contained in more than one agreement, which could result in our bankruptcy or liquidation. Risks related to the notes The right to receive payments on the outstanding notes are, junior to the borrowings under our senior secured credit facilities, and all of our future senior indebtedness. In addition, the guarantees of the outstanding notes are, junior to the guarantors senior indebtedness. The right to receive payments on the notes is effectively subordinated to the rights of our existing and future secured creditors. In addition, the guarantees of the notes are effectively subordinated to the guarantors secured indebtedness. The lenders under the senior secured credit facilities have the discretion to release the guarantors under the senior secured credit agreement in a variety of circumstances, which will cause those guarantors to be released from their guarantees of the notes. Repayment of our debt, including the notes, is dependent on cash flow generated by our subsidiaries. Federal and state statutes allow courts, under specific circumstances, to void the notes and the guarantees, subordinate claims in respect of the notes and the guarantees and require note holders to return payments received from the Issuers or the guarantors. Future liquidity and cash flow difficulties could prevent us from repaying the notes when due or repurchasing the notes when we are required to do so pursuant to a change of control or otherwise. A downgrade, suspension or withdrawal of the rating assigned by a rating agency to the notes, if any, could cause the liquidity or market value of the notes to decline.

Full 10-K form ▸

1356200--3/13/2007--Health_Finance_CORP