Overview
Our Company was founded in 1899. We are a publicly-traded New York corporation whose shares of common stock are listed on the NYSE MKT (HH). Our corporate headquarters are located in Olathe, Kansas. Over the last 40+ years, our business focus has been on providing health risk assessment services. With the acquisition of Accountable Health Solutions, Inc. ("AHS") ("the Acquisition") in 2015, we have expanded to also provide corporate wellness and health improvement services. This uniquely positions us to transform and capitalize on the large and growing health and wellness market as one of the only publicly-traded, end-to-end health and wellness companies.
We provide on-site screenings and flu shots, laboratory testing, risk assessment, and sample collection services to individuals as part of comprehensive health and wellness programs offered through organizations sponsoring such programs including corporate and government employers, health plans, hospital systems, health care management companies, wellness companies, brokers and consultants, disease management organizations, reward administrators, third party administrators, clinical research organizations and academic institutions. Through our comprehensive health and wellness services, we also provide telephonic health coaching, access to a wellness portal with individual and team challenges, data analytics, and reporting services. We contract with health professionals to deliver these services nationwide, all of whom are trained and certified to deliver quality service. We leverage our national network of health professionals to support the delivery of other similar products and services.
The majority of large employers that offer health benefits today also offer at least some wellness programs in an effort to promote employee health and productivity as well as to reduce health related costs. Through screenings, plan sponsors help employees learn of existing and/or potential health risks. Through corporate wellness, they provide education and health improvement tools and personalized challenges. Program sponsors also gain the ability to systematically reward employees for good, healthy behaviors and for actual health enhancement metrics. Some common examples of these rewards include reductions in annual medical premiums, contributions to an employee’s Health Savings Account (HSA), and credits that are redeemable through an online merchandise mall. By combining both the screening and corporate wellness services under a single organization, we create a seamless, end-to-end experience for members and drives improved engagement and outcomes for our clients.
Today, we service approximately 200 direct clients representing nearly 3,000 employers and up to 1,000,000 participants. In 2016, we delivered nearly 500,000 screenings and are on track to continue year-over-year revenue growth through a combination of our direct, channel partner, and clinical research organization partners as well as through the addition of new customers.
We operate under one reporting segment. Our screening services are subject to some seasonality, with the third and fourth quarters typically being our strongest quarters due to increased demand for screenings from mid-August through November related to annual benefit renewal cycles. Our health and wellness service operations are more constant, though there are some variations due to the timing of the health coaching programs which are billed per participant and typically start shortly after the conclusion of onsite screening events. In addition to our screening and health and wellness services, we generate ancillary revenue through the assembly of medical kits for sale to third parties.
We believe that the overall market for our screening and health and wellness services is growing and we expect it will continue to grow with the increased nationwide focus on healthcare, cost-containment and well-being/productivity initiatives.
Rights Offering
On January 25, 2016, we received $3.4 million in cash, net of issuance costs, in additional equity by issuing 2,601,789 shares of our common stock, $0.04 par value, through a rights offering to current shareholders which was used to fund working capital.
Additional Equity Contributions
On March 28, 2016, we received $1.2 million in cash, net of issuance costs, in additional equity by issuing 666,667 shares of our common stock, $0.04 par value, to 200 NNH, LLC, (the "Investor") a new private investor, which was used to fund working capital. Pursuant to the Stock Purchase Agreement, there is a lock-up period of 18 months, during which time the Investor cannot sell the shares acquired.
Beginning on September 15, 2016, we received $1.7 million in cash, net of issuance costs, in additional equity by issuing 1,388,889 shares of its common stock, $0.04 par value, and warrants (the "Private Offering Warrants") to purchase up to an additional 1,388,889 shares of its common stock at an exercise price of $2.00 per share to various investors in a private offering (the "Private Offering"). The proceeds from the Private Offering were used to fund working capital.
Reverse Stock Split
On June 15, 2016, we completed a one-for-fifteen reverse stock split, in order to regain compliance with the NYSE MKT's minimum market price requirement. As a result, the share and per share information for all periods presented in this Annual Report on Form 10-K have been adjusted to reflect the impact of the reverse stock split. The reverse stock split did not affect the total number of authorized shares of common stock of 240,000,000 shares or the par value of our common stock at $0.04. Accordingly, an adjustment was made between additional paid-in-capital and common stock in the consolidated balance sheet to reflect the new values after the reverse stock split.
Merger Agreement
On March 7, 2017, we signed a merger agreement with Piper Merger Corp., Provant Health Solutions, LLC, and Wellness Holdings, LLC. See Note 15 to the consolidated financial statements for further discussion.
Liquidity
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern (which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future). The uncertainty regarding our ability to generate sufficient cash flows and liquidity to fund operations raises substantial doubt about our ability to continue as a going concern within one year after issuance date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. See Note 2 to the consolidated financial statements and within the Liquidity and Capital Resources section in Item 7 for further discussion.
Description of Services
Our screening services are performed primarily at employee work locations, typically referred to as onsite screenings, for groups of all sizes, or for individual employees at remote work locations or residences. We provide many options for screening individuals at remote work locations or residences through our national network of health professionals as well as through our agreements with local retail clinics and lab testing centers. The information collected from our services is used by our customers to measure the populations they manage, identify risks in those populations, target intervention programs, promote positive lifestyle behaviors, and measure the results of their health and care management programs.
Our screening services include:
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scheduling of individual and group screenings and organizing health and wellness events;
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end-to-end screening event management;
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provision and fulfillment of needed supplies (e.g., examination kits, blood pressure cuffs, stadiometers, scales, centrifuges) at screening events;
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ScreeningPro
TM
tablet technology that streamlines the screening experience for participants eliminating the need to fill out paper forms;
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performing screenings (e.g., height, weight, body mass index, the taking of a person’s hip, waist and neck measurements, as well as his or her pulse and blood pressure) and blood draws via venipuncture or fingerstick;
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administration of flu shots, cotinine and other specialized testing;
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coordination of lab testing of blood specimens and other fluids;
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onsite participant wellness coaching;
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onsite health consultation services via Wellness Support Now
SM
program with ability to promote other wellness program initiatives during those meaningful face-to-face teachable moments;
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data processing and transmission;
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analytics to identify critical values of lab tests and notification services to individuals and customers to better manage risk;
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the delivery of other onsite or in-home services, including health professional administration of EEG tests; and
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support of data collection for academic and clinical research organizations.
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Our comprehensive health and wellness services include:
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screening services noted above;
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access to a wellness portal;
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incentive management services;
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year-round education, activities, and individual and team challenges;
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telephonic health coaching for lifestyle and health risk improvement;
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data analytics and reporting services;
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communication and engagement services; and
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wellness program advisory services.
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We provide patient results on an expedited basis through our web portal that enables participants to access test results within 48 hours of the screening.
In addition to our screening and health and wellness services, we generate ancillary revenue through the assembly of medical kits for sale to third parties.
Market Conditions and Strategic Initiatives
Our operating results for the past two years are discussed more fully in the Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
The health and care management industry continues to grow. For every dollar invested in health and wellness programs, employers are seeing a positive return due to the reduced health risks and the associated costs for their employees, improved employee productivity and morale, as well as being an attractive employee benefit to potential new employees.
The PwC 2016 Health and Well-being Touchstone survey indicates that wellness is the #1 area of investment and #1 strategy for employers with 76% of employers offering wellness programs, many of which have expanded into well-being programs. The most common wellness initiatives are health risk questionnaires (80%), followed by biometric screening (77%), physical activity programs/fitness discounts (73%), and tobacco cessation programs (73%). Physical activity/fitness programs and tobacco cessation are approaching similar levels of prevalence as health risk assessments and biometric screenings.
The latest 2015 survey on wellness programs from Fidelity Investments and the National Business Group on Health (NBGH) reveals that employers are continuing to expand their corporate health improvement and wellness programs to improve employee health and create a more positive workplace culture. Almost 80 percent of employers are offering wellness and health improvement programs, spending on average a record $693 per worker. According to the survey, the three most popular incentive-based health improvement programs for 2015 are biometric screenings (72% of employers plan to offer this program), health risk assessments (70%), and physical activity programs (54%). Companies are also rewarding employees for participation. In 2015, 81% of employees received at least some amount of incentives, which is up from 73% in 2014.
There is also a growing trend to expand wellness programs beyond physical activity to focus on other well-being factors that impact productivity such as emotional stress and financial challenges. According to the survey noted previously from NBGH, more employers are investing in “total wellbeing” programs that address areas such as financial and emotional health. The survey revealed employers are adding programs that help employees manage stress, improve their resiliency, and assist with their financial challenges, recognizing a ‘healthy’ employee may be affected by non-health factors, focusing beyond solely physical health. In 2016, we launched an enhanced wellness and health improvement platform that delivers more meaningful, holistic wellbeing solutions. The new Year Round Wellbeing Program delivers twelve months of impactful health-related educational content, personal activities and challenges, and more, focused on the core areas of wellbeing: nutrition, physical activity, reducing stress, and managing personal finances.
There are barriers to achieving employers' goals regarding such wellness programs including motivating participants to participate in screenings and to change their lifestyle based on these results, the unpredictability of health care costs, and the efficacy of health and wellness programs to manage these costs as well as government regulations managing the health of an aging workforce. Through our risk assessment and risk management services, we help companies identify and stratify risk of individuals for enrollment in care management programs. Through our health and wellness services, we tailor and personalize education and interventions, promote positive lifestyle behavior changes, and measure and reward risk reduction.
Sales and Marketing
We build our customer base through the typical sales management processes, with referrals being the largest source of new business closely followed by traditional requests for proposals. After we qualify new potential customers, we market our wellness solutions to “power and focus” their wellness programs while supporting their goal of integrating health and well-being into their organizational culture. This may take many forms, from a basic biometric screening to identifying potential health challenges for a participant to address on their own or with their family physician, to robust coaching and life changing activities that our screenings drive participants into. Our onsite coaching and engagement services, post screening, answer many basic health questions and help thousands of participants “engage” in the appropriate programs offered by their employers to improve their health. Our telephonic coaching services allow participants to build their own personalized goals with achievable action steps and a plan to track progress toward those goals, with education and motivation along the way. Our wellness portal and communication/engagement services allow employers to promote their own wellness program and goals along with year-round health and wellness education, seminars, and challenges to support those goals and help build a greater focus on health and wellness company wide.
We believe our fully integrated, end-to-end health and wellness solution gives us several competitive advantages in the market. Additionally, in 2016, we have
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increased participant access with the addition of CVS MinuteClinic® for biometric screenings;
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began marketing additional value-add services as part of our onsite screenings including flu shots, cotinine and other specialized testing including A1C and other many more flexible options;
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expanded our Wellness Support Now onsite health consulting services, extending the program to our Channel Partner clients allowing them to increase enrollment into their health coaching programs, cut operational participant outreach costs, and improve the member experience;
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increased the value of our wellness services with the expansion of our wellness and health improvement platform (the Year Round Wellbeing Program), delivering twelve months of impactful health-related educational content, personal activities and challenges and more, focused on the core areas of wellbeing: nutrition, physical activity, reducing stress and managing money;
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leveraged our national network of health professionals to support the delivery of other onsite or in-home services, including our new agreement with a predictive analytics company where our health professionals will deliver onsite or in-home Electroencephalogram (EEG) tests, which data will be sent to the company’s decision support tool to enable physicians to provide more personalized care to patients based on their brain waves;
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secured a multi-year contract extension with one of our largest clinical research partners; and
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expanded use of our proprietary ScreeningProTM tablet technology that streamlines the screening experience for participants and eliminates paperwork.
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Given our additional capabilities and our diversified sales approaches - direct business, channel partners, and clinical research organizations (CROs) - we continue to identify additional areas to leverage our assets to further expand into targeted adjacent markets with substantial opportunity and a favorable competitive landscape.
Our strategic alliance with CRL gives us additional access to an expanded panel of laboratory testing and product offerings. We also enhanced participant reporting to give our customers more data. Our sales force and support staff were also realigned to provide more meaningful resources for new large employers, brokerages and wellness organizations, and clinical research customers.
We believe that we are well-positioned for continued growth in the health and care management market given our unique set of assets, our proprietary IT system, our expertise and offerings in the health and wellness market, and our national network of quality health professionals. However, the success of our screening and health and wellness operations will also depend in part upon the success of our sponsors and their health and care management initiatives to encourage employers to adopt wellness programs based on screening results.
Information Technology
Information technology ("IT") systems are the foundation that enables all aspects of our business. We continue to enhance our IT systems as the need for services, products, and technology requirements advance. We firmly believe that technology can be a competitive differentiator for us. Our screening teams utilize a proprietary customer order, tracking, and scheduling system that is central to our operations. We continue to leverage ScreeningPro
TM
, in conjunction with mobile device technology, as the preferred method of accurately collecting data at the point of care to accelerate data transmission and drive meaningful behavior change. Data integrity is driven by the Laboratory Information Management system that meticulously inspects and secures screening results for expedient delivery to customers. In addition, our health and wellness teams leverage a proprietary portal platform that
can be easily customized to service the diverse needs of our client base. We are investing in improving our IT operating systems and expertise to enable innovation that meets or exceeds the needs of our customers.
During 2016, we continued the use of a state-of-the-art underground autonomous data center that employs three-factor biometric entrance security, 24x7 camera monitoring, and a highly resilient power grid solution that includes a centralized uninterrupted power supply with redundant generator backing. We also continued to utilize our highly available and secure private cloud operating environment leveraging converged infrastructure that has maintained a core uptime of 100% for three years running. In addition, next generation security technologies provide robust security measures that extend into all layers of our IT systems and products. As we look ahead to 2017, efforts will continue around innovation to drive efficiencies and advance our technological capabilities in the health and wellness market.
Major Customers
Net sales to our two largest customers in 2016 and 2015, American Healthways Services, Inc. ("Healthways") and IncentiSoft Solutions, LLC ("Incentisoft"), were just over 30% of consolidated revenue. No other customers accounted for more than 10% of consolidated revenue in any of these fiscal years. We have agreements with each of our customers, although these agreements do not provide for specific minimum levels of purchase.
Competition
Our competition is largely fragmented. For screenings, it consists primarily of private companies who provide screenings in certain geographies in the United States. There are a small number of competitors who we believe have the ability to service customers nationally. For health and wellness, there are a number of companies in this space including established wellness and care management providers, startup companies, health plans that offer their own proprietary solutions and more. Many of these companies outsource key elements of their programs, leaving our company as one of the only health and wellness providers that offers a fully integrated, end-to-end screening and wellness solution.
In addition to direct screening and health and wellness sales (i.e., direct contracts with corporate and government employers, health plans, hospital systems, etc.), we provide screening services for many health care management companies, wellness companies, brokers and consultants, disease management organizations, reward administrators, and third party administrators (our “channel partner” customers
).
Several of the health and care management companies and wellness companies, in turn, serve their own suite of large employer groups, allowing us to tap into new business through these indirect sub-contractor relationships. We also provide specialized screening and data collection services for clinical research organizations and academic institutions across the country.
Leaders within the wellness market win on technology, engagement, and outcomes. We believe the combination of the Hooper Holmes infrastructure, screening capabilities, and national network of experienced health professionals with AHS’s scalable technology and engagement platform, health coaches, and analytics tools positions us to become a leader in a growing health and wellness market.
Governmental Regulation
We are subject to federal and state regulations relating to the collection, testing, transportation, handling, and disposal of the various specimens obtained in the course of a wellness screening, such as Clinical Laboratory Improvement Amendments (“CLIA”). The health professionals we utilize are subject to certain licensing and certification requirements and regulations with respect to the drawing of blood and needle disposal, such as the Occupational Safety and Health Act (“OSHA”). In addition, many of the services we provide are subject to certain provisions of the Health Information Portability and Accountability Act of 1996, as amended (“HIPAA”), other federal and state laws relating to the privacy of health and other personal information, and state and federal laws designed to guard against healthcare fraud and abuse.
CLIA
The Centers for Medicare & Medicaid Services (CMS) regulates all laboratory testing (except research) performed on humans in the U.S. through the Clinical Laboratory Improvement Amendments (CLIA). The Division of Laboratory Services, within the Survey and Certification Group, under the Center for Clinical Standards and Quality (CCSQ) has the responsibility for implementing the CLIA Program. The objective of the CLIA program is to ensure the quality of laboratory testing. All clinical laboratories must be properly certified to receive Medicare or Medicaid payments.
OSHA
The federal, OSHA Bloodborne pathogens standard, as amended pursuant to the Needlestick Safety and Prevention Act of 2000, prescribes safeguards to protect workers against the health hazards caused by bloodborne pathogens. Its requirements address items such as exposure control plans, universal precautions, engineering and work practice controls, personal protective equipment, housekeeping, laboratories, hepatitis B vaccination, post-exposure follow-up, hazard communication and training, and recordkeeping. The standard places requirements on employers whose workers can be reasonably anticipated to contact blood or other potentially infectious materials. Some states operate their own OSHA-approved state program, which state programs are required to adopt a bloodborne pathogens standard that is at least as effective as the Federal OSHA standard.
HIPAA, Privacy Laws, and Data Security
Federal Privacy Laws
The HIPAA Privacy Standards and Security Standards under establish a set of national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses and healthcare providers (referred to as “covered entities”) and their “business associates,” which are persons or entities that perform certain services for or on behalf of a covered entity (or another business associate) that involve the use or disclosure of protected health information. As a “business associate”, we are subject to HIPAA with regard to certain aspects of our business, such as managing employee or plan member health information for employers or health plans. With respect to our services platform and related services, HITECH creates obligations for us to report any unauthorized use or disclosure of protected health information, known as a breach, to our covered entity customers. Violations of HIPAA may result in civil and criminal penalties.
As part of the payment-related aspects of our business, we may also undertake security-related obligations arising out of the USA Patriot Act, Gramm-Leach-Bliley Act and the Payment Card Industry guidelines applicable to card systems. These requirements generally require safeguards for the protection of personal and other payment related information.
State Privacy Laws
In addition to federal regulations issued under HIPAA, some states have enacted privacy and security statutes or regulations, or state privacy laws, that govern the use and disclosure of a person’s medical information or records and, in some cases, are more stringent than those issued under HIPAA. These state privacy laws include regulation of health insurance providers and agents, regulation of organizations that perform certain administrative functions such as utilization review or third-party administration, issuance of notices regarding privacy practices, and reporting and providing access to law enforcement authorities. These laws may require us to modify our operations and procedures to comply with these more stringent state privacy laws or be subject to applicable sanctions.
Healthcare Fraud Statutes
Federal statute identifies a class of federal crimes known as the “federal healthcare offenses,” including healthcare fraud and false statements relating to healthcare matters. The Federal Anti-Kickback Statute prohibits payment of remuneration to induce referrals of federal or state healthcare program beneficiaries. The Federal Healthcare Fraud statute prohibits, among other things, executing a scheme or artifice to defraud any healthcare benefit program, and the Federal Health Care Benefit Program False Statements Statute prohibits, among other things, concealing a material fact or making a materially false statement in connection with the payment for healthcare benefits, items or services. Violation of these statutes is punishable by fines and/or imprisonment. Most states have similar statutes relating to state (and sometimes private) healthcare benefit plans.
False Claims Act
The Federal Civil False Claims Act imposes liability on any person or entity who, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The “qui tam” or “whistleblower” provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. There are also state law corollaries to the Federal False Claims Act.
Regulation of Wellness Incentive Programs
The HIPAA Nondiscrimination Provisions generally prohibit group health plans from charging similarly situated individuals different premiums or contributions or imposing different deductible, co-payment, or other cost-sharing requirements based on a
“health factor.” Such differentials are, however, acceptable under the HIPAA Nondiscrimination Provisions if the differentials are applied through “wellness programs.” The Department of Labor, in coordination with the Departments of the Treasury and HHS, has issued regulations (finalized in 2013) that define “wellness programs” for purposes of the HIPAA nondiscrimination provisions, establishing specific requirements for wellness programs that reward participants who satisfy a standard related to a health factor (referred to as “health-contingent wellness programs”) and for other types of wellness programs. Programs that do not meet these requirements may be subject to enforcement actions.
Consumer Protection Laws
Federal and state consumer protection laws are being increasingly enforced by the United States Federal Trade Commission (“FTC”), the Federal Communications Commission (“FCC”), and the various state’s attorneys general to regulate the collection, use, storage and disclosure of personal or patient information, though websites or otherwise, to regulate the presentation of website content, and to regulate direct marketing, including telemarketing and telephonic communication. Courts may also adopt the standards for fair information practices promulgated by the FTC, concerning consumer notice, choice, security and access.
Americans with Disabilities Act
The Americans with Disabilities Act (ADA) prohibits discrimination on the basis of an employee’s disability or perceived disability. Among other things, it limits employers from inquiring about the disabilities of employees unless the questions are job-related and consistent with business necessity. The ADA also limits the circumstances in which an employer may require physical examinations or answers to medical inquiries. However, the ADA allows employers to conduct voluntary medical examinations and activities, including voluntary medical histories, as part of a voluntary wellness program. A wellness program is “voluntary” if the employer neither requires participation nor penalizes employees who do not participate. Records acquired as part of a wellness program must be kept confidential and may not be used for a discriminatory purpose. Many states and localities provide similar protections to employees.
GINA
The Genetic Information Nondiscrimination Act restricts the collection or use of genetic information for underwriting purposes, and treats the offering of incentives or disincentives for completing an HRA or participating in a wellness program as underwriting.
Employees
As of December 31, 2016, we employed 319 employees, including 178 full-time employees. For the full year 2016, we also engaged 1,524 independent contractors, primarily as health professionals to provide our screening services.
General Information
Hooper Holmes, Inc. is a New York corporation. As of December 31, 2016, our principal executive offices were located at 560 North Rogers Road, Olathe, Kansas 66062. Our telephone number in Olathe, Kansas is (913) 764-1045. Our website address is
www.hooperholmes.com
. We have included our website address as an inactive textual reference only. The information on our website is not incorporated by reference into this Report.
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). You may read and copy any document that we file with the SEC at the SEC's Public Reference Room located at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC. The SEC’s website is
www.sec.gov
. We also make available free of charge, through our website, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, our proxy statements, the Form 3, 4 and 5 filings of our directors and executive officers, and all amendments to these reports and filings, as soon as reasonably practicable after such material is electronically filed with the SEC.