Item 1A. Risk Factors
We are a smaller reporting company as
defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. However,
the risks associated with our Company are set forth in the "Risk Factors" section of our Form 10-K filed with the SEC on August
14, 2020. In addition, the following industry-specific risks may be associated with our entry into the substance use disorder treatment
business.
Risks Related to Our Business
Our revenue, profitability and cash flows
could be materially adversely affected if we are unable to operate certain key treatment facilities, our corporate office or our laboratory
facilities.
We intend to derive a significant portion of our revenue from our flagship
treatment facilities located in Kentucky. It is likely that a small number of facilities will continue to contribute a significant portion
of our total revenue in any given year for the foreseeable future. Additionally, we have a centralized corporate office that houses our
accounting, billing and collections, information technology, and admissions center departments, centralized and marketing offices. We
also are building out a high complexity laboratory that will conduct quantitative drug testing and other laboratory services. If any event
occurs that results in a complete or partial shutdown of any of these facilities, our centralized corporate office, our centralized marketing
offices or laboratory, including, without limitation, any material changes in legislative, regulatory, economic, environmental, or competitive
conditions in these states or natural disasters such as hurricanes, earthquakes, tornadoes, or floods or prolonged airline disruptions
due to a natural disaster or for any reason, such event could lead to decreased revenue and/or higher operating costs, which could have
a material adverse effect on our revenue, profitability, and cash flows.
Any disruption in our national sales and
marketing program, including our digital marketing resources, could have a material adverse effect on our business, financial condition,
and results of operations.
If any disruption occurs in our national sales and marketing program
for any reason, or if we are unable to effectively attract and enroll new patients to our network of facilities, our ability to maintain
census could be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations.
Internet search engines play an increasingly important
role in addiction treatment marketing. Google and other search engines use complex algorithms to rank websites. The algorithms take into
account many factors, including the domain name itself, website content and user-friendly factors such as the speed at which the website
pages may be clicked through and viewed. We cannot predict or control changes in algorithms and website rankings, which may result in
lower ranking search results for our websites. Additionally, Google and other online platforms have instituted review processes required
to advertise on their websites. Some of these processes are time-consuming, complex and continuously evolving. We cannot predict how these
private processes, rules and restrictions will evolve or be applied to individual advertising applicants. Unexpected changes in these
areas may result in a decrease in calls to our admissions center, a decrease in interactions with potential patients and a lowering of
our census, which could have and material adverse effects on our business, financial condition and results of operations.
In addition, our ability to grow or even to maintain
our existing level of business depends significantly on our ability to establish and maintain close working and referral relationships
with hospitals, other treatment facilities and clinicians, employers, alumni, employee assistance programs and other referral sources.
We have no binding commitments with any of these referral sources. We may not be able to maintain our existing referral relationships
or develop and maintain new relationships in existing or new markets. Negative changes to our existing referral relationships may cause
the number of people to whom we provide care to decrease, which could have material adverse effects on our business, financial condition
and results of operations.
If reimbursement rates paid by third-party
payors are reduced, if we are unable to maintain favorable contract terms with payors or comply with our payor contract obligations, or
if third-party payors otherwise restrain our ability to obtain or provide services to patients, our business, financial condition and
results of operation could be adversely affected. This risk is heightened because we are generally an “out-of-network” provider.
Managed care organizations and other third-party payors pay for the
services that we provide to many of our patients. We anticipate that approximately 90% or more of our revenue will be reimbursable by
third-party payors, including amounts paid by such payors to patients, with the remaining portion payable directly by our patients. If
any of these third-party payors reduce their reimbursement rates or elect not to cover some or all of our services, our business, financial
condition, and results of operations may be materially adversely affected.
In addition to limits on the amounts payors will pay for the services
we provide to their members or participants, controls imposed by third-party payors designed to reduce admissions and the length of stay
for patients, including pre-admission authorizations and utilization review, have affected and are expected to affect our facilities.
Utilization review entails the review of the admission and course of treatment of a patient by third-party payors. Inpatient utilization,
average lengths of stay, and occupancy rates are likely to be negatively affected by payor-required preadmission authorization and utilization
review and by payor pressure to maximize outpatient and alternative healthcare delivery services for less acutely ill patients.
We believe that, generally, health insurance companies
have become more stringent and aggressive with respect to addiction treatment providers, taking measures that are putting pressure on
reimbursement rates, length of stay, and timing of reimbursement throughout the industry. We expect that payor efforts to impose more
stringent cost controls will continue. Although we are unable to predict the effect these controls and changes could have on our operations,
significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on our
business, financial condition, and results of operations. If the rates paid or the scope of substance use treatment services covered by
third-party commercial payors are reduced, our business, financial condition, and results of operations could be materially adversely
affected.
Third-party payors often use plan structures,
such as narrow networks or tiered networks, to encourage or require patients to use in-network providers. In-network providers typically
provide services through third-party payors for a negotiated lower rate or other less favorable terms. Third-party payors generally attempt
to limit use of out-of-network providers by requiring patients to pay higher copayment and/or deductible amounts for out-of-network care.
Additionally, third-party payors have become increasingly aggressive in attempting to minimize the use of out-of-network providers by
disregarding the assignment of payment from patients to out-of-network providers (i.e., sending payments directly to patients instead
of to out-of-network providers), capping out-of-network benefits payable to patients, waiving out-of-pocket payment amounts, and initiating
litigation against out-of-network providers for interference with contractual relationships, insurance fraud, and violation of state licensing
and consumer protection laws. The majority of third-party payors consider certain of our facilities to be “out-of-network”
providers. If third-party payors continue to impose and to increase restrictions on out-of-network providers, our revenue could be threatened,
forcing our facilities to participate with third-party payors and accept lower reimbursement rates compared to our historic reimbursement
rates.
Third-party payors also are entering into sole
source contracts with some healthcare providers, which could effectively limit our pool of potential patients. Moreover, third-party payors
are beginning to carve out specific services, including substance abuse treatment and behavioral health services, and establish small,
specialized networks of providers for such services at fixed reimbursement rates. Continued growth in the use of carve-out arrangements
could materially adversely affect our business to the extent we are not selected to participate in such smaller specialized networks or
if the reimbursement rate is not adequate to cover the cost of providing the service.
If reimbursement rates paid by federal or
state healthcare programs are reduced or if government payors otherwise restrain our ability to obtain or provide services to patients,
our business, financial condition, and results of operation could be adversely affected.
Managed care organizations and other third-party
payors, both government and commercial, pay for the services that we provide to many of our patients. We intend for a significant portion
of our revenues to come from government healthcare programs, principally Medicare and Medicaid. Payments from federal and state government
programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for
utilization review, and federal and state funding restrictions, all of which could materially increase or decrease program payments, as
well as affect the cost of providing service to patients and the timing of payments to facilities.
We are unable to predict the effect of recent
and future policy changes on our operations. In addition, the uncertainty and fiscal pressures placed upon federal and state governments
as a result of, among other things, deterioration in general economic conditions and the funding requirements from the federal healthcare
reform legislation, may affect the availability of taxpayer funds for Medicare and Medicaid programs. Changes in government healthcare
programs may reduce the reimbursement we receive and could adversely affect our business and results of operations.
As federal healthcare expenditures continue to
increase, and state governments continue to face budgetary shortfalls, federal and state governments have made, and continue to make,
significant changes in the Medicare and Medicaid programs. These changes include reductions in reimbursement levels and to new or modified
demonstration projects authorized pursuant to Medicaid waivers. Some of these changes have decreased, or could decrease, the amount of
money we receive for our services relating to these programs. In some cases, private third-party payers rely on all or portions of Medicare
payment systems to determine payment rates. Changes to government health care programs that reduce payments under these programs may negatively
impact payments from private third-party payers.
In addition to limits on the amount payors will
pay for the services we provide to their members, government and commercial payors attempt to control costs by imposing controls designed
to reduce admissions and the length of stay for patients, including preadmission authorizations and utilization review. The ability of
governmental payors to control healthcare costs using these measures may be enhanced by the increasing consolidation of insurance and
managed care companies and vertical integration of health insurers with healthcare providers. Although we are unable to predict the effect
these controls and changes could have on our operations, significant limits on the scope of services reimbursed and on reimbursement rates
and fees could have a material adverse effect on our business, financial condition and results of operations. If the rates paid or the
scope of substance use treatment services covered by government payors are reduced, our business, financial condition and results of operations
could be materially adversely affected.
If we overestimate the reimbursement amounts
that payors will pay us for out-of-network services performed, it would increase our revenue adjustments, which could have a material
adverse effect on our revenue, profitability, and cash flows and lead to significant shifts in our results of operations from quarter
to quarter that may make it difficult to project long-term performance.
For out-of-network services, we recognize revenue from payors at the
time services are provided based on our estimate of the amount that payors will pay us for the services performed. We estimate the net
realizable value of revenue by adjusting gross patient charges using our expected realization and applying this discount to gross patient
charges. A significant or sustained decrease in our collection rates could have a material adverse effect on our operating results. There
is no assurance that we will be able to maintain or improve historical collection rates in future reporting periods.
Estimates of net realizable value are subject
to significant judgment and approximation by management. It is possible that actual results could differ from the historical estimates
management has used to help determine the net realizable value of revenue. If our actual collections either exceed or are less than the
net realizable value estimates, we will record a revenue adjustment, either positive or negative, for the difference between our estimate
of the receivable and the amount actually collected in the reporting period in which the collection occurred. A significant negative revenue
adjustment could have a material adverse effect on our revenue, profitability and cash flows in the reporting period in which such adjustment
is recorded. In addition, if we record a significant revenue adjustment, either positive or negative, in any given reporting period, it
may lead to significant changes in our results from operations from quarter to quarter, which may limit our ability to make accurate long-term
predictions about our future performance.
Certain third-party payors are likely to
account for a significant portion of our revenue, and the reduction of reimbursement rates or coverage of services by any such payor could
have a material adverse effect on our revenue, profitability and cash flows.
We intend that certain payors such as Medicaid
and Medicare will account for a significant portion of our revenue on an annual basis. If any of these or other third-party payors reduce
their reimbursement rates for the services we provide or otherwise implement measures, such as specialized networks, that reduce the payments
we receive, our revenue, profitability, and cash flows could be materially adversely affected.
A deterioration in the collectability of
the accounts receivable could have a material adverse effect on our business, financial condition, and results of operations.
The collection of receivables from third-party
payors and patients will be critical to our operating performance. Our primary collection risks are: (i) the risk of overestimating our
net revenue at the time of billing, which may result in us receiving less than the recorded receivable; (ii) the risk of non-payment as
a result of commercial insurance companies denying claims; (iii) in certain states, the risk that patients will fail to remit insurance
payments to us when the commercial insurance company pays out-of-network claims directly to the patient; and (iv) resource and capacity
constraints that may prevent us from handling the volume of billing and collection issues in a timely manner. Additionally, our ability
to hire and retain experienced personnel may affect our ability to bill and collect accounts in a timely manner.
We intend to routinely review accounts receivable
balances in conjunction with these factors and other economic conditions that might ultimately affect the collectability of the patient
accounts and to adjust our allowances as warranted. Significant changes in business operations, payor mix or economic conditions, including
changes resulting from legislation or other health reform efforts (including to repeal or significantly change the Affordable Care Act),
could affect our collection of accounts receivable, cash flows, and results of operations. In addition, future patient concentration in
states that permit commercial insurance companies to pay out-of-network claims directly to the patient instead of the provider, such as
California and Nevada, could adversely affect our collection of receivables. Unexpected changes in reimbursement rates by third-party
payors could have a material adverse effect on our business, financial condition, and results of operations.
Our business depends
on our information systems. Failure to effectively integrate, manage, and keep our information systems secure could disrupt our operations
and have a material adverse effect on our business.
Our business depends on effective and secure information
systems that assist us in, among other things, admitting patients to our facilities, monitoring census and utilization, processing and
collecting claims, reporting financial results, measuring outcomes and quality of care, managing regulatory compliance controls, and maintaining
operational efficiencies. These systems may include software developed in-house and systems provided by external contractors and other
service providers. To the extent that these external contractors or other service providers become insolvent or fail to support the software
or systems, our operations could be negatively affected. Our facilities also depend upon our information systems for electronic medical
records, accounting, billing, collections, risk management, payroll, and other information. If we experience a reduction in the performance,
reliability, or availability of our information systems, our operations and ability to process transactions and produce timely and accurate
reports could be adversely affected.
Our information systems and applications require
continual maintenance, upgrading, and enhancement to meet our operational needs. We regularly upgrade and expand our information systems’
capabilities. If we experience difficulties with the transition and integration of information systems or are unable to implement, maintain,
or expand our systems properly or in a timely manner, we could suffer from, among other things, operational disruptions, regulatory problems,
working capital disruptions, and increases in administrative expenses.
In addition, we could be subject to cybersecurity
risks such as a cyber-attack that bypasses our information technology security systems and other security incidents that result in security
breaches, including the theft, loss, destruction, or misappropriation of individually identifiable health information subject to HIPAA
and other privacy and security laws, proprietary business information, or other confidential or personal data. Such an incident could
disrupt our information technology systems, impede clinical operations, cause us to incur significant investigation and remediation expenses,
and subject us to litigation, government inquiries, penalties, and reputational damages. Information security and the continued development,
maintenance, and enhancement of our safeguards to protect our systems, data, software, and networks are a priority for us. As security
threats continue to evolve, we may be required to expend significant additional resources to modify and enhance our safeguards and investigate
and remediate any information security vulnerabilities. Cyber-attacks may also impede our ability to exercise sufficient disclosure controls.
If we are subject to cyberattacks or security breaches, our business, financial condition, and results of operations could be adversely
impacted.
Further, our information systems are vulnerable
to damage or interruption from fire, flood, natural disaster, power loss, telecommunications failure, break-ins, and similar events. A
failure to implement our disaster recovery plans or ultimately restore our information systems after the occurrence of any of these events
could have a material adverse effect on our business, financial condition, and results of operations. Because of the confidential health
information that we store and transmit, loss, theft or destruction of electronically-stored information for any reason could expose us
to a risk of regulatory action, litigation, liability to patients and other losses.
Our acquisition strategy exposes us to a
variety of operational, integration, and financial risks, which may have a material adverse effect on our business, financial condition,
and results of operations.
An element of our business strategy is to grow
by acquiring other companies and assets in the mental health and substance abuse treatment industry. We
evaluate potential acquisition opportunities consistent with the normal course of our business. Our ability to complete acquisitions is
subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with the counterparties, our ability
to finance the purchase price and our ability to obtain any licenses or other approvals required to operate the assets to be acquired.
We may not be successful in identifying and consummating suitable acquisitions, which may impede our growth and negatively affect our
results of operations, and may also require a significant amount of management resources. In addition, rapid growth through acquisitions
exposes us to a variety of operational and financial risks. We summarize the most significant of these risks below.
Integration risks. We must integrate our
acquisitions with our existing operations. This process involves various components of our business and the businesses we have acquired,
including the following:
|
·
|
physicians and employees who are not familiar with our operations;
|
|
·
|
patients who may elect to switch to another substance abuse treatment provider;
|
|
·
|
assignment or termination of material contracts, including commercial payor agreements;
|
|
·
|
regulatory compliance programs and state and federal licensing requirements; and
|
|
·
|
disparate operating, information and record keeping systems and technology platforms.
|
The integration of acquisitions with our operations
could be expensive, require significant attention from management, may impose substantial demands on our operations or other projects,
and may impose challenges on the combined business including, without limitation, consistencies in business standards, procedures, policies,
business cultures, internal controls, and compliance. In addition, certain acquisitions require a capital outlay, and the return we achieve
on such invested capital may be less than the return that we could achieve on other projects or investments.
Expected benefits may not materialize.
When evaluating potential acquisition targets, we identify potential synergies and cost savings that we expect to realize upon the successful
completion of the acquisition and the integration of the related operations. We may, however, be unable to achieve or may otherwise never
realize the expected benefits. Our ability to realize the expected benefits from potential cost savings and revenue improvement opportunities
is subject to significant business, economic, and competitive uncertainties, many of which are beyond our control. Such uncertainties
may include changes to regulations impacting the substance abuse treatment and behavioral healthcare industries, reductions in reimbursement
rates from third-party payors, operating difficulties, difficulties obtaining required licenses and permits, patient preferences, changes
in competition, and general economic or industry conditions. If we do not achieve our expected results, it may adversely impact our results
of operations.
Assumptions of unknown liabilities. Businesses
that we acquire may have unknown or contingent liabilities, including, without limitation, liabilities for failure to comply with healthcare
laws and regulations. Although we typically attempt to exclude significant liabilities from our acquisition transactions and seek indemnification
from the sellers of such facilities for at least a portion of these matters, we may experience difficulty enforcing those indemnification
obligations, or we may incur material liabilities in excess of any indemnification for the past activities of acquired facilities. Such
liabilities and related legal or other costs and/or resulting damage to a facility’s reputation could negatively impact our business.
Completing acquisitions. Suitable
acquisitions may not be accomplished due to unfavorable terms. Further, the cost of an acquisition could result in a dilutive effect on
our results of operations, depending on various factors, including the amount paid for an acquired facility, the acquired facility’s
results of operations, the fair value of assets acquired and liabilities assumed, effects of subsequent legislation, and limits on reimbursement
rate increases. In addition, we may have to pay cash, incur additional debt, or issue equity securities to pay for any such acquisition,
which could adversely affect our financial results, result in dilution to our existing stockholders, result in increased fixed obligations,
or impede our ability to manage our operations.
Managing growth. Some of the facilities
we may acquire in the future either had or may have significantly lower operating margins than the facilities we operated prior to the
time of our acquisition thereof or had or may have operating losses prior to such acquisition. If we fail to improve the operating margins
of the facilities we acquire, operate such facilities profitably, or effectively integrate the operations of acquired facilities, our
results of operations could be negatively impacted.
Liquidity risk could impair our ability
to fund operations and meet our obligations as they become due, and our funding sources may be insufficient to fund our future operations
and growth.
Liquidity is essential to our business. Liquidity
risk is the potential that we will be unable to meet our obligations as they come due because of an inability to obtain adequate funding.
An inability to obtain such funding, at competitive rates or at all, could have a substantial negative effect on our liquidity. Our access
to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that
affect us specifically or the healthcare industry or economy in general.
Any substantial, unexpected and/or prolonged change
in the level or cost of liquidity could have a material adverse effect on our ability to fund our future operations and growth, which
could have a material adverse effect on our assets, business, cash flow, condition (financial or otherwise), liquidity, prospects and
results of operations.
The uncertainties associated with the factors
described above raise substantial doubt about our ability to continue as a going concern. In order for us to continue operations beyond
the next twelve months and to be able to discharge our liabilities and commitments in the normal course of business, we must do some or
all of the following: (i) increase the bed counts and other capacities at our facilities; (ii) increase gross revenues while improving
operating margins through cost savings initiatives; and (iii) obtain additional financing. There can be no assurance that we will be able
to achieve any or all of the foregoing objectives.
We will need additional financing to execute
our long-term business plan and fund operations, at which time additional financing may not be available on reasonable terms or at all.
To fund our acquisition development and operational
strategies, we may consider raising additional funds through various financing sources, including the sale of our common or preferred
stock and the procurement of commercial debt financing. However, there can be no assurance that such funds will be available on commercially
reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business
as desired and operating results may be adversely affected. Any debt financing will increase expenses and must be repaid regardless of
operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds,
the percentage ownership of our existing stockholders will be reduced, and our stockholders may experience additional dilution in net
book value per share.
Our ability to obtain needed financing may be
impaired by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability
or cost of future financings. Any deterioration of credit and capital markets may adversely affect our access to sources of funding, and
we cannot be certain that we will have access to adequate capital to fund our acquisition and development strategies when needed. In addition,
substantial sales of our common stock by existing stockholders could adversely affect our stock price and limit our ability to raise capital.
If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient
to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our acquisition strategy and potentially reduce
or even cease operations.
Our business may face significant risks
with respect to future de novo expansion, including the time and costs of identifying new geographic markets, the ability to obtain necessary
licensure and other zoning or regulatory approvals and significant start-up costs including advertising, marketing, and the costs of providing
equipment, furnishings, supplies, and other capital resources.
As part of our growth strategy, we intend to develop
new substance abuse treatment facilities in existing and new markets, either by building a new facility or by acquiring an existing facility
with an alternative use and repurposing it as a substance abuse treatment facility. Such de novo expansion involves significant
risks, including, but not limited to, the following:
|
·
|
the time and costs associated with identifying locations in suitable geographic markets, which may divert
management attention from existing operations;
|
|
·
|
the possibility of changes to comprehensive zoning plans or zoning regulations that imposes additional
restrictions on use or requirements, which could impact our expansion into otherwise suitable geographic markets;
|
|
·
|
the need for significant advertising and marketing expenditures to attract patients;
|
|
·
|
our ability to provide each de novo facility with the appropriate equipment, furnishings, materials,
supplies, and other capital resources;
|
|
·
|
our ability to obtain licensure and accreditation, establish relationships with healthcare providers in
the community, and delays or difficulty in installing our operating and information systems;
|
|
·
|
the costs of evaluating new markets, hiring experienced local physicians, management, and staff, and opening
new facilities, and the time lags between these activities and the generation of sufficient revenue to support the costs of the expansion;
and
|
|
·
|
our ability to finance de novo expansion and possible dilution to our existing stockholders if
our common stock is used as consideration.
|
As a result of these and other risks, there can
be no assurance that we will be able to develop de novo treatment facilities or that a de novo treatment facility will become
profitable. De novo expansion could expose us to liabilities or loss.
Our ability to maintain census is dependent
on a number of factors outside of our control, and if we are unable to maintain census (i.e., our daily patient occupancy), our
business, results of operations and cash flows could be materially adversely affected.
Our revenue is directly impacted by our
ability to maintain census (i.e., the daily patient occupancy of our facilities by bed count). Our ability to maintain census is
dependent on a variety of factors, many of which are outside of our control, including our referral relationships, average length of
stay of our patients, the extent to which third-party payors require preadmission authorization or utilization review controls,
competition in the industry, and the decisions of our patients to seek and commit to treatment.
Further, our census depends upon the effectiveness of our multi-faceted
marketing program. See above, Item 2.01. Risk Factors —“We rely on a multi-faceted sales and marketing program to
attract and enroll patients in our network of facilities. Our sales and marketing program includes the use of digital media, including
our recovery resource websites that provide information about addiction treatment and connect website visitors with our helpline. Any
disruption in our national sales and marketing program, including our digital marketing resources, could have a material adverse effect
on our business, financial condition, and results of operations.” A significant decrease in census could materially adversely
affect our revenue, profitability, and cash flows due to fewer or lower reimbursements received and the additional resources required
to collect accounts receivable and maintain our existing level of business.
Given the patient-driven nature of the substance
abuse treatment sector, our business is dependent on patients seeking and committing to treatment. Although increased awareness and de-stigmatization
of substance abuse treatment in recent years has resulted in more people seeking treatment, the decision of each patient to seek treatment
is ultimately discretionary. In addition, even after the initial decision to seek treatment, our patients may decide at any time to discontinue
treatment and leave our facilities against the advice of our physicians and other treatment professionals. For this reason, among others,
average length of stay can vary among periods without correlating to the overall operating performance of our business. If patients or
potential patients decide not to seek treatment or discontinue treatment early, census could decrease and, as a result, our business,
financial condition, and results of operations could be adversely affected.
We operate in a highly competitive industry
where competition may lead to declines in patient volumes and an increase in labor costs, which could have a material adverse effect on
our business, financial condition, and results of operations.
The substance abuse treatment industry is highly
competitive, and competition among substance abuse treatment providers (including behavioral healthcare facilities) for patients has intensified
in recent years. In 2018, there were approximately 4,200 substance abuse treatment businesses in the United States. There are behavioral
healthcare facilities that provide substance abuse and other mental health treatment services comparable to at least some of the services
offered by our facilities in each of the geographical areas in which we intend to operate. Some of our competitors are owned by tax-supported
governmental agencies or by nonprofit corporations and may have certain financial advantages not available to us, including endowments,
charitable contributions, tax-exempt financing, and exemptions from sales, property, and income taxes. In some markets, certain of our
competitors may have greater financial resources, be better equipped, and offer a broader range of services than we do. Some of our competitors
are local, independent operators or physician groups with strong established reputations within the surrounding communities, which may
adversely affect our ability to attract new patients in markets where we compete with such providers. If our competitors are better able
to attract patients, expand services, or obtain favorable participation agreements with third-party payors, we may experience a decline
in patient volume, which could have a material adverse effect on our business, financial condition and results of operations.
Our operations depend on the efforts, abilities,
and experience of our management team, physicians, and medical support personnel, including our nurses, mental health technicians, therapists,
addiction counselors, pharmacists, and clinical technicians. We compete with other healthcare providers in recruiting and retaining qualified
management, mental health technicians, therapists, nurses, counselors, and other support personnel responsible for the daily operations
of our facilities. The nationwide shortage of nurses and other medical support personnel has been a significant operating issue facing
our industry in recent years. This shortage may require us to enhance our wages and benefits to recruit and retain nurses and other medical
support personnel or require us to hire expensive temporary personnel. If we are unable to attract and retain qualified personnel, we
may be unable to provide our services, the quality of our services may decline, and we could experience a decline in patient volume, all
of which could have a material adverse effect on our business, financial condition, and results of operations.
Increased labor union activity is another factor
that could adversely affect our labor costs. We do not currently employ a unionized labor force. In the event of the independent organization
or unionization of our employees, we may become subject to the risk of labor disputes, strikes, work stoppages, slowdowns, and other labor-relations
matters. Although we are not aware of any union organizing activity at any of our other facilities, we are unable to predict whether any
such activity will take place in the future.
We depend heavily on key executives and
other key management personnel, and the departure of one or more of our key executives or other key management personnel could have a
material adverse effect on our business, financial condition, and results of operations.
The expertise and efforts of our key executives, including our Chief
Executive Officer, Mark Conte, and other management personnel are critical to the success of our business. We currently do not have employment
agreements or non-compete covenants with any of our key executives. The loss of the services of one or more of our key executives could
significantly undermine our management expertise and our ability to provide efficient, quality healthcare services at our facilities.
Furthermore, if one or more of our key executives were to terminate employment with us and engage in a competing business, we would be
subject to increased competition, which could have a material adverse effect on our business, financial condition, and results of operations.
Failure to adequately protect our trademarks
and any other proprietary rights could have a material adverse effect on our business, financial condition, and results of operations.
We intend to develop a trademark portfolio that
we consider to be of significant importance to our business, and we may acquire additional trademarks or other proprietary rights in acquisitions
that we pursue as part of our growth strategy. If the actions we take to establish and protect our trademarks and other proprietary rights
are not adequate to prevent imitation of our services by others or to prevent others from seeking to block sales of our services as an
alleged violation of their trademarks and proprietary rights, it may be necessary for us to initiate or enter into litigation in the future
to enforce our trademark rights or to defend ourselves against claimed infringement of the rights of others. The cost of any such legal
proceedings could be expensive, and such legal proceedings could result in an adverse determination that could have a material adverse
effect on our business, financial condition, and results of operations.
Risks Related to Regulatory Matters
If we fail to comply with the extensive
laws and government regulations impacting our industry, we could suffer penalties, be the subject of federal and state investigations,
or be required to make significant changes to our operations, which may reduce our revenue, increase our costs, and have a material adverse
effect on our business, financial condition, and results of operations.
Healthcare service providers are required to comply
with extensive and complex laws and regulations at the federal, state, and local government levels relating to, among other things:
|
·
|
licensure, certification and accreditation of substance use treatment services;
|
|
·
|
licensure, Clinical Laboratory Improvement Amendments of 1988 (CLIA)
certification and accreditation of laboratory services;
|
|
·
|
handling, administration and distribution of controlled substances;
|
|
·
|
necessity and adequacy of care and quality of services;
|
|
·
|
licensure, certification and qualifications of professional and support personnel;
|
|
·
|
referrals of patients and permissible relationships with physicians and other referral sources;
|
|
·
|
claim submission and collections, including penalties for the submission of, or causing the submission
of, false, fraudulent or misleading claims and the failure to repay overpayments in a timely manner;
|
|
·
|
extensive conditions of participation for Medicare and Medicaid programs
|
|
·
|
consumer protection issues and billing and collection of patient-owed accounts issues;
|
|
·
|
communications with patients and consumers, including laws intended to prevent misleading marketing practices;
|
|
·
|
privacy and security of health-related information, patient personal information and medical records;
|
|
·
|
physical plant planning, construction of new facilities and expansion of existing facilities;
|
|
·
|
activities regarding competitors;
|
|
·
|
U.S. Federal Drug Administration (FDA) laws and regulations related to drugs and medical devices;
|
|
·
|
operational, personnel and quality requirements intended to ensure that clinical testing services are
accurate, reliable and timely;
|
|
·
|
health and safety of employees;
|
|
·
|
handling, transportation and disposal of medical specimens and infectious and hazardous waste;
|
|
·
|
corporate practice of medicine, fee-splitting, self-referral and kickback prohibitions, including recent
state and federal laws intended to eliminate bribes and kickbacks; and
|
|
·
|
the SUPPORT for Patients and Communities Act, which became law on October 24, 2018.
|
A CLIA certificate demonstrates that a testing laboratory meets the
federal regulations for clinical diagnostic testing, ensuring quality and safety in the laboratory and laboratory results. The Clinical
Laboratory Improvement Amendments of 1988 are administered by the Centers for Medicare & Medicaid Services (CMS).
The United States has recently enacted the Eliminating
Kickbacks in Recovery Act of 2018 (EKRA) to create a new federal crime for knowingly and willfully: (1) soliciting or receiving any remuneration
in return for referring a patient to a recovery home, clinical treatment facility, or laboratory; or (2) paying or offering any remuneration
to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility, or laboratory.
Certain states, including Florida, have enacted similar laws, or will likely enact similar laws in the future.
As a provider of addiction treatment services,
we are subject to governmental investigations and potential claims and lawsuits by patients, employees, and others, which may increase
our costs, cause reputational issues, and have a material adverse effect on our business, financial condition, results of operations,
and reputation.
Given the addiction and mental health issues of
patients and the nature of the services provided, the substance abuse treatment industry is heavily regulated by governmental agencies
and involves significant risk of liability. We and others in our industry are exposed to the risk of governmental investigations, regulatory
actions, and whistleblower lawsuits or other claims against us and our physicians and other professionals arising out of our day to day
business operations, including, without limitation, patient treatment at our facilities and relationships with healthcare providers that
may refer patients to us. Addressing any investigation, lawsuit, or other claim may distract management and divert resources, even if
we ultimately prevail. Regardless of the outcome of any such investigation, lawsuit, or claim, the publicity and potential risks associated
with the investigation, lawsuit, or claim could harm our reputation or the reputation of our management and negatively impact the perception
of the Company by patients, investors, or others and could have a materially adverse impact on our financial condition and results of
operations. Fines, restrictions, penalties, and damages imposed as a result of an investigation or a successful lawsuit or claim that
is not covered by, or is in excess of, our insurance coverage may increase our costs and reduce our profitability. Our insurance premiums
may increase year over year, and insurance coverage may not be available at a reasonable cost in the future, especially given the significant
increase in insurance premiums generally experienced in the healthcare industry.
We also are subject to an inherent risk of potential
medical malpractice lawsuits and other potential claims or legal actions in the ordinary course of business. From time to time, we may
be subject to claims alleging that we did not properly treat or care for a patient, that we failed to follow internal or external procedures
that resulted in death or harm to a patient, or that our employees mistreated our patients, resulting in death or harm. Any deficiencies
in the quality of care provided by our employees could expose us to governmental investigations and lawsuits from our patients. Some of
these actions may involve large claims as well as significant defense costs. We cannot predict the outcome of these lawsuits or the effect
that findings in such lawsuits may have on us. In an effort to resolve one or more of these matters, we may decide to negotiate a settlement,
and amounts we pay to settle any of these matters may be material. All professional and general liability insurance we purchase is subject
to policy limitations. We believe that, based on our past experience, our insurance coverage is adequate considering the claims arising
from the operation of our facilities. While we continuously monitor our coverage, our ultimate liability for professional and general
liability claims could change materially from our current estimates. If such policy limitations should be partially or fully exhausted
in the future or if payments of claims exceed our estimates or are not covered by our insurance, they could have a material adverse effect
on our financial condition and results of operations.
We intend to care for a large number of patients
with complex medical conditions, special needs, or who require a substantial level of care and supervision. There is an inherent risk
that our patients could be harmed while in treatment, whether through negligence, by accident, or otherwise. Further, patients might engage
in behavior that results in harm to themselves, our employees, or to one or more other individuals. Patient safety incidents may result
in regulatory enforcement actions, negative press about us, or the addiction treatment industry generally, as well as in lawsuits filed
by plaintiff’s lawyers against us. These developments could diminish public perception of the quality of our services, which in
turn could lead to a loss of patient placements and referrals, resulting in a material adverse effect on our business, results of operations,
and financial condition.
Failure to comply with these laws and regulations
could result in the imposition of significant civil or criminal penalties, loss of licenses or certifications, or require us to change
our operations, or in the ultimate exclusion of one or more facilities from participation in Medicare, Medicaid, and other federal and
state healthcare programs, any of which may have a material adverse effect on our business, financial condition, and results of operations.
Both federal and state government agencies, as well as commercial payors, have heightened and coordinated civil and criminal enforcement
efforts as part of numerous ongoing investigations of healthcare organizations.
We endeavor to comply with all applicable legal
and regulatory requirements; however, there is no guarantee that we will be able to adhere to all of the complex government regulations
that apply to our business. We seek to structure all of our relationships with referral sources and patients to comply with applicable
anti-kickback laws, physician self-referral laws, fee-splitting laws, and state corporate practice of medicine prohibitions. We monitor
these laws and their implementing regulations and implement changes as necessary. However, the laws and regulations in these areas are
complex and often subject to varying interpretations. For example, if an enforcement agency were to challenge the compensation paid under
our contracts with professional physician groups, we could be required to change our practices, face criminal or civil penalties, pay
substantial fines, or otherwise experience a material adverse effect as a result.
We may be required to spend substantial
amounts to comply with legislative and regulatory initiatives relating to privacy and security of patient health information.
There currently are numerous legislative and regulatory
initiatives at the federal and state levels addressing patient privacy and security concerns. For example, the regulations contained in
42 CFR Part 2 (the “Part 2 Regulations”) serve to protect patient records created by federally assisted programs for the treatment
of substance use disorders (SUD) and are administered by the Substance Abuse and Mental Health Services Administration (SAMHSA) branch
of the U.S. Department of Health and Human Services (HHS). Specifically, the Part 2 Regulations restrict the disclosure, and regulate
the security, of our patient’s identifiable information related to substance abuse. These requirements apply to any of our facilities
that receive federal assistance, which is interpreted broadly to include facilities licensed, certified or registered by a federal agency.
In addition, the federal privacy and security
regulations issued under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) require our facilities to comply with
extensive requirements on the use and disclosure of protected health information and to implement and maintain administrative, physical,
and technical safeguards to protect the security of such information. Additional security requirements apply to electronic protected health
information. These regulations also provide patients with substantive rights with respect to their health information and impose substantial
administrative obligations on our facilities, including the requirement to enter into written agreements with contractors, known as business
associates, to whom our programs disclose protected health information. We may be subject to penalties as a result of a business associate
violating HIPAA, if the business associate is found to be our agent. Covered entities must notify individuals, HHS and, in some cases,
the media of breaches involving unsecured protected health information. HHS and state attorneys general are authorized to enforce these
regulations. Violations of the HIPAA privacy and security regulations may result in significant civil and criminal penalties, and data
breaches and other HIPAA violations may give rise to class action lawsuits by affected patients under state law.
Our programs remain subject to any privacy-related
federal or state laws that are more restrictive than the HIPAA privacy and security regulations. These laws vary by state and may impose
additional requirements and penalties. For example, some states impose strict restrictions on the use and disclosure of health information
pertaining to mental health or substance abuse. Further, most states have enacted laws and regulations that require us to notify affected
individuals in the event of a data breach involving individually identifiable information. In addition, the Federal Trade Commission may
use its consumer protection authority to initiate enforcement actions in response to data breaches or other privacy or security lapses.
As public attention is drawn to issues related
to the privacy and security of medical and other personal information, federal and state authorities may increase enforcement efforts
and seek to impose harsher penalties, as well as revise and expand laws or enact new laws concerning these topics. Compliance with current
as well as any newly established provisions or interpretations of existing requirements will require us to expend significant resources.
Increased focus on privacy and security issues by enforcement authorities may increase the overall risk that our substance abuse treatment
facilities may be found lacking under federal and state privacy and security laws and regulations.
Our treatment facilities operate in an environment
of increasing state and federal enforcement activity and private litigation targeted at healthcare providers.
Both federal and state government agencies have
heightened and coordinated their civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies
and various segments of the healthcare industry. These investigations relate to a wide variety of topics, including relationships with
physicians, billing practices and use of controlled substances. The Affordable Care Act included an additional $350 million of federal
funding over ten years to fight healthcare fraud, waste, and abuse, including $10 million for each of federal fiscal years 2018 through
2020. The HHS Office of Inspector General and the Department of Justice have established national enforcement initiatives that focus on
specific billing practices or other suspected areas of abuse. Some of our facilities participate in Medicare or Medicaid and, therefore,
could be subject to government investigation.
Even if a facility does not currently bill Medicare
or Medicaid for substance use treatment services, there is a risk that specific investigative initiatives or new laws such as EKRA could
result in investigations or enforcement actions that include or affect our treatment services, laboratory service providers, or marketing
operations. In addition, increased government enforcement activities, even if not directed towards our treatment facilities or laboratories,
also increase the risk that our facilities, physicians, and other clinicians furnishing services in our facilities, or our executives
and directors, could be named as defendants in private litigation such as state or federal false claims act cases or consumer protection
cases, or could become the subject of complaints at the various state and federal agencies that have jurisdiction over our operations.
Any governmental investigations, private litigation,
or other legal proceedings involving any of our facilities, laboratories, executives, or directors, even if we ultimately prevail, could
result in significant expense, adversely affect our reputation or profitability and materially adversely affect our financial condition
and results of operation. In addition, we may be required to make changes in our laboratory, substance use treatment services or marketing
or other operational practices as a result of an adverse determination in any governmental enforcement action, private litigation or other
legal proceeding, which could materially adversely affect our business and results of operations.
Changes to federal, state, and local regulations,
as well as different or new interpretations of existing regulations, could adversely affect our operations and profitability.
Because our treatment programs and operations
are regulated at federal, state, and local levels, we could be affected by regulatory changes in different regional markets. Increases
in the costs of regulatory compliance and the risks of noncompliance may increase our operating costs, and we may not be able to recover
these increased costs, which may adversely affect our results of operations and profitability.
Many of the current laws and regulations are relatively
new, including the EKRA and recent state laws intended to prohibit deceptive marketing practices in the addiction treatment industry.
Thus, we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. Evolving interpretations
or enforcement of these laws and regulations could subject our current or past practices to allegations of impropriety or illegality or
could require us to make changes in our treatment facilities, equipment, personnel, services or capital expenditure programs. A determination
that we have violated these laws or a public announcement that we are being investigated for possible violations of these laws could adversely
affect our business, operating results, and overall reputation in the marketplace.
In addition, federal, state, and local regulations
may be enacted that impose additional requirements on our facilities. Adoption of legislation or the creation of new regulations affecting
our facilities could increase our operating costs, restrain our growth or limit us from taking advantage of opportunities presented and
could have a material adverse effect on our business, financial condition and results of operations. Adverse changes in existing comprehensive
zoning plans or zoning regulations that impose additional restrictions on the use of, or requirements applicable to, our facilities may
affect our ability to operate our existing facilities or acquire new facilities, which may adversely affect our results of operations
and profitability.
We are subject to uncertainties regarding
the direction and impact of healthcare reform efforts, particularly efforts to repeal or significantly modify the Affordable Care Act.
The healthcare industry is subject to changing
political, regulatory, scientific and technological changes, which have resulted and may continue to result in initiatives intended to
reform the industry. The most prominent of recent efforts, the Affordable Care Act, as currently structured, provides for increased access
to coverage for healthcare and seeks to reduce healthcare-related expenses. Among other mandates, it requires all new small group and
individual market health plans to cover ten essential health benefit categories, which currently include substance abuse addiction and
mental health disorder services. However, efforts by the executive branch and some members of Congress to repeal or make fundamental changes
to the Affordable Care Act, its implementation and/or its interpretation have cast significant uncertainty on the future of the law. For
example, in 2017, Congress eliminated the penalties associated with the individual mandate, effective January 2019, which may affect rates
of insurance coverage.
We are unable to predict the full impact of the
Affordable Care Act and related regulations or the impact of its repeal or modification on our operations in light of the uncertainty
regarding whether or how the law will be changed, what alternative reforms, if any, may be enacted or what other actions may be taken.
Any government efforts related to health reform may have an adverse effect on our business, results of operations, cash flow, capital
resources and liquidity. Moreover, the general uncertainty of health reform efforts, particularly if Congress elects to repeal provisions
of the Affordable Care Act but delays the implementation of repeal or fails to enact replacement provisions at the time of repeal, may
negatively impact our payment sources or demand for our services.
The expansion of health insurance coverage under
the Affordable Care Act has been beneficial to the substance abuse treatment industry. This is due, in part, to higher demand for treatment
services, which resulted from the requirement that small group and individual market plans comply with the requirements of the Mental
Health Parity and Addiction Equity Act of 2008, which previously applied only to group health plans and group insurers. The 21st Century
Cures Act requires development of an action plan for enhanced enforcement of mental health parity requirements and additional
guidance for health plans regarding compliance with parity laws. Increased demand for treatment services may bring new competitors to
the market, some of which may be better capitalized and have greater market penetration than we do. In addition, we expect increased demand
for substance use treatment services to increase the demand for case managers, therapists, medical technicians and others with clinical
expertise in substance abuse treatment, which may make it more difficult to adequately staff our substance abuse treatment facilities
and could significantly increase our costs in delivering treatment, which may adversely affect both our operations and profitability.
One of the many impacts of the Affordable Care
Act and subsequent legislation has been a dramatic increase in payment reform efforts by federal and state government payors as well as
commercial payors. These efforts take many forms, including the growth of accountable care organizations, pay-for-performance bonus arrangements,
partial capitation arrangements and the bundling of services into a single payment. One result of these efforts is that more risk of the
overall cost of care is being transferred to providers. As institutional providers and their affiliated physicians assume more risk for
the cost of care, we expect more services to be furnished within provider networks that are formed for these types of payment arrangements.
Our ability to compete and to retain our traditional sources of patients may be adversely affected by our exclusion from such networks
or our inability to be included in such networks.
Change of ownership or change of control
requirements imposed by state and federal licensure and certification agencies as well as third-party payors may limit our ability to
timely realize opportunities, adversely affect our licenses and certifications, interrupt our cash flows, and adversely affect our profitability.
State licensure laws and many federal healthcare
programs (where applicable) impose a number of obligations on healthcare providers undergoing a change of ownership or change of control
transaction. These requirements may require new license applications as well as notices given a fixed number of days prior to the closing
of affected transactions. These provisions require us to be proactive when considering both internal restructuring and acquisitions of
other treatment companies. Failure to provide such notices or to submit required paperwork can adversely affect licensure on a going forward
basis, can subject the parties to penalties and can adversely affect our ability to operate our facilities.
Many third-party payor agreements, including government
payor programs, also have change of ownership or change of control provisions. Such provisions generally include a prior notice provision
as well as require the consent of the payor in order to continue the terms of the payor agreement. Abiding by the terms of such provisions
may reopen pricing negotiations with third-party payors where the provider currently has favorable reimbursement terms as compared to
the market. Failure to comply with the terms of such provisions can result in a breach of the underlying third-party payor agreement.
As substance abuse treatment coverage and payment reform initiatives continue to expand, these types of provisions could have a significant
impact on our ability to realize opportunities and could adversely affect our cash flows and profitability.
State efforts to regulate the construction
or expansion of healthcare facilities could impair our ability to operate and expand our facilities.
The construction of new healthcare facilities,
the expansion, transfer, or change of ownership of existing facilities and the addition of new beds, services, or equipment may be subject
to state laws that require a determination of public need and prior approval by state regulatory agencies under CON laws or other healthcare
planning initiatives. The National Health Planning and Resources Development Act of 1974 requires the withholding of federal funds from
states that fail to adopt certificate-of-need (CON) laws regulating healthcare facilities.
CON laws require healthcare providers wishing
to open or expand a healthcare facility to first prove to a regulatory body that the community needs the planned services. Review of CONs
and similar proposals may be lengthy and may require public hearings. States in which we now or may in the future operate may require
CONs under certain circumstances not currently applicable to us or may impose standards and other health planning requirements upon us.
Violation of these state laws and our failure to obtain any necessary state approval could:
|
·
|
result in our inability to acquire a targeted facility, complete a desired expansion or make a desired
replacement; or
|
|
·
|
result in the revocation of a facility’s license or imposition of civil or criminal penalties on
us, any of which could have a material adverse effect on our business, financial condition and results of operations.
|
If we are unable
to obtain required regulatory, zoning, or other required approvals for renovations and expansions, our growth may be restrained, and our
operating results may be adversely affected. In the past, we have not experienced any material adverse effects from such requirements,
but we cannot predict their future impact on our operations.
We could
face risks associated with, or arising out of, environmental, health, and safety laws and regulations.
We are subject
to various federal, state, and local laws and regulations that:
|
·
|
regulate certain activities and operations that may have environmental or health and safety effects, such
as the generation, handling and disposal of medical and pharmaceutical wastes;
|
|
·
|
impose liability for costs of cleaning up, and damages to natural resources from, past spills, waste disposals
on and off-site and other releases of hazardous materials or regulated substances; and
|
|
·
|
regulate workplace safety.
|
Compliance with these laws and regulations could
increase our costs of operation. Violation of these laws may subject us to significant fines, penalties, or disposal costs, which could
negatively impact our results of operations, financial position, or cash flows. We could be responsible for the investigation and remediation
of environmental conditions at currently or formerly operated or leased sites, as well as for associated liabilities, including liabilities
for natural resource damages, third-party property damage, or personal injury resulting from lawsuits that could be brought by the government
or private litigants relating to our operations, the operations of our facilities, or the land on which our facilities are located.
Liability for contamination under certain environmental
laws can be imposed on current or past owners or operators of a site without regard to fault. Therefore, we may be subject to these liabilities
regardless of whether we lease or own the facility or such environmental conditions were created by us, a prior owner or tenant, a third-party,
or a neighboring facility whose operations may have affected such facility or land. We cannot assure you that environmental conditions
relating to our prior, existing, or future sites or those of predecessor companies whose liabilities we may have assumed or acquired will
not have a material adverse effect on our business.
Changes in tax laws or their interpretations,
or becoming subject to additional U.S., state or local taxes, could negatively affect our business, financial condition, and results of
operations.
We are subject to tax liabilities, including federal
and state taxes such as excise, sales/use, payroll, franchise, withholding, and ad valorem taxes. Changes in tax laws or their interpretations
could decrease the amount of revenues we receive, the value of any tax loss carryforwards and tax credits recorded on our balance sheet
and the amount of our cash flow, and have a material adverse impact on our business, financial condition and results of operations. Some
of our tax liabilities are subject to periodic audits by the respective taxing authority which could increase our tax liabilities. If
we are required to pay additional taxes, our costs would increase.
COVID-19 RELATED RISKS
The coronavirus may negatively impact sourcing
and manufacturing of the products that we plan to sell as well as consumer spending, which could adversely affect our business, results
of operations and financial condition.
In December 2019, a novel strain of coronavirus
was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including
the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public
Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared
a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020
the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted
in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect our
business, results of operations and financial condition.
The ultimate extent of the impact of any epidemic,
pandemic, or other health crisis on our business, financial condition and results of operations will depend on future developments, which
are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic
or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential
impacts of an epidemic, pandemic, or other health crisis, such as COVID-19, could therefore materially and adversely affect our business,
financial condition, and results of operations.
The effect of the COVID-19 may adversely
affect occupancy at our rehabilitation facility.
The coronavirus may materially impact occupancy
rates at our facility and the availability of our rehabilitation services, which would adversely affect our business, results of operations
and financial condition.
The outbreak of COVID-19 has resulted in a widespread
health crisis that could adversely affect the economies and financial markets in which operate and could significant increase the risk
factors described above and herein.