Form: 10-K/A

Annual report pursuant to Section 13 and 15(d)

August 9, 2023

true2022FY0001083446P3Yhttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrentP1YP5Y00010834462022-01-012022-12-3100010834462022-06-30iso4217:USD00010834462023-02-16xbrli:shares00010834462022-12-3100010834462021-12-310001083446us-gaap:SeriesAPreferredStockMember2021-12-31iso4217:USDxbrli:shares0001083446us-gaap:SeriesAPreferredStockMember2022-12-310001083446us-gaap:SeriesBPreferredStockMember2021-12-310001083446us-gaap:SeriesBPreferredStockMember2022-12-310001083446ameh:PrimaryBeneficiaryMember2022-12-310001083446ameh:PrimaryBeneficiaryMember2021-12-310001083446ameh:HealthCareCapitationRevenueMember2022-01-012022-12-310001083446ameh:HealthCareCapitationRevenueMember2021-01-012021-12-310001083446ameh:HealthCareCapitationRevenueMember2020-01-012020-12-310001083446us-gaap:HealthCareOtherMember2022-01-012022-12-310001083446us-gaap:HealthCareOtherMember2021-01-012021-12-310001083446us-gaap:HealthCareOtherMember2020-01-012020-12-310001083446us-gaap:ManagementServiceMember2022-01-012022-12-310001083446us-gaap:ManagementServiceMember2021-01-012021-12-310001083446us-gaap:ManagementServiceMember2020-01-012020-12-310001083446us-gaap:HealthCarePatientServiceMember2022-01-012022-12-310001083446us-gaap:HealthCarePatientServiceMember2021-01-012021-12-310001083446us-gaap:HealthCarePatientServiceMember2020-01-012020-12-310001083446us-gaap:ProductAndServiceOtherMember2022-01-012022-12-310001083446us-gaap:ProductAndServiceOtherMember2021-01-012021-12-310001083446us-gaap:ProductAndServiceOtherMember2020-01-012020-12-3100010834462021-01-012021-12-3100010834462020-01-012020-12-310001083446ameh:MezzanineMember2019-12-310001083446us-gaap:CommonStockMember2019-12-310001083446us-gaap:AdditionalPaidInCapitalMember2019-12-310001083446us-gaap:RetainedEarningsMember2019-12-310001083446us-gaap:NoncontrollingInterestMember2019-12-3100010834462019-12-310001083446ameh:MezzanineMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberameh:MezzanineMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommonStockMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AdditionalPaidInCapitalMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RetainedEarningsMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:NoncontrollingInterestMember2019-12-310001083446srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001083446ameh:MezzanineMember2020-01-012020-12-310001083446us-gaap:RetainedEarningsMember2020-01-012020-12-310001083446us-gaap:NoncontrollingInterestMember2020-01-012020-12-310001083446us-gaap:CommonStockMember2020-01-012020-12-310001083446us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001083446ameh:MezzanineMember2020-12-310001083446us-gaap:CommonStockMember2020-12-310001083446us-gaap:AdditionalPaidInCapitalMember2020-12-310001083446us-gaap:RetainedEarningsMember2020-12-310001083446us-gaap:NoncontrollingInterestMember2020-12-3100010834462020-12-310001083446ameh:MezzanineMember2021-01-012021-12-310001083446us-gaap:RetainedEarningsMember2021-01-012021-12-310001083446us-gaap:NoncontrollingInterestMember2021-01-012021-12-310001083446us-gaap:CommonStockMember2021-01-012021-12-310001083446us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001083446ameh:MezzanineMember2021-12-310001083446us-gaap:CommonStockMember2021-12-310001083446us-gaap:AdditionalPaidInCapitalMember2021-12-310001083446us-gaap:RetainedEarningsMember2021-12-310001083446us-gaap:NoncontrollingInterestMember2021-12-310001083446ameh:MezzanineMemberus-gaap:NoncontrollingInterestMember2022-01-012022-12-310001083446us-gaap:RetainedEarningsMember2022-01-012022-12-310001083446us-gaap:NoncontrollingInterestMember2022-01-012022-12-310001083446us-gaap:CommonStockMember2022-01-012022-12-310001083446us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310001083446ameh:MezzanineMember2022-01-012022-12-310001083446ameh:MezzanineMember2022-12-310001083446us-gaap:CommonStockMember2022-12-310001083446us-gaap:AdditionalPaidInCapitalMember2022-12-310001083446us-gaap:RetainedEarningsMember2022-12-310001083446us-gaap:NoncontrollingInterestMember2022-12-310001083446srt:ScenarioPreviouslyReportedMember2022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-12-310001083446srt:ScenarioPreviouslyReportedMember2022-01-012022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-01-012022-12-310001083446ameh:MezzanineMembersrt:ScenarioPreviouslyReportedMember2022-01-012022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberameh:MezzanineMember2022-01-012022-12-310001083446srt:ScenarioPreviouslyReportedMemberus-gaap:RetainedEarningsMember2022-01-012022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2022-01-012022-12-310001083446us-gaap:NoncontrollingInterestMembersrt:ScenarioPreviouslyReportedMember2022-01-012022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:NoncontrollingInterestMember2022-01-012022-12-310001083446srt:ScenarioPreviouslyReportedMemberus-gaap:RetainedEarningsMember2022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2022-12-310001083446us-gaap:NoncontrollingInterestMembersrt:ScenarioPreviouslyReportedMember2022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:NoncontrollingInterestMember2022-12-310001083446srt:ScenarioPreviouslyReportedMember2021-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-12-310001083446srt:ScenarioPreviouslyReportedMember2021-01-012021-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-01-012021-12-310001083446ameh:MezzanineMembersrt:ScenarioPreviouslyReportedMember2021-01-012021-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberameh:MezzanineMember2021-01-012021-12-310001083446srt:ScenarioPreviouslyReportedMemberus-gaap:RetainedEarningsMember2021-01-012021-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2021-01-012021-12-310001083446srt:ScenarioPreviouslyReportedMemberus-gaap:RetainedEarningsMember2021-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2021-12-310001083446srt:ScenarioPreviouslyReportedMember2020-01-012020-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2020-01-012020-12-310001083446ameh:MezzanineMembersrt:ScenarioPreviouslyReportedMember2020-01-012020-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberameh:MezzanineMember2020-01-012020-12-310001083446srt:ScenarioPreviouslyReportedMemberus-gaap:RetainedEarningsMember2020-01-012020-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2020-01-012020-12-310001083446srt:ScenarioPreviouslyReportedMember2020-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2020-12-310001083446srt:ScenarioPreviouslyReportedMemberus-gaap:RetainedEarningsMember2020-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMemberus-gaap:RetainedEarningsMember2020-12-310001083446ameh:APAMHMedicalCorporationMembersrt:AffiliatedEntityMember2019-09-300001083446ameh:APAMHMedicalCorporationMembersrt:AffiliatedEntityMember2019-09-012019-09-30xbrli:pure0001083446ameh:APAMHMedicalCorporationMemberameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:SeriesAPreferredStockMembersrt:AffiliatedEntityMember2019-09-012019-09-300001083446ameh:APAMHMedicalCorporationMemberameh:AlliedPacificOfCaliforniaIPAMembersrt:AffiliatedEntityMember2022-01-012022-12-310001083446ameh:APAMHMedicalCorporationMemberameh:AlliedPacificOfCaliforniaIPAMembersrt:AffiliatedEntityMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMembersrt:AffiliatedEntityMember2019-09-300001083446ameh:AlliedPacificOfCaliforniaIPAMembersrt:AffiliatedEntityMember2019-09-012019-09-300001083446ameh:AlliedPacificOfCaliforniaIPAMembersrt:AffiliatedEntityMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApolloMedicalHoldingsIncMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApolloMedicalHoldingsIncMember2021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ConcourseDiagnosticSurgeryCenterLlcMember2022-12-310001083446ameh:DmgMember2022-12-310001083446ameh:Tag8MedicalInvestmentGroupLLCMember2022-12-310001083446ameh:Tag8MedicalInvestmentGroupLLCMember2022-08-310001083446ameh:Tag6MedicalInvestmentGroupLLCMember2022-08-310001083446ameh:AccessPrimaryCareMedicalGroupMember2021-07-310001083446ameh:ApolloSunLabsManagementLLCMember2021-08-010001083446ameh:ApolloSunLabsManagementLLCMember2021-08-012021-08-010001083446ameh:ApolloSunLabsManagementLLCMember2022-12-310001083446ameh:OrmaHealthIncAndProviderGrowthSolutionsLLCMember2022-01-270001083446ameh:JadeHealthCareMedicalGroupIncMember2022-04-190001083446ameh:ValleyOaksMedicalGroupMember2022-10-140001083446ameh:AAMGMember2022-10-31ameh:segment0001083446us-gaap:CertificatesOfDepositMember2022-01-012022-12-310001083446us-gaap:CertificatesOfDepositMember2022-12-310001083446us-gaap:CertificatesOfDepositMember2021-12-310001083446ameh:UniversalCareIncMemberameh:UniversalCareAcquisitionPartnersLlcMember2020-04-300001083446ameh:ClinigenceHoldingsIncMember2021-09-012021-09-300001083446ameh:CommercialMember2022-01-012022-12-310001083446ameh:CommercialMember2021-01-012021-12-310001083446ameh:CommercialMember2020-01-012020-12-310001083446ameh:MedicareMember2022-01-012022-12-310001083446ameh:MedicareMember2021-01-012021-12-310001083446ameh:MedicareMember2020-01-012020-12-310001083446ameh:MedicaidMember2022-01-012022-12-310001083446ameh:MedicaidMember2021-01-012021-12-310001083446ameh:MedicaidMember2020-01-012020-12-310001083446ameh:OtherThirdPartiesMember2022-01-012022-12-310001083446ameh:OtherThirdPartiesMember2021-01-012021-12-310001083446ameh:OtherThirdPartiesMember2020-01-012020-12-310001083446ameh:PayorAMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2021-01-012021-12-310001083446ameh:PayorAMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-01-012020-12-310001083446ameh:PayorBMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-01-012020-12-310001083446ameh:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2022-01-012022-12-310001083446ameh:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2021-01-012021-12-310001083446ameh:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-01-012020-12-310001083446us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberameh:PayorDMember2021-01-012021-12-310001083446us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberameh:PayorDMember2020-01-012020-12-310001083446ameh:PayorCMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-12-310001083446ameh:PayorEMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-12-310001083446ameh:PayorEMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001083446ameh:PayorFMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001083446srt:MinimumMember2022-01-012022-12-310001083446srt:MaximumMember2022-01-012022-12-310001083446us-gaap:FairValueInputsLevel1Member2022-12-310001083446us-gaap:FairValueInputsLevel2Member2022-12-310001083446us-gaap:FairValueInputsLevel3Member2022-12-310001083446us-gaap:FairValueInputsLevel1Memberameh:ContingentEquitySecuritiesMember2022-12-310001083446us-gaap:FairValueInputsLevel2Memberameh:ContingentEquitySecuritiesMember2022-12-310001083446us-gaap:FairValueInputsLevel3Memberameh:ContingentEquitySecuritiesMember2022-12-310001083446ameh:ContingentEquitySecuritiesMember2022-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel1Member2022-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel2Member2022-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel3Member2022-12-310001083446us-gaap:InterestRateSwapMember2022-12-310001083446ameh:APCMGMemberus-gaap:FairValueInputsLevel1Member2022-12-310001083446us-gaap:FairValueInputsLevel2Memberameh:APCMGMember2022-12-310001083446ameh:APCMGMemberus-gaap:FairValueInputsLevel3Member2022-12-310001083446ameh:APCMGMember2022-12-310001083446us-gaap:FairValueInputsLevel1Memberameh:AAMGMember2022-12-310001083446us-gaap:FairValueInputsLevel2Memberameh:AAMGMember2022-12-310001083446ameh:AAMGMemberus-gaap:FairValueInputsLevel3Member2022-12-310001083446ameh:AAMGMember2022-12-310001083446us-gaap:FairValueInputsLevel1Memberameh:VOMGMember2022-12-310001083446us-gaap:FairValueInputsLevel2Memberameh:VOMGMember2022-12-310001083446us-gaap:FairValueInputsLevel3Memberameh:VOMGMember2022-12-310001083446ameh:VOMGMember2022-12-310001083446us-gaap:FairValueInputsLevel1Member2021-12-310001083446us-gaap:FairValueInputsLevel2Member2021-12-310001083446us-gaap:FairValueInputsLevel3Member2021-12-310001083446us-gaap:FairValueInputsLevel1Memberameh:ContingentEquitySecuritiesMember2021-12-310001083446us-gaap:FairValueInputsLevel2Memberameh:ContingentEquitySecuritiesMember2021-12-310001083446us-gaap:FairValueInputsLevel3Memberameh:ContingentEquitySecuritiesMember2021-12-310001083446ameh:ContingentEquitySecuritiesMember2021-12-310001083446us-gaap:WarrantMemberus-gaap:FairValueInputsLevel1Member2021-12-310001083446us-gaap:FairValueInputsLevel2Memberus-gaap:WarrantMember2021-12-310001083446us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2021-12-310001083446us-gaap:WarrantMember2021-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel1Member2021-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel2Member2021-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel3Member2021-12-310001083446us-gaap:InterestRateSwapMember2021-12-310001083446ameh:APCMGMemberus-gaap:FairValueInputsLevel1Member2021-12-310001083446us-gaap:FairValueInputsLevel2Memberameh:APCMGMember2021-12-310001083446ameh:APCMGMemberus-gaap:FairValueInputsLevel3Member2021-12-310001083446ameh:APCMGMember2021-12-310001083446ameh:AAMGMember2022-01-012022-12-310001083446ameh:VOMGMember2022-01-012022-12-31ameh:units0001083446ameh:HealthcareDeliveryMember2022-09-300001083446ameh:PacificAmbulatorySurgeryCenterLlcMember2019-01-012019-12-310001083446ameh:PacificAmbulatorySurgeryCenterLlcMember2021-01-012021-12-310001083446ameh:PacificAmbulatorySurgeryCenterLlcMember2022-01-012022-12-310001083446us-gaap:InterestRateSwapMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-12-310001083446ameh:PerMemberPerMonthManagedCareContractMember2022-01-012022-12-310001083446ameh:CMSMember2022-01-012022-12-310001083446ameh:RiskPoolSettlementsAndIncentivesMember2022-01-012022-12-310001083446us-gaap:ManagementServiceMembersrt:MinimumMember2022-01-012022-12-310001083446srt:MaximumMemberus-gaap:ManagementServiceMember2022-01-012022-12-310001083446ameh:NextGenerationACOModelParticipationAgreementMember2021-12-310001083446ameh:AccountsPayableAndAccruedExpensesMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:UniversalCareAcquisitionPartnersLlcMember2020-04-300001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:UniversalCareIncMember2020-04-012020-04-300001083446ameh:AAMGMember2022-12-310001083446ameh:AccessPrimaryCareMedicalGroupMember2022-12-310001083446ameh:ApolloSunLabsManagementLLCMember2021-08-012021-08-310001083446ameh:DmgMember2021-10-012021-10-310001083446us-gaap:LandMember2022-12-310001083446us-gaap:LandMember2021-12-310001083446us-gaap:BuildingMembersrt:MinimumMember2022-01-012022-12-310001083446us-gaap:BuildingMembersrt:MaximumMember2022-01-012022-12-310001083446us-gaap:BuildingMember2022-12-310001083446us-gaap:BuildingMember2021-12-310001083446us-gaap:ComputerEquipmentMembersrt:MinimumMember2022-01-012022-12-310001083446srt:MaximumMemberus-gaap:ComputerEquipmentMember2022-01-012022-12-310001083446us-gaap:ComputerEquipmentMember2022-12-310001083446us-gaap:ComputerEquipmentMember2021-12-310001083446srt:MinimumMemberus-gaap:FurnitureAndFixturesMember2022-01-012022-12-310001083446srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2022-01-012022-12-310001083446us-gaap:FurnitureAndFixturesMember2022-12-310001083446us-gaap:FurnitureAndFixturesMember2021-12-310001083446us-gaap:ConstructionInProgressMember2022-12-310001083446us-gaap:ConstructionInProgressMember2021-12-310001083446us-gaap:LeaseholdImprovementsMembersrt:MinimumMember2022-01-012022-12-310001083446srt:MaximumMemberus-gaap:LeaseholdImprovementsMember2022-01-012022-12-310001083446us-gaap:LeaseholdImprovementsMember2022-12-310001083446us-gaap:LeaseholdImprovementsMember2021-12-310001083446us-gaap:TrademarksMember2021-12-310001083446us-gaap:TrademarksMember2022-01-012022-12-310001083446us-gaap:TrademarksMember2022-12-310001083446ameh:NetworkRelationshipsMembersrt:MinimumMember2022-01-012022-12-310001083446srt:MaximumMemberameh:NetworkRelationshipsMember2022-01-012022-12-310001083446ameh:NetworkRelationshipsMember2021-12-310001083446ameh:NetworkRelationshipsMember2022-01-012022-12-310001083446ameh:NetworkRelationshipsMember2022-12-310001083446ameh:ManagementContractsMember2022-01-012022-12-310001083446ameh:ManagementContractsMember2021-12-310001083446ameh:ManagementContractsMember2022-12-310001083446ameh:MemberRelationshipsMember2022-01-012022-12-310001083446ameh:MemberRelationshipsMember2021-12-310001083446ameh:MemberRelationshipsMember2022-12-310001083446ameh:PatientManagementPlatformMember2022-01-012022-12-310001083446ameh:PatientManagementPlatformMember2021-12-310001083446ameh:PatientManagementPlatformMember2022-12-310001083446us-gaap:TrademarksAndTradeNamesMember2022-01-012022-12-310001083446us-gaap:TrademarksAndTradeNamesMember2021-12-310001083446us-gaap:TrademarksAndTradeNamesMember2022-12-310001083446us-gaap:DevelopedTechnologyRightsMember2022-01-012022-12-310001083446us-gaap:DevelopedTechnologyRightsMember2021-12-310001083446us-gaap:DevelopedTechnologyRightsMember2022-12-310001083446us-gaap:TrademarksMember2021-01-012021-12-310001083446ameh:NetworkRelationshipsMembersrt:MinimumMember2021-01-012021-12-310001083446srt:MaximumMemberameh:NetworkRelationshipsMember2021-01-012021-12-310001083446ameh:NetworkRelationshipsMember2020-12-310001083446ameh:NetworkRelationshipsMember2021-01-012021-12-310001083446ameh:ManagementContractsMember2021-01-012021-12-310001083446ameh:ManagementContractsMember2020-12-310001083446ameh:MemberRelationshipsMember2021-01-012021-12-310001083446ameh:MemberRelationshipsMember2020-12-310001083446ameh:PatientManagementPlatformMember2021-01-012021-12-310001083446ameh:PatientManagementPlatformMember2020-12-310001083446us-gaap:TrademarksAndTradeNamesMember2021-01-012021-12-310001083446us-gaap:TrademarksAndTradeNamesMember2020-12-310001083446us-gaap:CustomerRelationshipsMember2022-01-012022-12-310001083446us-gaap:IntangibleAssetsAmortizationPeriodMember2022-01-012022-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2021-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2022-01-012022-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2022-12-310001083446ameh:PacificMedicalImagingAndOncologyCenterIncMember2021-12-310001083446ameh:PacificMedicalImagingAndOncologyCenterIncMember2022-01-012022-12-310001083446ameh:PacificMedicalImagingAndOncologyCenterIncMember2022-12-310001083446ameh:FiveThreeOneW.CollegeLLCMember2021-12-310001083446ameh:FiveThreeOneW.CollegeLLCMember2022-01-012022-12-310001083446ameh:FiveThreeOneW.CollegeLLCMember2022-12-310001083446ameh:OneMSOLLCMember2021-12-310001083446ameh:OneMSOLLCMember2022-01-012022-12-310001083446ameh:OneMSOLLCMember2022-12-310001083446ameh:Tag6MedicalInvestmentGroupLLCMember2021-12-310001083446ameh:Tag6MedicalInvestmentGroupLLCMember2022-01-012022-12-310001083446ameh:Tag6MedicalInvestmentGroupLLCMember2022-12-310001083446ameh:CAIPAMSOMember2021-12-310001083446ameh:CAIPAMSOMember2022-01-012022-12-310001083446ameh:CAIPAMSOMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:Dr.ArteagaMemberameh:LasalleMedicalAssociatesIpaMemberus-gaap:NotesReceivableMember2020-12-310001083446ameh:Dr.ArteagaMemberameh:LasalleMedicalAssociatesIpaMemberameh:APCAndAPCLSMAMemberus-gaap:NotesReceivableMember2020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:Dr.ArteagaMemberameh:LasalleMedicalAssociatesIpaMemberus-gaap:NotesReceivableMember2022-12-310001083446ameh:NetworkMedicalManagementMemberameh:LmaMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:LasalleMedicalAssociatesIpaMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:LasalleMedicalAssociatesIpaMember2021-01-012021-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2022-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2021-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2022-01-012022-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2021-01-012021-12-310001083446ameh:LasalleMedicalAssociatesIpaMember2020-01-012020-12-310001083446ameh:PacificMedicalImagingAndOncologyCenterIncMemberameh:ApcLsmaMember2015-07-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PacificMedicalImagingAndOncologyCenterIncMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PacificMedicalImagingAndOncologyCenterIncMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PacificMedicalImagingAndOncologyCenterIncMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PacificMedicalImagingAndOncologyCenterIncMember2021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:FiveThreeOneW.CollegeLLCMember2019-04-230001083446ameh:FiveThreeOneW.CollegeLLCMemberameh:AlliedPacificOfCaliforniaAndNetworkMedicalManagementMember2022-01-012022-12-310001083446ameh:FiveThreeOneW.CollegeLLCMemberameh:AlliedPacificOfCaliforniaAndNetworkMedicalManagementMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:FiveThreeOneW.CollegeLLCMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:FiveThreeOneW.CollegeLLCMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:FiveThreeOneW.CollegeLLCMember2021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:FiveThreeOneW.CollegeLLCMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:OneMSOLLCMember2020-12-310001083446ameh:OneMSOLLCMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:Tag6MedicalInvestmentGroupLLCMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:Tag6MedicalInvestmentGroupLLCMember2022-08-310001083446ameh:Tag6MedicalInvestmentGroupLLCMember2021-01-012021-12-310001083446ameh:CAIPAMSOLLCMemberameh:ApolloMedicalHoldingsIncMember2021-08-310001083446ameh:CAIPAMSOLLCMember2021-08-310001083446ameh:CAIPAMSOLLCMember2022-01-012022-12-310001083446ameh:CAIPAMSOLLCMember2021-01-012021-12-310001083446ameh:CAIPAMSOLLCMember2022-12-310001083446ameh:CAIPAMSOLLCMember2021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:MediPortalLLCMember2018-05-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:MediPortalLLCMember2018-05-012018-05-310001083446ameh:NetworkMedicalManagementIncMemberameh:AchievaMedInc.Member2019-07-010001083446ameh:NetworkMedicalManagementIncMemberameh:AchievaMedInc.Member2019-07-012019-07-010001083446ameh:NetworkMedicalManagementIncMemberameh:AchievaMedInc.Member2022-12-310001083446ameh:Pacific6EnterprisesMemberameh:NetworkMedicalManagementMemberus-gaap:NotesReceivableMember2020-10-310001083446ameh:Pacific6EnterprisesMemberameh:NetworkMedicalManagementMemberus-gaap:NotesReceivableMember2020-10-300001083446ameh:ApcLsmaMemberus-gaap:NotesReceivableMemberameh:LmaMember2022-12-310001083446ameh:AHMCMemberameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:NotesReceivableMember2020-10-310001083446us-gaap:RevolvingCreditFacilityMember2022-12-310001083446us-gaap:RevolvingCreditFacilityMember2021-12-310001083446us-gaap:RealEstateLoanMember2022-12-310001083446us-gaap:RealEstateLoanMember2021-12-310001083446ameh:ConstructionLoanMember2022-12-310001083446ameh:ConstructionLoanMember2021-12-310001083446ameh:AmendedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2021-06-162021-06-160001083446ameh:AmendedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-06-160001083446us-gaap:LetterOfCreditMemberameh:AmendedCreditAgreementMemberus-gaap:LineOfCreditMember2021-06-160001083446us-gaap:BridgeLoanMemberameh:AmendedCreditAgreementMemberus-gaap:LineOfCreditMember2021-06-160001083446ameh:AmendedCreditAgreementMember2021-06-162021-06-160001083446ameh:AmendedCreditAgreementMembersrt:MinimumMember2021-06-162021-06-160001083446srt:MaximumMemberameh:AmendedCreditAgreementMember2021-06-162021-06-160001083446ameh:AmendedCreditAgreementMembersrt:MinimumMemberus-gaap:StandbyLettersOfCreditMember2021-06-162021-06-160001083446srt:MaximumMemberameh:AmendedCreditAgreementMemberus-gaap:StandbyLettersOfCreditMember2021-06-162021-06-160001083446ameh:AmendedCreditAgreementMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-06-162021-06-160001083446srt:MaximumMemberameh:AmendedCreditAgreementMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-06-162021-06-160001083446ameh:AmendedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2022-12-310001083446ameh:CreditAgreementMember2022-12-31ameh:financial_ratio0001083446ameh:CreditAgreementMember2022-01-010001083446ameh:CreditAgreementMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ZLLPartnersLLCMember2020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:MedicalPropertyPartnersLLCMember2020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:AMGPropertiesLLCMember2020-12-310001083446ameh:MedicalPropertyPartnersLLCMember2022-12-310001083446ameh:MedicalPropertyPartnersLLCMemberus-gaap:PrimeRateMember2022-01-012022-12-310001083446ameh:MedicalPropertyPartnersLLCMember2022-01-012022-12-310001083446ameh:AMGPropertiesLLCMember2022-12-310001083446ameh:AMGPropertiesLLCMemberus-gaap:PrimeRateMember2022-01-012022-12-310001083446ameh:AMGPropertiesLLCMember2022-01-012022-12-310001083446ameh:ZLLPartnersLLCMember2022-12-310001083446us-gaap:PrimeRateMemberameh:ZLLPartnersLLCMember2022-01-012022-12-310001083446ameh:ZLLPartnersLLCMember2022-01-012022-12-310001083446ameh:A120HellmanLLCMember2022-01-250001083446ameh:A120HellmanLLCMember2022-12-310001083446ameh:A120HellmanLLCMemberus-gaap:PrimeRateMember2022-01-252022-01-250001083446ameh:A120HellmanLLCMember2022-01-252022-01-250001083446ameh:ConstructionLoanMemberameh:Tag8MedicalInvestmentGroupLLCMember2021-04-300001083446ameh:ConstructionLoanMemberameh:Tag8MedicalInvestmentGroupLLCMembersrt:ScenarioForecastMemberus-gaap:LondonInterbankOfferedRateLIBORMember2023-01-012023-12-010001083446us-gaap:ConstructionLoansMemberameh:Tag8MedicalInvestmentGroupLLCMember2022-12-310001083446ameh:BusinessLoanMember2022-09-070001083446ameh:CreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2022-12-310001083446ameh:AmendedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2021-06-300001083446ameh:CreditAgreementMember2021-01-012021-12-310001083446ameh:CreditAgreementMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PreferredBankMemberus-gaap:LineOfCreditMemberameh:ApcBusinessLoanAgreementMember2019-09-100001083446us-gaap:StandbyLettersOfCreditMemberameh:TruistBankMemberameh:AmendedCreditAgreementMember2022-12-310001083446us-gaap:StandbyLettersOfCreditMemberameh:TruistBankMemberameh:AmendedCreditAgreementMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:StandbyLettersOfCreditMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:StandbyLettersOfCreditMember2022-01-012022-12-310001083446ameh:PreferredBankMemberameh:AlphaCareMedicalGroupInc.Memberus-gaap:StandbyLettersOfCreditMember2022-12-310001083446ameh:PreferredBankMemberameh:AlphaCareMedicalGroupInc.Memberus-gaap:StandbyLettersOfCreditMember2022-01-012022-12-310001083446us-gaap:DomesticCountryMember2022-12-310001083446us-gaap:CaliforniaFranchiseTaxBoardMember2022-12-310001083446us-gaap:PrivatePlacementMember2015-10-012015-10-310001083446us-gaap:PrivatePlacementMember2015-10-310001083446us-gaap:SeriesBPreferredStockMember2016-03-012016-03-310001083446us-gaap:SeriesBPreferredStockMember2016-03-310001083446ameh:NetworkMedicalManagementMember2017-12-012017-12-3100010834462017-12-012017-12-310001083446ameh:Warrant1Member2017-12-310001083446ameh:Warrant2Member2017-12-310001083446us-gaap:ShareBasedCompensationAwardTrancheOneMember2018-12-310001083446us-gaap:ShareBasedCompensationAwardTrancheOneMember2019-12-310001083446ameh:FormerShareholdersOfNmmMember2022-12-310001083446ameh:NetworkMedicalManagementMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMember2020-01-012020-12-310001083446ameh:CDSCMember2022-01-012022-12-310001083446ameh:CDSCMember2021-01-012021-12-310001083446ameh:CDSCMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMember2021-12-310001083446ameh:EquityIncentivePlanTwentyThirteenMember2017-12-080001083446ameh:EquityIncentivePlanTwentyThirteenMember2022-12-310001083446ameh:EquityIncentivePlanTwentyFifteenMember2017-12-080001083446ameh:EquityIncentivePlanTwentyFifteenMember2022-12-310001083446ameh:EquityIncentivePlanTwentyFifteenMember2021-12-310001083446ameh:EquityIncentivePlanTwentyFifteenMember2020-12-310001083446us-gaap:EmployeeStockOptionMember2022-01-012022-12-310001083446us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001083446us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001083446ameh:StockAwardsAndUnitsMember2022-01-012022-12-310001083446ameh:StockAwardsAndUnitsMember2021-01-012021-12-310001083446ameh:StockAwardsAndUnitsMember2020-01-012020-12-310001083446ameh:EquityIncentivePlanTwentyFifteenMember2022-01-012022-12-310001083446ameh:ApcStockOptionMember2022-01-012022-12-310001083446ameh:ApcStockOptionMember2021-01-012021-12-310001083446srt:MinimumMember2022-12-310001083446srt:MaximumMember2022-12-310001083446srt:MaximumMember2021-12-310001083446srt:ExecutiveOfficerMember2022-01-012022-12-310001083446srt:MinimumMembersrt:ExecutiveOfficerMember2022-12-310001083446srt:MaximumMembersrt:ExecutiveOfficerMember2022-12-310001083446srt:MinimumMembersrt:ExecutiveOfficerMember2022-01-012022-12-310001083446srt:MaximumMembersrt:ExecutiveOfficerMember2022-01-012022-12-310001083446us-gaap:RestrictedStockUnitsRSUMember2021-12-310001083446ameh:PerformanceBasedRestrictedStockUnitsMember2021-12-310001083446us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-12-310001083446ameh:PerformanceBasedRestrictedStockUnitsMember2022-01-012022-12-310001083446us-gaap:RestrictedStockUnitsRSUMember2022-12-310001083446ameh:PerformanceBasedRestrictedStockUnitsMember2022-12-310001083446us-gaap:RestrictedStockMembersrt:MinimumMember2022-01-012022-12-310001083446srt:MaximumMemberus-gaap:RestrictedStockMember2022-01-012022-12-310001083446us-gaap:RestrictedStockMember2022-01-012022-12-310001083446us-gaap:RestrictedStockMember2021-01-012021-12-310001083446us-gaap:RestrictedStockMember2020-01-012020-12-310001083446us-gaap:CommonStockMemberameh:A11CommonStockWarrantsMember2016-03-012016-03-310001083446us-gaap:CommonStockMemberameh:A11CommonStockWarrantsMember2016-03-310001083446us-gaap:CommonStockMemberameh:A10CommonStockWarrantsMember2016-03-012016-03-310001083446us-gaap:CommonStockMemberameh:A10CommonStockWarrantsMember2016-03-310001083446srt:MinimumMember2021-01-012021-12-310001083446srt:MaximumMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:StandbyLettersOfCreditMember2022-12-310001083446us-gaap:StandbyLettersOfCreditMemberameh:AlphaCareMedicalGroupInc.Member2022-12-310001083446ameh:NetworkMedicalManagementMemberameh:LasalleMedicalAssociatesIpaMember2022-01-012022-12-310001083446ameh:NetworkMedicalManagementMemberameh:LasalleMedicalAssociatesIpaMember2021-01-012021-12-310001083446ameh:NetworkMedicalManagementMemberameh:LasalleMedicalAssociatesIpaMember2020-01-012020-12-310001083446ameh:LasalleMedicalAssociatesIpaMemberameh:NetworkMedicalManagementMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PmiocMemberus-gaap:ServiceMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PmiocMemberus-gaap:ServiceMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PmiocMemberus-gaap:ServiceMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:PmiocMemberus-gaap:ServiceMemberameh:ApcShareholdersMember2022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:AdvanceDiagnosticSurgeryCenterMemberus-gaap:ServiceMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:AdvanceDiagnosticSurgeryCenterMemberus-gaap:ServiceMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:AdvanceDiagnosticSurgeryCenterMemberus-gaap:ServiceMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:ServiceMemberameh:FulgentGeneticsIncMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:ServiceMemberameh:FulgentGeneticsIncMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberus-gaap:ServiceMemberameh:FulgentGeneticsIncMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ArroyoVistaFamilyHealthCenterMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ArroyoVistaFamilyHealthCenterMember2021-01-012021-12-310001083446ameh:NetworkMedicalManagementMemberameh:NetworkMedicalManagementIncNmmMember2022-01-012022-12-310001083446ameh:NetworkMedicalManagementMemberameh:NetworkMedicalManagementIncNmmMember2021-01-012021-12-310001083446ameh:NetworkMedicalManagementMemberameh:NetworkMedicalManagementIncNmmMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:SunnyVillageCareCenterMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:SunnyVillageCareCenterMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:SunnyVillageCareCenterMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApolloMedOfficerMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApolloMedOfficerMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApolloMedOfficerMember2020-01-012020-12-310001083446ameh:OneMSOInc.Memberameh:NetworkMedicalManagementMember2022-01-012022-12-310001083446ameh:OneMSOInc.Memberameh:NetworkMedicalManagementMember2021-01-012021-12-310001083446ameh:OneMSOInc.Memberameh:NetworkMedicalManagementMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:OneMSOInc.Member2022-12-310001083446ameh:DiagnosticAndSurgicalCenterMember2022-01-012022-12-310001083446ameh:DiagnosticAndSurgicalCenterMember2021-01-012021-12-310001083446ameh:Tag6MedicalInvestmentGroupLLCMemberameh:SunnyVillageCareCenterMember2022-01-012022-12-310001083446ameh:ApolloMedOfficerMember2022-01-012022-12-310001083446ameh:Tag6MedicalInvestmentGroupLLCMemberameh:ApolloMedOfficerMember2022-01-012022-12-310001083446ameh:ApolloMedOfficerMemberameh:Tag8MedicalInvestmentGroupLLCMember2022-01-012022-12-310001083446ameh:AHMCMember2022-01-012022-12-310001083446ameh:AHMCMember2021-01-012021-12-310001083446ameh:HSMSOMember2022-01-012022-12-310001083446ameh:HSMSOMember2021-01-012021-12-310001083446ameh:AurionMember2022-01-012022-12-310001083446ameh:AurionMember2021-01-012021-12-310001083446ameh:AHMCMember2020-01-012020-12-310001083446ameh:AHMCMember2022-12-310001083446ameh:AHMCMember2021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApcShareholdersMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApcShareholdersMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMemberameh:ApcShareholdersMember2020-01-012020-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMembersrt:OfficerMemberameh:ApcShareholdersMember2022-01-012022-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMembersrt:OfficerMemberameh:ApcShareholdersMember2021-01-012021-12-310001083446ameh:AlliedPacificOfCaliforniaIPAMembersrt:OfficerMemberameh:ApcShareholdersMember2020-01-012020-12-310001083446ameh:NetworkMedicalManagementMembersrt:DirectorMemberameh:ConsultingServicesMember2022-01-012022-12-310001083446ameh:NetworkMedicalManagementMembersrt:DirectorMemberameh:ConsultingServicesMember2021-01-012021-12-310001083446ameh:NetworkMedicalManagementMembersrt:DirectorMemberameh:ConsultingServicesMember2020-01-012020-12-310001083446us-gaap:RestrictedStockMember2022-01-012022-12-310001083446us-gaap:RestrictedStockMember2021-01-012021-12-310001083446us-gaap:RestrictedStockMember2020-01-012020-12-310001083446us-gaap:PerformanceSharesMember2022-01-012022-12-310001083446us-gaap:EmployeeStockOptionMember2022-01-012022-12-310001083446us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001083446us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001083446us-gaap:WarrantMember2022-01-012022-12-310001083446us-gaap:WarrantMember2021-01-012021-12-310001083446us-gaap:WarrantMember2020-01-012020-12-310001083446us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-12-310001083446us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:CareEnablementMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:CarePartnersMember2022-01-012022-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMemberameh:ThirdPartyMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:OtherMember2022-01-012022-12-310001083446us-gaap:IntersegmentEliminationMemberameh:ThirdPartyMember2022-01-012022-12-310001083446ameh:ThirdPartyMemberus-gaap:CorporateNonSegmentMember2022-01-012022-12-310001083446ameh:ThirdPartyMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:CareEnablementMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:CarePartnersMember2022-01-012022-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMemberameh:IntersegmentMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:OtherMember2022-01-012022-12-310001083446us-gaap:IntersegmentEliminationMemberameh:IntersegmentMember2022-01-012022-12-310001083446us-gaap:CorporateNonSegmentMemberameh:IntersegmentMember2022-01-012022-12-310001083446ameh:IntersegmentMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:CareEnablementMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:CarePartnersMember2022-01-012022-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:OtherMember2022-01-012022-12-310001083446us-gaap:IntersegmentEliminationMember2022-01-012022-12-310001083446us-gaap:CorporateNonSegmentMember2022-01-012022-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:CareEnablementMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:CarePartnersMember2021-01-012021-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMemberameh:ThirdPartyMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:OtherMember2021-01-012021-12-310001083446us-gaap:IntersegmentEliminationMemberameh:ThirdPartyMember2021-01-012021-12-310001083446ameh:ThirdPartyMemberus-gaap:CorporateNonSegmentMember2021-01-012021-12-310001083446ameh:ThirdPartyMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:CareEnablementMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:CarePartnersMember2021-01-012021-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMemberameh:IntersegmentMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:OtherMember2021-01-012021-12-310001083446us-gaap:IntersegmentEliminationMemberameh:IntersegmentMember2021-01-012021-12-310001083446us-gaap:CorporateNonSegmentMemberameh:IntersegmentMember2021-01-012021-12-310001083446ameh:IntersegmentMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:CareEnablementMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:CarePartnersMember2021-01-012021-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:OtherMember2021-01-012021-12-310001083446us-gaap:IntersegmentEliminationMember2021-01-012021-12-310001083446us-gaap:CorporateNonSegmentMember2021-01-012021-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:CareEnablementMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:CarePartnersMember2020-01-012020-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMemberameh:ThirdPartyMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:ThirdPartyMemberameh:OtherMember2020-01-012020-12-310001083446us-gaap:IntersegmentEliminationMemberameh:ThirdPartyMember2020-01-012020-12-310001083446ameh:ThirdPartyMemberus-gaap:CorporateNonSegmentMember2020-01-012020-12-310001083446ameh:ThirdPartyMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:CareEnablementMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:CarePartnersMember2020-01-012020-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMemberameh:IntersegmentMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:IntersegmentMemberameh:OtherMember2020-01-012020-12-310001083446us-gaap:IntersegmentEliminationMemberameh:IntersegmentMember2020-01-012020-12-310001083446us-gaap:CorporateNonSegmentMemberameh:IntersegmentMember2020-01-012020-12-310001083446ameh:IntersegmentMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:CareEnablementMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:CarePartnersMember2020-01-012020-12-310001083446ameh:CareDeliveryMemberus-gaap:OperatingSegmentsMember2020-01-012020-12-310001083446us-gaap:OperatingSegmentsMemberameh:OtherMember2020-01-012020-12-310001083446us-gaap:IntersegmentEliminationMember2020-01-012020-12-310001083446us-gaap:CorporateNonSegmentMember2020-01-012020-12-310001083446srt:ScenarioPreviouslyReportedMember2022-03-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-03-3100010834462022-03-310001083446srt:ScenarioPreviouslyReportedMember2022-01-012022-03-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-01-012022-03-3100010834462022-01-012022-03-310001083446srt:ScenarioPreviouslyReportedMember2022-06-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-06-300001083446srt:ScenarioPreviouslyReportedMember2022-04-012022-06-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-04-012022-06-3000010834462022-04-012022-06-300001083446srt:ScenarioPreviouslyReportedMember2022-09-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-09-3000010834462022-09-300001083446srt:ScenarioPreviouslyReportedMember2022-07-012022-09-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-07-012022-09-3000010834462022-07-012022-09-300001083446srt:ScenarioPreviouslyReportedMember2022-10-012022-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-10-012022-12-3100010834462022-10-012022-12-310001083446srt:ScenarioPreviouslyReportedMember2021-03-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-03-3100010834462021-03-310001083446srt:ScenarioPreviouslyReportedMember2021-01-012021-03-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-01-012021-03-3100010834462021-01-012021-03-310001083446srt:ScenarioPreviouslyReportedMember2021-06-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-06-3000010834462021-06-300001083446srt:ScenarioPreviouslyReportedMember2021-04-012021-06-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-04-012021-06-3000010834462021-04-012021-06-300001083446srt:ScenarioPreviouslyReportedMember2021-09-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-09-3000010834462021-09-300001083446srt:ScenarioPreviouslyReportedMember2021-07-012021-09-300001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-07-012021-09-3000010834462021-07-012021-09-300001083446srt:ScenarioPreviouslyReportedMember2021-10-012021-12-310001083446srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2021-10-012021-12-3100010834462021-10-012021-12-310001083446us-gaap:SubsequentEventMemberameh:AMGMember2023-02-23

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No.1
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
for the transition period from ___ to ___ .
Commission file number:  001-37392
B_montserrat (002).jpg
Apollo Medical Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 95-4472349
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1668 S. Garfield Avenue, 2nd Floor, Alhambra, California 91801
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:  (626) 282-0288
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class   Trading Symbol   Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share   AMEH   Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☒  No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes    No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer  
 
Non-accelerated filer  
 
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☒ No
The aggregate market value of common stock held by non-affiliates of the registrant, as of June 30, 2022, the last day of the registrant’s most recently completed second fiscal quarter, was approximately $1.5 billion (based on the closing price for shares of the registrant’s common stock as reported by the NASDAQ Capital Market on June 30, 2022).
As of February 16, 2023, there were 57,435,292 shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2023 annual meeting of the stockholders of the registrant are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement was filed with the Securities and Exchange Commission (the “SEC”) April 28, 2023.



Explanatory Note

Apollo Medical Holdings, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (“Form 10-K Amendment No. 1”) to amend the Annual Report on Form 10-K (“Original Filing”) for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2023. This Form 10-K Amendment No. 1 amends the Original Filing to include restated consolidated financial statements for the periods presented in Item 8 of the Original Filing primarily as a result of errors related to the Company’s tax provision as well as other immaterial items (refer to Note 1 – “Restatement of Prior Financial Information” to our consolidated financial statements under Item 8 in this Form 10-K Amendment No.1 for additional information). In connection with the tax provision errors identified, management has re-evaluated its disclosure controls and procedures and concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2022 due to a material weakness in internal control over financial reporting related to the ineffective design of controls related to income taxes.

Restatement of Prior Financial Information.

As previously summarized in our Current Report on Form 8-K filed with the SEC on August 7, 2023, in the second quarter of 2023, the Company began a review of the tax implications of intercompany dividends and the rationale for conclusions with respect to which entities were (or should have been) included in consolidated tax returns, and related accounting matters. In connection with such review, the Company identified unintentional errors in its accounting for the income tax effects of certain intercompany dividends and certain net operating losses. Specifically, the Company failed to accrue for income tax expense on certain intercompany dividends. Although the Company accrued taxes on the income generated by the subsidiary that made the intercompany dividend, the additional taxes due by the subsidiary entitled to the dividend were not accrued. Also, based on a review of historical tax filings, the Company concluded that its previous determination regarding the realizability of certain net operating losses was incorrect resulting in an overstatement of the valuation allowance with respect to such net operating losses. The errors resulted in a net understatement of income tax expense in prior periods and also had an impact on purchase accounting (goodwill) as a portion of the deferred tax assets affected by the errors pertained to acquisitions made in 2019. The Company has determined that the adjustments as of December 31, 2022 and 2021, for each of the years ended December 31, 2022, 2021, and 2020, and the first quarter of 2023 were material and require restatement. The Company is evaluating changes to its tax structure to reduce the current effective tax rate and amount of cash taxes.

On August 4, 2023, the Audit Committee of the Board of Directors of the Company, based on the recommendation of, and after consultation with, the Company’s management, concluded that the Company’s previously issued audited consolidated financial statements as of December 31, 2022 and 2021 and for each of the years ended December 31, 2022, 2021, and 2020 included in the Original Filing, and the Company’s unaudited consolidated financial statements included in the Quarterly Reports on Form 10-Q for the quarterly 2022 fiscal year periods (the “Historical Quarterly Reports”), as well as the unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Q1 Quarterly Report” and, together with the Original Filing and the Historical Quarterly Reports, collectively, the “Affected Financials”), should no longer be relied upon. Similarly, related earnings releases, press releases, shareholder communications, investor presentations or other communications describing relevant portions of the Affected Financials should no longer be relied upon.

This Amendment sets forth the Original Filing, as modified and superseded where necessary to reflect the restatement and the related internal control considerations. Accordingly, the following items included in the Original Filing have been amended:
Part I
Item 1A - Risk Factors
to add an additional risk factor that the Company’s complex legal structure may cause tax authorities to question or disagree with the Company’s tax status, potentially adversely impacting the Company
to add an additional risk factor related to the restatement
Part II
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
to revise “Results of Operations”, “Reconciliation of Net Income to EBITDA and Adjusted EBITDA”, and “Liquidity and Capital Resources” as a result of the restatement

Item 8 - Financial Statements and Supplementary Data
to reflect the restatement in our Consolidated Balance Sheets as of December 31, 2022 and 2021



to reflect the restatement in our Consolidated Statements of Income for the Years Ended December 31, 2022, 2021, and 2020
to reflect the restatement in our Consolidated Statements of Mezzanine and Stockholders’ Equity for the Years Ended December 31, 2022, 2021, and 2020
to reflect the restatement in our Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020
to reflect the restatement in certain Notes to our Consolidated Financial Statements
Item 9A - Evaluation of Disclosure Controls and Procedures
to amend for a material weakness in our internal control over financial reporting associated with the Company’s tax provision
Part IV
Item 15 - Exhibits and Financial Statement Schedules
provide updated Certifications of Principal Executive Officers and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed or furnished as Exhibits 31.1, 31.2, 31.3, and 32, as well as an updated Consent of Independent Registered Public Accounting Firm filed as Exhibit 23.1

In accordance with applicable SEC rules, this Form 10-K Amendment No. 1 also includes an updated signature page and Reports of Independent Registered Public Accounting Firm.

Also, as part of this Form 10-K Amendment No. 1, the Company is recasting segment reporting information previously presented in the Original Filing to account for the revision of the Company’s segment reporting structure from one to three reportable segments. As a result of certain changes to the information regularly provided to the Company’s chief operating decision makers when reviewing the Company’s performance, as well as in an effort to provide additional transparency to investors and other financial statement users, the Company began providing reporting for the following three segments in the first quarter of 2023: Care Enablement, Care Partners and Care Delivery. All subsequent periodic reports will report three segments, with prior periods adjusted accordingly. The recast of segment reporting information impacted the following areas of the Original Filing:
Part I
Item 1 - Business
Part II
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 8 - Financial Statements and Supplementary Data

Except as described above, this Form 10-K Amendment No. 1 does not amend, update or change any other disclosures in the Original Filing. In addition, the information contained in this Form 10-K Amendment No. 1 does not reflect events occurring after the Original Filing and does not modify or update the disclosures therein, except to reflect the effects of the restatement and the segment change. This Form 10-K Amendment No. 1 should be read in conjunction with the Company’s other filings with the SEC.




Table of Contents
Apollo Medical Holdings, Inc.
Form 10-K
Fiscal Year Ended December 31, 2022
Page
ITEM

2


Glossary

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:
120 Hellman 120 Hellman LLC
Accountable Health Care Accountable Health Care IPA, a Professional Medical Corporation
AAMG All-American Medical Group
AHMC AHMC Healthcare Inc.
AIPBP All-Inclusive Population-Based Payments
AKM AKM Medical Group, Inc.
Alpha Care Alpha Care Medical Group, Inc.
AMG AMG, a Professional Medical Corporation
AMG Properties AMG Properties, LLC
AMH ApolloMed Hospitalists, a Medical Corporation
AMM Apollo Medical Management, Inc.
AP-AMH AP-AMH Medical Corporation
AP-AMH 2 AP - AMH 2 Medical Corporation
APAACO APA ACO, Inc.
APC Allied Physicians of California, a Professional Medical Corporation
APCMG Access Primary Care Medical Group
APC-LSMA APC-LSMA Designated Shareholder Medical Corporation
BAHA Bay Area Hospitalist Associates
CAIPA MSO CAIPA MSO, LLC
CDSC Concourse Diagnostic Surgery Center, LLC
CMS Centers for Medicare & Medicaid Services
CQMC Critical Quality Management Corporation
DMHC California Department of Managed Healthcare
DMG Diagnostic Medical Group of Southern California
GPDC Global and Professional Direct Contracting
HSMSO Health Source MSO Inc., a California corporation
ICC AHMC International Cancer Center, a Medical Corporation
IPA Independent Practice Association
Jade Jade Health Care Medical Group, Inc.
LMA LaSalle Medical Associates
MMG Maverick Medical Group, Inc.
MPP Medical Property Partners
MSSP Medicare Shared Savings Program
NGACO Next Generation Accountable Care Organization
NMM Network Medical Management, Inc.
PMIOC Pacific Medical Imaging and Oncology Center, Inc.
SCHC Southern California Heart Centers
Sun Labs Sun Clinical Labs
Tag 6 Tag-6 Medical Investments Group, LLC
Tag 8 Tag-8 Medical Investments Group, LLC
UCAP Universal Care Acquisition Partners, LLC
UCI Universal Care, Inc.
VIE Variable Interest Entity
ZLL ZLL Partners, LLC

3



INTRODUCTORY NOTE
    
Unless the context dictates otherwise, references in this Annual Report on Form 10-K to the “Company,” “we,” “us,” “our,” and similar words are references to Apollo Medical Holdings, Inc., a Delaware corporation (“ApolloMed”), and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial performance. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein, and with our prior filings with the Securities and Exchange Commission (the “SEC”).
The Centers for Medicare & Medicaid Services (“CMS”) have not reviewed any statements contained in this Report, including statements describing the participation of APA ACO, Inc. (“APAACO”) the Global and Professional Direct Contracting Model or the ACO Realizing Equity, Access, and Community Health Model.
Trade names and trademarks of ApolloMed and its subsidiaries referred to herein, and their respective logos, are our property. This Annual Report on Form 10-K may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any statements about our business, financial condition, operating results, plans, objectives, expectations, and intentions; any projections of earnings, revenue, EBITDA, Adjusted EBITDA or other financial items, such as our projected capitation from CMS and our future liquidity; any statements of any plans, strategies, and objectives of management for future operations, such as the material opportunities that we believe exist for our company; any statements concerning proposed services, developments, mergers, or acquisitions; any statements regarding the outlook on the GPDC Model, ACO REACH Model, or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding our efforts to remediate the material weakness in our internal control over financial reporting and the timing of remediation; any statements regarding potential changes to our tax structure; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms, such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” or “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases, or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Annual Report on Form 10-K and are subject to change.
Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations, and certain assumptions of management. Some or all of such beliefs, expectations, and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental, and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and significant risks and uncertainties that could cause actual conditions, outcomes, and results to differ materially from those indicated by such statements.
4


PART I
Item 1.    Business
Overview (Recasted)
Apollo Medical Holdings, Inc. is a leading physician-centric, technology-powered, risk-bearing healthcare company. Leveraging its proprietary end-to-end technology solutions, ApolloMed operates an integrated healthcare delivery platform that enables providers to successfully participate in value-based care arrangements, thus empowering them to deliver high-quality care to patients in a cost-effective manner. We, together with our affiliated physician groups and consolidated entities, provide coordinated outcomes-based medical care primarily serving patients in California, the majority of whom are covered by private or public insurance provided through Medicare, Medicaid, and health maintenance organizations (“HMOs”), with a small portion of our revenue coming from non-insured patients. We provide care coordination services to each major constituent of the healthcare delivery system, including patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups, and health plans. Our physician network consists of primary care physicians, specialist physicians, physician and specialist extenders, and hospitalists. We operate primarily through ApolloMed and the following subsidiaries: Network Medical Management, Inc. (“NMM”), Apollo Medical Management, Inc. (“AMM”), and APAACO, and their consolidated entities, including consolidated VIEs.
Led by a management team with several decades of experience, we have built a company and culture that is focused on physicians providing high-quality medical care, population health management, and care coordination for patients. As a result, we are well-positioned to take advantage of the shift in the U.S. healthcare industry toward providing value-based and results-oriented healthcare with a focus on patient satisfaction, high-quality care, and cost efficiency.
In December 2017, ApolloMed merged with NMM, a California corporation formed in 1994 (the “2017 Merger”). As a result of the 2017 Merger, NMM became a wholly owned subsidiary of ApolloMed. The combined company operates under the Apollo Medical Holdings, Inc. name, but NMM is the larger entity in terms of assets, revenues, and earnings. In addition, as of the closing of the 2017 Merger, the majority of the board of directors of the combined company was comprised of former NMM directors and directors nominated for election by NMM. Accordingly, ApolloMed is considered to be the legal acquirer (and accounting acquiree), whereas NMM is considered to be the accounting acquirer (and legal acquiree).
We implement and operate different innovative healthcare models, primarily including the following integrated operations:
Independent practice associations (“IPAs”), which contract with physicians and provide care to Medicare, Medicaid, and commercial and dual-eligible patients on a risk- and value-based fee basis;
Management service organizations (“MSOs”), which provide management, administrative and other support services to our affiliated physician groups such as IPAs;
APAACO, which participates in the Global and Professional Direct Contracting Model (“GPDC Model”) model sponsored by CMS, and focuses on providing high-quality and cost-efficient care to Medicare fee-for-service (“FFS”) patients;
Outpatient clinics providing primary care, specialty care, urgent care, as well as an ambulatory surgery center and specialty clinics, including cardiac care and diagnostic testing services; and
Hospitalists, which include our contracted physicians who focus on the delivery of comprehensive medical care to hospitalized patients.
ApolloMed’s common stock is listed on the NASDAQ Capital Market and trades under the symbol “AMEH.”
In an effort to provide additional transparency to investors and other financial statement users, the Company began providing reporting for the following three segments in the first quarter of 2023. Our business overview is recasting segment reporting information previously presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 to account for the revision of the three new reportable segments. The three segments are as follows:

Care Enablement

5


Our Care Enablement segment is an integrated, end-to-end clinical and administrative platform, powered by our proprietary technology suite, which provides operational, clinical, financial, technology, management, and strategic services in order to enable success in the delivery of high-quality, value-based care for providers and payers. We provide solutions to providers, including independent physicians, provider and medical groups, and accountable care organizations, and payers, including health plans and other risk-bearing organizations. Our platform meets providers and payers where they are, with a wide spectrum of solutions across the total cost of care risk spectrum, ranging from solutions for fee-for-service entities to global risk-bearing entities, and across patient type, including Medicare, Medicaid, commercial, and exchange-insured patients. This segment includes our wholly owned subsidiaries which operate as management services organizations, NMM and Apollo Medical Management (“AMM”), which enter into long-term management and/or administrative services agreements with providers and payers. By leveraging our care enablement platform, providers and payers can improve their ability to deliver high-quality care to their patients and achieve better patient outcomes.

Care Partners

Our Care Partners segment is focused on building and managing high-quality and high-performance provider networks by partnering with, empowering, and investing in strong provider partners with a shared vision for coordinated care delivery. By leveraging our unique care enablement platform and ability to recruit, empower, and incentivize physicians to effectively manage total cost of care, we are able to organize partnered providers into successful multi-payer risk-bearing organizations which take on varying levels of risk based on total cost of care across membership in all lines of business, including Medicare, Medicaid, commercial, and exchange. Through our network of IPAs, ACOs, and Restricted Knox-Keen licensed health plan, our healthcare delivery entities are responsible for coordinating and delivering high quality care to our patients.

Our consolidated IPAs consist of the following: (i) Allied Physicians of California, a Professional Medical Corporation d.b.a. Allied Pacific of California IPA (“APC”), (ii) Alpha Care Medical Group, Inc. (“Alpha Care”), (iii) Accountable Health Care IPA, a Professional Medical Corporation (“Accountable Health Care”), (iv) Jade Health Care Medical Group, Inc. (“Jade”), (v) Access Primary Care Medical Group (“APCMG”), and (vi) All American Medical Group (“AAMG”). The Company’s ACO operates under the APA ACO, Inc. (“APAACO”) brand and participates in the Centers for Medicare & Medicaid Services (“CMS”) program that allows provider groups to assume higher levels of financial risk and potentially achieve a higher reward from participation in the program’s attribution-based risk-sharing model.

APC was incorporated in 1992 for the purpose of arranging healthcare services as an IPA. APC is owned by California-licensed physicians and professional medical corporations, and contracts with various health maintenance organizations (“HMOs”) and other licensed healthcare service plans, as defined in the California Knox-Keene Health Care Service Plan Act of 1975. Each HMO negotiates a fixed amount per member per month (“PMPM”) that is to be paid to APC. In return, APC arranges for the delivery of healthcare services by contracting with physicians or professional medical corporations for primary care and specialty care services. APC assumes the financial risk of the cost of delivering healthcare services in excess of the fixed amounts received. Some of the risk is transferred to the contracted physicians or professional corporations. The risk is subject to stop-loss provisions in contracts with HMOs.

Alpha Care, an IPA acquired by the Company in May 2019, has been operating in California since 1993 as a risk-bearing organization engaged in providing professional services under capitation arrangements with its contracted health plans through a provider network consisting of primary care and specialty care physicians. Alpha Care specializes in delivering high-quality healthcare to its enrollees and focuses on Medi-Cal/Medicaid, Commercial, and Medicare and Dual Eligible members in the Riverside and San Bernardino counties of Southern California.

Accountable Health Care is a California-based IPA that has served the local community in the greater Los Angeles County area through a network of physicians and healthcare providers for more than 20 years. Accountable Health Care provides quality healthcare services to its members through four federally qualified health plans and multiple product lines, including Medi-Cal, Commercial, and Medicare.

In July 2021, AP-AMH 2, a VIE of the Company, purchased an 80% equity interest (on a fully diluted basis) in Access Primary Care Medical Group (“APCMG”), a primary care physicians’ group focused on providing high-quality care to patients in the northern California cities of Daly City and San Francisco. As a result, APCMG is consolidated by the Company.

On April 19, 2022, the AP-AMH 2 acquired 100% of the capital stock of Jade. Jade is a primary and specialty care physicians’ group focused on providing high-quality care to its patients in the San Francisco Bay Area in Northern California.

6


On October 31, 2022, AP-AMH 2, a VIE of the Company, acquired 100% of the equity interest in AAMG. AAMG is an IPA operating in Northern California.

APAACO began participating in the Next Generation Accountable Care Organization (“NGACO”) Model of CMS in January 2017. The NGACO Model was a CMS program that allowed provider groups to assume higher levels of financial risk and potentially achieve a higher reward from participating in this new attribution-based risk-sharing model. With the termination of the NGACO Model on December 31, 2021, APAACO applied, and was selected by CMS, to participate as a Direct Contracting Entity (“DCE”) in the standard track of CMS’s GPDC Model for Performance Year 2022 (“PY22”), beginning January 1, 2022. CMS has since redesigned the GPDC Model in response to the current Administration’s health care priorities, including their commitment to advancing health equity, stakeholder feedback, and participant experience, and renamed the GPDC Model to ACO Realizing Equity, Access, and Community Health (“ACO REACH”) Model. The ACO REACH Model commenced on January 1, 2023.

Care Delivery

Our Care Delivery segment is a patient-centric, data-driven care delivery organization focused on delivering high-quality and accessible care to all patients. Our care delivery organization includes primary care, multi-specialty care, and ancillary care services. This segment includes our primary care clinics, operating under the AMG, a Professional Medical Corporation (“AMG”) and Valley Oaks Medical Group (“VOMG”) brands, our multi-specialty care clinics and medical groups, operating under the ApolloMed Hospitalists, a Medical Corporation (“AMH”), Southern California Heart Centers, a Medical Corporation (“SCHC”), and AllCare Women’s Health brands, and our ancillary service providers, operating under the 1 World Medicine Urgent Care Corporation (“1 World”), DMG, Concourse Diagnostic Surgery Center, LLC (“CDSC”), and Sun Clinical Laboratories (“Sun Labs”) brands.

AMG is a network of family practice clinics operating out of three main locations in Southern California. AMG provides professional and post-acute care services to Medicare, Medi-Cal/Medicaid, and commercial patients through its network of doctors and nurse practitioners.
On October 14, 2022, a sole equity holder acquired 100% of the equity interest in Valley Oaks Medical Group (“VOMG”). VOMG owns nine primary care clinics consisting of seven in Nevada and two in Texas.
AMH provides hospitalist, intensivist, and physician advisory services. SCHC, is a specialty clinic that focuses on cardiac care and diagnostic testing.     1 World is an urgent care center and Eleanor Leung M.D., provides specialized care for women’s health operating as AllCare Women’s Health. DMG is a professional medical California corporation and a complete outpatient imaging center.

    CDSC was formed in March 2010 in the state of California. CDSC is an ambulatory surgery center in City of Industry, California, organized by a group of highly qualified physicians, which utilizes some of the most advanced equipment in the eastern part of Los Angeles County and the San Gabriel Valley. The facility is Medicare-certified and accredited by the Accreditation Association for Ambulatory Healthcare.

    Sun Labs is a Clinical Laboratory Improvement Amendments certified full-service lab that operates across the San Gabriel Valley in Southern California. In accordance with relevant accounting guidance, Sun Labs is determined to be a VIE of the Company and is consolidated by the Company.
Other Affiliates
Our other affiliates are not included as a reportable segment and primarily consist of real estate operations.
Organization
Subsidiaries
We operate through our subsidiaries, including:
NMM;
AMM; and
7


APAACO.
Each of NMM and AMM operates as a management services organization (“MSO”) and is in the business of providing management services to physician practice corporations under long-term management and/or administrative services agreements (“MSAs”), pursuant to which the MSO manages certain non-medical services for the physician groups and have exclusive authority over all non-medical decision-making related to ongoing business operations. The MSAs generally provide for management fees that are recognized as earned based on a percentage of revenue or cash collections generated by the physician practices.
APAACO participated as a Direct Contracting Entity (“DCE”) under the GPDC Model for Performance Year (“PY”) 2022, or PY2022. Under the GPDC Model, CMS contracts with DCEs, which are composed of healthcare providers operating under a common legal structure, and accepts financial accountability for the overall quality and cost of medical care furnished to Medicare FFS beneficiaries aligned to the entity. CMS has redesigned and renamed the GPDC Model to the ACO Realizing Equity, Access, and Community Health Model (“ACO REACH Model”). The ACO REACH Model commenced on January 1, 2023.
Through our accountable care organization (“ACO”) and network of IPAs with more than approximately 11,000 contracted healthcare providers, which have agreements with various health plans, hospitals, and other HMOs, we are responsible for coordinating the care of approximately 1.3 million patients, as of December 31, 2022. These patients are comprised of managed care members whose health coverage is provided through their employers, or who have acquired health coverage directly from a health plan or as a result of their eligibility for Medicaid or Medicare benefits. Our managed patients benefit from an integrated approach that places physicians at the center of patient care and utilizes sophisticated risk management techniques and clinical protocols to provide high-quality, cost-effective care. To implement a patient-centered, physician-centric experience, we also have other integrated and synergistic operations, including (i) MSOs that provide management and other services to our affiliated IPAs, (ii) outpatient clinics, and (iii) hospitalists that coordinate the care of patients in hospitals.
Variable Interest Entities
If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits – that is, (i) we have the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance, and (ii) we have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. See Note 19 – “Variable Interest Entities (VIEs)” to our consolidated financial statements for information on our entities that qualify as consolidated VIEs.
Some states have laws that prohibit business entities with non-physician owners from practicing medicine, which are generally referred to as the corporate practice of medicine laws. States that have corporate practice of medicine laws require that only physicians can practice medicine, exercise control over medical decisions, or engage in certain arrangements with other physicians, such as fee-splitting. California is a corporate practice of medicine state.
Therefore, in addition to our subsidiaries, we mainly operate by maintaining long-term MSAs with our affiliated IPAs, which are owned and operated by a network of independent primary care physicians and specialists, and which employ or contract with additional physicians to provide medical services. Under such agreements, we provide and perform non-medical management and administrative services, including financial management, information systems, marketing, risk management, and administrative support.
8


NMM has entered into MSAs with several affiliated IPAs, including Allied Physicians of California IPA d.b.a. Allied Pacific of California IPA (“APC”). APC contracts with various HMOs or licensed healthcare service plans, each of which pays a fixed payment (“capitation”). In return, APC arranges for the delivery of healthcare services by contracting with physicians or professional medical corporations for primary care and specialty care services. APC assumes the financial risk of the cost of delivering healthcare services in excess of the fixed amounts received. The risk is subject to stop-loss provisions in contracts with HMOs. Some risk is transferred to the contracted physicians or professional corporations. The physicians in the IPA are exclusively in control of, and responsible for, all aspects of the practice of medicine for enrolled patients. In accordance with relevant accounting guidance, APC has been determined to be a VIE of NMM, as NMM is its primary beneficiary with the ability, through majority representation on the APC Joint Planning Board and otherwise, to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance. Therefore, APC and its consolidated subsidiaries, Universal Care Acquisition Partners, LLC (“UCAP”), Medical Property Partners, LLC (“MPP”), AMG Properties, LLC (“AMG Properties”), and ZLL Partners, LLC (“ZLL”), AHMC International Cancer Center, a Medical Corporation (“ICC”), 120 Hellman LLC (“120 Hellman”), APC’s consolidated VIEs, Concourse Diagnostic Surgery Center, LLC (“CDSC”), APC-LSMA Designated Shareholder Medical Corporation (“APC-LSMA”), Tag-8 Medical Investment Group, LLC (“Tag 8”), and Tag-6 Medical Investment Group, LLC (“Tag 6”), and APC-LSMA’s consolidated subsidiaries, Alpha Care Medical Group, Inc. (“Alpha Care”), Accountable Health Care IPA, a Professional Medical Corporation (“Accountable Health Care”), and AMG, a Professional Medical Corporation (“AMG”) are consolidated in the accompanying financial statements.
CDSC is an ambulatory surgery center in City of Industry, California. The facility is Medicare-certified and accredited by the Accreditation Association for Ambulatory Healthcare. CDSC is consolidated as a VIE by APC, as it was determined that APC has a controlling financial interest in CDSC and is the primary beneficiary of CDSC.
Due to laws prohibiting a California professional corporation that has more than one shareholder, such as APC, from being a shareholder in another California professional corporation, APC cannot directly own shares in other professional corporations in which APC has invested. However, an exception to this regulation permits a professional corporation that has only one shareholder to own shares in another professional corporation. In reliance on this exception, APC-LSMA holds controlling and non-controlling ownership interests in several medical corporations. APC-LSMA was formed in October 2012 as a designated shareholder professional corporation. Dr. Thomas Lam, a shareholder and the Chief Executive Officer and Chief Financial Officer of APC and the Co-Chief Executive Officer of ApolloMed, is a nominee shareholder of APC-LSMA. APC makes all investment decisions on behalf of APC-LSMA, funds all investments, and receives all distributions from the investments. APC has the obligation to absorb losses and the right to receive benefits from all investments made by APC-LSMA. APC-LSMA’s sole function is to act as the nominee shareholder for APC in other California medical professional corporations. Therefore, APC-LSMA, and its consolidated subsidiaries, Alpha Care, Accountable Health Care, and AMG are controlled and consolidated by APC as the primary beneficiary.
Through AMM, we manage a number of our affiliates pursuant to their long-term MSAs, including: ApolloMed Hospitalists (“AMH”), a physician group that provides hospitalist, intensivist, and physician advisor services, and Southern California Heart Centers (“SCHC”), a specialty clinic that focuses on cardiac care and diagnostic testing. AMH and SCHC are VIEs of AMM. We have determined that AMM is the primary beneficiary of such entities.
AP-AMH Medical Corporation (“AP-AMH”) and AP-AMH 2 Medical Corporation (“AP-AMH 2”) were formed in May 2019 and July 2021, respectively, as designated shareholder professional corporations. Dr. Thomas Lam is the sole shareholder of AP-AMH and AP-AMH 2. In accordance with relevant accounting guidance, AP-AMH and AP-AMH 2 are determined to be VIEs of ApolloMed. Therefore, AP-AMH, AP-AMH 2, and AP-AMH 2’s consolidated subsidiaries, Access Primary Care Medical Group (“APCMG”), Jade Health Care Medical Group, Inc. (“Jade”), and All American Medical Group (“AAMG”) are consolidated in the accompanying financial statements.
Sun Clinical Labs (“Sun Labs”) is a Clinical Laboratory Improvement Amendments-certified full-service lab that operates across the San Gabriel Valley in Southern California. In August 2021, Apollo Medical Holdings, Inc. acquired 49% of the aggregate issued and outstanding shares of capital stock of Sun Labs for an aggregate purchase price of $4.0 million. In accordance with relevant accounting guidance, Sun Labs is determined to be a VIE of the Company and is consolidated by the Company.
Diagnostic Medical Group of Southern California (“DMG”) is a professional medical California corporation and a complete outpatient imaging center. APC owns 40% of DMG and is managed by a subsidiary of the Company. In accordance with relevant accounting guidance, DMG is determined to be a VIE of the Company and is consolidated by the Company.
9


On October 14, 2022, a sole equity holder acquired 100% of the equity interest in Valley Oaks Medical Group (“VOMG”). Under the terms of the Physician Equity Holder Agreement (the “Equity Agreement”) between ApolloMed and the equity holder, ApolloMed may designate a third party who is permitted under Nevada law to be an owner or equity holder of VOMG with the right (the “Acquisition Right”) (a) to acquire the equity holder’s equity interest or (b) to acquire from VOMG. The Acquisition Right shall be exercisable by ApolloMed and equity holder shall be obligated to assign and transfer the equity interest or to cause VOMG to issue new equity interests (as applicable) to ApolloMed. As a result of the arrangement and in accordance with relevant accounting guidance, VOMG is determined to be a VIE of ApolloMed and is consolidated by the Company.
As of December 31, 2022, ApolloMed and its subsidiaries’ consolidated VIEs, and their consolidated subsidiaries, included the following entities: (i) ApolloMed’s consolidated VIEs, AP-AMH, AP-AMH 2, Sun Labs, DMG, AMH, SCHC, APC, and VOMG; (ii) AP-AMH 2’s consolidated subsidiary, APCMG, Jade, and AAMG; (iii) APC’s subsidiaries, UCAP, MPP, AMG Properties, ZLL, ICC, 120 Hellman, APC’s consolidated VIEs, CDSC, APC-LSMA, Tag 8, and Tag 6; and (iv) APC-LSMA’s consolidated subsidiaries Alpha Care, Accountable Health Care, and AMG.
Investments
We invested in several entities in the healthcare and real estate industries. APC holds a 50% interest in each of the following real estate entities: 531 W. College LLC, and One MSO LLC (“One MSO”). ApolloMed holds a 30% interest in CAIPA MSO, LLC (“CAIPA MSO”). CAIPA MSO is a New York-based management services organization affiliated with Chinese-American IPA d.b.a. Coalition of Asian-American IPA (“CAIPA”), a leading independent practice association serving the greater New York City area. APC-LSMA holds a 25% interest in the IPA line of business of LaSalle Medical Associates (“LMA”) and a 40% interest in Pacific Medical Imaging and Oncology Center, Inc. (“PMIOC”). PMIOC provides comprehensive diagnostic imaging services using state-of-the-art technology. PMIOC offers high-quality diagnostic services, such as MRI/MRA, PET/CT, CT, nuclear medicine, ultrasound, digital x-rays, bone densitometry, and digital mammography, at its facilities. These investments are accounted for under the equity method as the Company has the ability to exercise significant influence, but not control over operations.
APC holds a 2.8% membership interests of MediPortal LLC, a New York limited liability company, and NMM holds a 10% interest in AchievaMed, Inc., a California corporation. The Company also holds equity securities that are primarily comprised of common stock of a payor partner that completed its initial public offering (“IPO”) in June 2021 and Nutex Health Inc. (formerly known as Clinigence Holdings, Inc.) (“Nutex”). As of December 31, 2022, the value of the equity securities was $5.6 million. As of December 31, 2022, APC also holds a 18.12% ownership interest in ApolloMed. APC’s ownership interest in ApolloMed is eliminated upon consolidation.
Our Industry
Industry Overview
U.S. healthcare spending has increased steadily over the past approximately two decades. CMS estimates that total U.S. healthcare expenditures are expected to grow at an average annual rate of 5.1% from 2021 to 2030 and will reach $6.8 trillion by 2030. Health spending is projected to grow 1.8% faster than the U.S. gross domestic product per year on average over 2021-2030, and as a result, the healthcare share of gross domestic product is expected to stay consistent from 19.7% in 2020 to 19.6% in 2030. Medicare spending increased by 8.4% to $900.8 billion and Medicaid spending increased by 9.2% to $734.0 billion in 2021, which accounted for 21% and 17% of total health expenditures, respectively. Private health insurance spending increased by 5.8% to $1.2 trillion in 2021, accounting for 28% of total health expenditures. Medicare spending is expected to have the fastest growth (7.3% per year for 2021-2030) primarily due to the projected enrollment growth.
Managed care health plans were developed in the U.S., primarily during the 1980s, in an attempt to mitigate the rising cost of providing healthcare to populations covered by health insurance. These managed care health plans enroll members through their employers in connection with federal Medicare benefits or state Medicaid programs. As a result of the prevalence of these health plans, many seniors now becoming eligible for Medicare have been interacting with managed care companies through their employers for the last 30 years. Individuals now turning 65 are likely more familiar with the managed care setting than previous Medicare populations. The healthcare industry, however, is highly regulated by various government agencies and heavily relies on reimbursement and payments from government-sponsored programs such as Medicare and Medicaid. Companies in the healthcare industry therefore have to organize, operate around, and face challenges from idiosyncratic laws and regulations.
10


Many health plans recognize both the opportunity for growth from adding members, as well as the potential risks and costs associated with managing additional members. In California, many health plans subcontract a significant portion of the responsibility for managing patient care to integrated medical systems such as ApolloMed and our affiliated physician groups. These integrated healthcare systems offer a comprehensive medical delivery system, sophisticated care management know-how, and infrastructure to more efficiently provide for the healthcare needs of the population enrolled with that health plan. While reimbursement models for these arrangements vary around the U.S., health plans often prospectively pay the integrated healthcare system a fixed capitation payment, which is frequently based on a percentage of the amount received by the health plan. Capitation payments to integrated healthcare systems, in the aggregate, represent a prospective budget from which the system manages care-related expenses on behalf of the population enrolled with that system. To the extent that these systems manage such expenses under the capitated levels, the system realizes an operating profit. On the other hand, if the expenses exceed projected levels, the system will realize an operating deficit. Since premiums paid represent a substantial amount per person, there is a significant revenue opportunity for an integrated medical system that is able to effectively manage healthcare costs for the capitated arrangements entered into by its affiliated physician groups.
Industry Trends and Demand Drivers
We believe that the healthcare industry is undergoing a significant transformation and the demand for our offerings is driven by the confluence of a number of fundamental healthcare industry trends, including:
Shift to Value-Based and Results-Oriented Models. According to the 2021 National Health Expenditure Historical Data prepared by CMS, healthcare spending in the U.S. increased 2.7% to $4.3 trillion in 2021, representing 18.3% of U.S. Gross Domestic Product. CMS projects healthcare spending in the U.S. to increase at an average rate of 5.1% for 2021-2030 and to reach approximately $6.8 trillion by 2030. To address this expected significant rise in healthcare costs, the U.S. healthcare market is seeking more efficient and effective methods of delivering care. The fee-for-service reimbursement model has arguably played a major role in increasing the level and growth rate of healthcare spending. In response, both the public and private sectors are shifting away from the fee-for-service reimbursement model toward value-based, capitated payment models that are designed to incentivize value and quality at an individual patient level. The number of Americans covered by capitated payment programs continues to increase, which drives more coordinated and outcomes-based patient care.
Increasingly Patient-Centered. More patients are becoming actively involved and taking an informed role in how their own healthcare is delivered resulting in the healthcare marketplace becoming increasingly patient-centered, and thus requiring providers to deliver team-based, coordinated, and accessible care to stay competitive.
Added Complexity. In the healthcare space, more sophisticated technology has been employed, new diagnostics and treatments have been introduced, research and development has expanded, and regulations have multiplied. This expanding complexity drives a growing and continuous need for integrated care delivery systems.
Integration of Healthcare Information. Across the healthcare landscape, a significant amount of data is being created every day, driven by patient care, payment systems, regulatory compliance, and record keeping. As the amount of healthcare data continues to grow, it becomes increasingly important to connect disparate data and apply insights in a targeted manner in order to better achieve the goals of higher quality and more efficient care.
Integrated Medical Systems
Integrated medical systems that are able to pool a large number of patients, such as the Company and its affiliated physician groups, are positioned to take advantage of industry trends, meet patient and government demands, and benefit from cost advantages resulting from their scale of operation and integrated approach of care delivery. In addition, integrated medical systems with years of managed care experience can leverage their expertise and sizeable medical data to identify specific treatment strategies and interventions, improve the quality of medical care and lower cost. Many integrated medical systems have also established physician performance metrics that allow them to monitor quality and service outcomes achieved by participating physicians in order to reward efficient, high-quality care delivered to members and initiate improvement efforts for physicians whose performance can be enhanced.
IPAs and MSOs

    An IPA is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to HMOs, which are medical insurance groups that provide health services generally for a fixed annual fee, on a negotiated per capita rate, flat retainer fee, or negotiated FFS basis. MSOs are formed to provide management and administrative support services to affiliated physician groups such as IPAs. These services include physician recruiting,
11


physician and health plan contracting, care management, provider relations, member services, revenue cycle management, and claims processing.
ACOs
An ACO participates in in one or more payment and delivery models sponsored by CMS that provides high-quality and affordable care to Medicare fee-for-service patients.
Outpatient Clinics
Ambulatory surgery centers and other outpatient clinics are healthcare facilities that specialize in performing outpatient surgeries, ambulatory treatments, and diagnostic and other services in local communities. As medical care has increasingly been delivered in clinic settings, many integrated medical systems also operate healthcare facilities primarily focused on the diagnosis and/or care of outpatients, including those with chronic conditions such as heart disease and diabetes, to cover the primary healthcare needs of local communities.
Hospitalists
Hospitalists are doctors specialized in the care of patients in the hospital. Hospitalists assume the inpatient care responsibilities otherwise provided by primary care or other attending physicians and are reimbursed through the same billing procedures as other physicians. Hospitalists tend to focus exclusively on inpatient care. By practicing in the same facilities, hospitalists perform consistent functions, interact regularly with the same healthcare professionals, and thus are familiar with specific and unique hospital processes, which can result in greater efficiency, less process variability, and better outcomes. Through managing the treatment of a large number of patients with similar clinical needs, hospitalists generally develop practice expertise in both the diagnosis and treatment of common conditions that require hospitalization. For these reasons, hospitalists have an increasingly important role in improving care quality.
Population Health Management
Population health management (“PHM”) is a central trend within healthcare delivery, which includes the aggregation of patient data across multiple health information technology resources, the analysis of that data into a single, actionable patient record, and the actions through which care providers can improve both clinical and financial outcomes. PHM seeks to improve the health outcomes by monitoring and identifying individual patients, aggregating data, and providing a comprehensive clinical picture of each patient. Using that data, providers can track, and hopefully improve, clinical outcomes while lowering costs. A successful PHM platform requires a robust care and risk management infrastructure, a cohesive delivery system, and a well-managed partnership network.
Our Business Operations
IPAs
Each of our affiliated IPAs comprises a network of independent primary care physicians and specialists who collectively care for patients and contract with HMOs to provide physician services to their enrollees typically under capitated arrangements. Under the capitated model, an HMO pays the IPA a capitation payment and assigns it the responsibility for providing physician services required by patients. The IPA physicians are exclusively in control of, and responsible for, all aspects of the practice of medicine for enrolled patients. Most of the HMO agreements have an initial term of two years renewing automatically for successive one-year terms. The HMO agreements generally allow either party to terminate the HMO agreements without cause typically with a four to six months advance notice and provide for a termination for cause by the HMO at any time.
MSOs
Our MSOs generally provide services to our affiliated IPAs or ACOs under long-term MSAs, pursuant to which they manage certain non-medical services for the physician groups and have exclusive authority over all non-medical decision-making related to ongoing business operations. These services include but are not limited to:
Physician recruiting;
Physician and health plan contracting;
Care management, including utilization management, medical management, and quality management;
12


Provider relations;
Member services, including annual wellness evaluations;
Pre-negotiating contracts with specialists, labs, imaging centers, nursing homes, and other vendors; and
Revenue cycle management.
ACO REACH (previous iteration: GPDC Model)
In February 2022, CMS announced that APAACO was approved to participate in the GPDC Model and APAACO began operations under this new model in 2022. Under the current Administration, changes were made to the model, and it was renamed the ACO Realizing Equity, Access, and Community Health Model. The ACO REACH Model commenced on January 1, 2023. We had devoted significant effort and resources, financial and otherwise, to the GPDC Model in PY2022, and have now transitioned to the ACO REACH Model in PY2023. APAACO’s new Participation Agreement for the ACO REACH Model runs through PY2026. The Company continues to be eligible to receive any shared savings or deficit under the GPDC Model for PY2022. The Company will be eligible to receive any shared savings or deficit under the ACO REACH Model for Performance Years 2023-2026.
In advance of its participation in the ACO REACH Model, APAACO entered into agreements with approximately 850 medical care providers, including physicians, hospitals, nursing facilities and multiple labs, radiology centers, outpatient surgery centers, dialysis clinics, and other service providers.
Under the Participation Agreement, APAACO must require its Participant and Preferred Providers to make medically necessary covered services available to beneficiaries in accordance with applicable laws, regulations, and guidance. During each Performance Year, from PY2021 (April-December 2021) through PY2026 (Calendar Year 2026), ACOs and their Participant Providers may not simultaneously participate in the Medicare Shared Savings Program. The determination of whether such an overlap exists during PY2021 – PY2026 will be made at the TIN level. During the GPDC / ACO REACH Model’s performance years (PY2021 – PY2026), Participant Providers may not simultaneously participate in the GPDC / ACO REACH Model and another model tested or expanded under section 1115A of the Act that involves shared savings, or any other Medicare initiative that involves shared savings unless otherwise permitted by CMS. For example, Participant Providers may not participate in the Kidney Care Choices model or the Vermont All-Payer ACO Model. In addition, for the Primary Care First model, Independence at Home demonstration, and the Maryland Primary Care Program, which have similar payment structures to the GPDC / ACO REACH Model, overlap is prohibited even though they are not shared savings initiatives. For each of these initiatives, overlap is determined based on the TIN/NPI combination of the participating clinicians.
There are different levels of financial risk and reward that an ACO may select under the GPDC / ACO REACH Model, and the extent of risk and reward may be limited on a percentage basis. The GPDC / ACO REACH Model offers two risk arrangement options: the Professional risk track and the Global risk track. In the Professional risk track, the ACO retains 50% of shared savings/losses with CMS, up to 5% under/over the benchmark, with risk corridors for savings/losses greater than 5%. In the Global risk track, the ACO retains 100% of shared savings/losses, up to 25% under/over the benchmark, with risk corridors for savings/losses greater than 25%. Given that the ACO retains 100% of any shared savings up to 25%, the Global risk track incorporates a “discount”, which is the primary mechanism for CMS to obtain savings from ACOs participating in this risk track. Under the GPDC model, this discount was 2% of the benchmark. Under the ACO REACH model, this discount is 3% of the benchmark for PY2023-24, increasing to 3.5% for PY2025-26. APA ACO has opted for the Global risk track.
The ACO REACH Model offers two payment mechanisms:
Primary Care Capitation (“PCC”). ACOs who have selected the Professional risk track may only opt for PCC. ACOs who have selected the Global risk track may opt for either PCC or Total Care Capitation (“TCC”). In PCC arrangements, ACOs will receive a per-beneficiary, per-month (PBPM) capitated payment for primary care services provided to aligned beneficiaries by all Participant Providers and those Preferred Providers who have opted to participate in PCC Payment.
Total Care Capitation. This payment arrangement is only available to ACOs who have selected the Global risk track. In TCC arrangements, ACOs will receive a PBPM capitated payment for all services provided to aligned beneficiaries by all Participant Providers and those Preferred Providers who have opted to participate in TCC payment. This TCC Payment amount will reflect the estimated total cost of care for the ACO’s aligned population.
13


APAACO opted for, and was approved by CMS to participate in, TCC, under the Global risk track, which is the most advanced risk-taking payment model in the GPDC / ACO REACH program. Under TCC in the Global risk track, APAACO is responsible for paying all Part A and Part B costs for in-network Participant Providers and Preferred Providers with whom it has contracted. In addition, APAACO is at risk for the total sum of all Part A and Part B expenditures incurred by its GPDC and ACO REACH patients, including expenditures incurred by its patients outside of APAACO’s network of Participant and Preferred Providers. Throughout the GPDC and ACO REACH programs, a substantial portion of APAACO’s spending benchmark is held at-risk by CMS, subject to APAACO meeting certain quality measures as determined by CMS. In the GPDC program, the portion of the benchmark held at-risk by CMS for quality was 5% of the benchmark. In the ACO REACH program, the portion of the benchmark held at-risk by CMS for quality is 2% of the benchmark.
Our Revenue Streams
Our revenue reflected in the accompanying consolidated financial statements includes revenue generated by our subsidiaries and consolidated entities. Revenue generated by consolidated entities, however, does not necessarily result in available or distributable cash for ApolloMed. Some revenue is generated from Excluded Assets that remain solely for the benefit of APC and its shareholders. Our revenue streams flow from various multi-year renewable contractual arrangements that vary by type of business operation as follows:
Capitation Revenue
Our capitation revenue consists primarily of capitated fees for medical services we provide under capitated arrangements made directly with various managed care providers, including HMOs. Capitation revenue is typically prepaid monthly to us based on the number of enrollees selecting us as their healthcare provider. Capitation is a fixed payment amount per patient per unit of time paid in advance for the delivery of healthcare services, whereby the service providers are generally liable for excess medical costs. The actual amount paid is determined by the ranges of services provided, the number of patients enrolled, and the period of time during which the services are provided. Capitation rates are generally based on local costs and average utilization of services. Because Medicare pays capitation using a “Risk Adjustment” model, which compensates managed care providers based on the health status (acuity) of each individual enrollee, managed care providers with higher acuity enrollees receive more, and those with lower acuity enrollees receive less, capitation that can be allocated to service providers. Under the Risk Adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled.
Per member per month (“PMPM”) managed care contracts generally have a term of one year or longer. All managed care contracts have a single performance obligation that constitutes a series for the provision of managed healthcare services for a population of enrolled members for the duration of the contract. The transaction price for PMPM contracts is variable, as it primarily includes PMPM fees associated with unspecified membership that fluctuates throughout the term of the contract. In certain contracts, PMPM fees also include adjustments for items such as performance incentives, performance guarantees, and risk shares.
Risk Pool Settlements and Incentives
Capitation arrangements are supplemented by risk-sharing arrangements. We have two different types of capitation risk-sharing arrangements: full-risk and shared-risk arrangements.
We enter into full-risk capitation arrangements with certain health plans and local hospitals, which are administered by a related party, where the hospital is responsible for providing, arranging, and paying for institutional risk. We are responsible for providing, arranging, and paying for professional risk. Under a full-risk pool-sharing agreement, we generally receive a percentage of the net surplus from the affiliated hospital’s risk pools with HMOs after deductions for the affiliated hospital’s costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus. Risk pool settlements under arrangements with health plans and hospitals are recognized using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The assumptions for medical loss ratios (“MLR”), incurred but not reported (“IBNR”) completion factor and constraint percentages were used by management in applying the most likely amount methodology.
14


Under capitation arrangements with certain HMOs, we participate in one or more shared-risk arrangements relating to the provision of institutional services to enrollees (shared-risk arrangements) and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services. Shared-risk capitation arrangements are entered into with certain health plans, which are administered by the health plan, where we are responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore, the health plan retains the institutional risk. Shared-risk deficits, if any, are not payable until and unless (and only to the extent of any) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished.
In addition to risk-sharing revenues, we also receive incentives under “pay-for-performance” programs for quality medical care, based on various criteria. As an incentive to control enrollee utilization and to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate us for our efforts to improve the quality of services and to promote the efficient and effective use of pharmacy supplemental benefits provided to HMO members. The incentive programs track specific performance measures and calculate payments to us based on the performance measures.
Generally, for the foregoing arrangements, the final settlement is dependent on each distinct day’s performance within the annual measurement period, but cannot be allocated to specific days until the full measurement period has occurred and performance can be assessed.
Management Fee Income
Management fee income encompasses fees paid for management, physician advisory, healthcare staffing, administrative, and other non-medical services provided by us to IPAs, hospitals, and other healthcare providers. Such fees may be in the form of billings at agreed-upon hourly rates, percentages of revenue, or fee collections, or amounts fixed on a monthly, quarterly, or annual basis. The revenue may include variable arrangements measuring factors such as hours staffed, patient visits, or collections per visit against benchmarks, and, in certain cases, may be subject to achieving quality metrics or fee collections.
GPDC / ACO REACH Revenue
Through APAACO, we participate in the Global Risk track with TCC in the GPDC / ACO REACH Model sponsored by CMS. Under the GPDC / ACO REACH Model, we recruit a group of Participant and Preferred (in-network) Providers. Based on the Participant Providers that join our ACO, CMS grants us a pool of Traditional Medicare patients (beneficiaries) to manage. Our beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network. Under TCC, CMS estimates an average of in-network monthly expenditures for APAACO’s aligned beneficiaries and pays that projected amount to us in monthly installments. We are then responsible for paying our in-network providers for all Part A and Part B expenditures incurred by our beneficiaries with those providers. In addition, we bear risk on all Part A and Part B expenditures (both in-network and out-of-network) based on a budgetary benchmark established with CMS. Claims from out-of-network providers are processed and paid by CMS. Our shared savings or losses in managing our beneficiaries are generally determined on an annual basis after reconciliation with CMS. Pursuant to our risk-share agreement with CMS, we will be eligible to receive the surplus (shared savings) or be liable for the deficit (shared losses) according to the budgetary benchmark established by CMS based on our efficiency or lack thereof, in managing the expenditures associated with beneficiaries aligned to us by CMS. We recognize such savings or deficit upon substantial completion of reconciliation and determination of the amounts. We also recognize the final budgetary benchmark established by CMS, net of discounts, and retrospective trend adjustments, as revenue. Our maximum shared savings or losses are determined by the risk track we elect with CMS. Under the Global Risk track, we are responsible for 100% of shared savings or losses up to 25% of the total budgetary benchmark established by CMS, with adjusted risk corridors taking effect for any proportion of shared savings / losses exceeding 25% of the benchmark—for savings/losses of 25-35% of the benchmark, we assume 50% risk responsibility, for savings/losses 35%-50% of the benchmark we assume 25% of the risk responsibility, and for savings/losses exceeding 50% of the benchmark, we assume only 10% of the risk responsibility.
NGACO AIPBP Revenue
15


Through APAACO, we participated in the AIPBP track of the NGACO Model sponsored by CMS. Under the NGACO Model, CMS granted us a pool of patients to manage (direct care and pay providers) based on a budgetary benchmark established with CMS. Pursuant to our risk-share agreement with CMS, we were eligible to receive the surplus or be liable for the deficit according to the budgetary benchmark established by CMS based on our efficiency or lack thereof, in managing how the beneficiaries aligned to us by CMS are served by in-network and out-of-network providers. Our shared savings or losses on providing such services are both capped by CMS. With the ending of the NGACO Model on December 31, 2021, we received $48.8 million and $21.8 million in risk pool savings related to the 2021 and 2020 performance years, respectively, and have recognized such amounts as revenue in the risk pool settlements and incentives in the accompanying consolidated statements of income for the years ended December 31, 2022 and 2021, respectively.
Fee For Service Revenue
FFS revenue represents revenue earned under contracts in which we bill and collect the professional component of charges for medical services rendered by our contracted physicians and employed physicians. Under the FFS arrangements, we bill, and receive payments from, the hospitals and third-party payors for physician staffing and further bill patients or their third-party payors for patient care services provided. 
Our Key Payors
A limited number of payors represent a significant portion of our net revenue. For the years ended December 31, 2022, 2021 and 2020, four payors accounted for an aggregate of 59.0%, 49.6%, and 53.4% of our total net revenue, respectively.
Our Strengths and Advantages
The following are some of the material opportunities that we believe exist for our company:
Combination of Clinical, Administrative and Technology Capabilities
We believe our key strength lies in our combined clinical, administrative, and technology capabilities. While many companies separately provide clinical, MSO, or technology support services, to our knowledge there are currently very few organizations like us that provide all three types of services to approximately 1.3 million patients as of December 31, 2022.
Diversification
Through our subsidiaries, consolidated affiliates, and invested entities, we have been able to reduce our business risk and increase revenue opportunities by diversifying our service offerings and expanding our ability to manage patient care across a horizontally integrated care network. Our revenue is spread across our operations. Additionally, with our ability to monitor and manage care within our wide network, we are an attractive business partner to health plans, hospitals, IPAs, and other medical groups seeking to provide better care at lower costs.
Strong Management Team
Our management team has, collectively, several decades of experience managing physician practices, risk-based organizations, health plans, hospitals, and health systems, a deep understanding of the healthcare marketplace and emerging trends, and a vision for the future of healthcare delivery led by physician-driven healthcare networks.
A Robust Physician Network
As of December 31, 2022, our physician network consisted of approximately 11,000 contracted physicians, including primary care physicians, specialist physicians, and hospitalists, through our affiliated physician groups and ACOs.
Cultural Affinities with Patients
In addition to delivering premium healthcare, we believe in the importance of providing services that are sensitive to the needs of local communities, including their cultural affinities. This value is shared by physicians within our affiliated IPAs and medical groups, and promotes patient comfort in communicating with care providers.
Long-Standing Relationships with Partners
16


We have developed long-standing relationships with and have earned trust from multiple health plans, hospitals, IPAs, and other medical groups that have helped to generate recurring contractual revenue for us.
Comprehensive and Effective Healthcare Management Programs
We offer comprehensive and effective healthcare management programs to patients. We have developed expertise in population health management and care coordination, and in proper medical coding, which results in improved Risk Adjustment Factor (“RAF”) scores and higher payments from health plans, and in improving quality metrics in both inpatient and outpatient settings and thus patient satisfaction and CMS scores. Using our own proprietary risk assessment scoring tool, we have also developed our own protocol for identifying high-risk patients.
Competition
The healthcare industry is highly competitive and fragmented. We compete for customers across all of our services with other healthcare management companies, including MSOs and healthcare providers, such as local, regional, and national networks of physicians, medical groups, and hospitals, many of which are substantially larger than us and have significantly greater financial and other resources, including personnel, than we have.
IPAs
Our affiliated IPAs compete with other IPAs, medical groups, and hospitals, many of which have greater financial, personnel, and other resources available to them. In the greater Los Angeles area, such competitors include Regal Medical Group and Lakeside Medical Group, which are part of Heritage Provider Network (“Heritage”), as well as Optum (f.k.a. HealthCare Partners), a subsidiary of UnitedHealth Group.
ACOs
APAACO competes with other sophisticated provider groups in the creation, administration, and management of ACOs, many of which have greater financial, personnel, and other resources available to them. Major competitors of APAACO include Privia Health and Aledade.
Outpatient Clinics
Our outpatient clinics compete with large ambulatory surgery centers and/or diagnostic centers such as RadNet and Envision Healthcare, many of which have greater financial, personnel, and other resources available to them, as well as smaller clinics that have ties to local communities. Optum (f.k.a. HealthCare Partners) also has its own urgent care centers, clinics, and diagnostic centers.
Hospitalists
Because individual physicians may provide hospitalist services if they have necessary credentials and privileges, the markets for hospitalist services are highly fragmented. Our affiliated hospitalist groups face competition primarily from numerous small inpatient practices in existing and expanding markets, but also compete with large physician groups, many of which have greater financial, personnel, and other resources available to them. Some of such competitors operate on a national level, including EmCare, Team Health, and Sound Physicians.
Regulatory Matters
As a healthcare company, our operations and relationships with healthcare providers, such as hospitals, other healthcare facilities, and healthcare professionals, are subject to extensive and increasing regulation by numerous federal, state, and local government agencies, including the Office of Inspector General, the Department of Justice, CMS, and various state authorities. These laws and regulations often are interpreted broadly and enforced aggressively. Imposition of liabilities associated with a violation of any of these healthcare laws and regulations could have a material adverse effect on our business, financial condition, or results of operations. We cannot guarantee that our practices will not be subject to government scrutiny or be found to violate certain healthcare laws. Government investigations and prosecutions, even if we are ultimately found to be without fault, can be costly and disruptive to our business. Moreover, changes in healthcare legislation or government regulation may restrict our existing operations, limit our expansion, or impose additional compliance requirements and costs, any of which could have a material adverse effect on our business, financial condition, or results of operations. Below are brief descriptions of some, but not all, of such laws and regulations that affect our business operations.
17


Corporate Practice of Medicine
Our consolidated financial statements include our subsidiaries and VIEs. Some states have laws that prohibit business entities with non-physician owners, such as ApolloMed and its subsidiaries, from practicing medicine, employing physicians to practice medicine, or exercising control over medical decisions by physicians. These laws are generally referred to as corporate practice of medicine laws. States that have corporate practice of medicine laws permit only physicians to practice medicine, exercise control over medical decisions, or engage in certain arrangements, such as fee-splitting, with physicians. In these states, a violation of the corporate practice of medicine prohibition constitutes the unlawful practice of medicine, which is a public offense punishable by fines and other criminal penalties. In addition, any physician who participates in a scheme that violates the state’s corporate practice of medicine prohibition may be punished for aiding and abetting a lay entity in the unlawful practice of medicine.
California is a corporate practice of medicine state, and we operate by maintaining long-term MSAs with our affiliated IPAs and medical groups, each of which is owned and operated by physicians only, and employs or contracts with additional physicians to provide medical services. Under such MSAs, our wholly owned MSOs are contracted to provide non-medical management and administrative services, such as financial and risk management, as well as information systems, marketing, and administrative support to the IPAs and medical groups. The MSAs typically have an initial term of 1-10 years and are generally not terminable by our affiliated IPAs and medical groups except in the case of bankruptcy, gross negligence, fraud, or other illegal acts by the contracting MSO.
Through the MSAs and the relationship with the physician owners of our medical affiliates, we have exclusive authority over all non-medical decisions related to the ongoing business operations of those affiliates. Consequently, ApolloMed consolidates the revenue and expenses of such affiliates as their primary beneficiary from the date of execution of the applicable MSA. When necessary, our Co-Chief Executive Officer, Dr. Thomas Lam, serves as nominee shareholder of affiliated medical practices on ApolloMed’s behalf, in order to comply with corporate practice of medicine laws and certain accounting rules applicable to consolidated financial reporting by our affiliates as VIEs.
Under these arrangements, our MSOs perform only non-medical functions, do not represent to offer medical services, and do not exercise influence or control over the practice of medicine by physicians. The California Medical Board, as well as other states’ regulatory bodies, has taken the position that MSAs that confer too much control over a physician practice to MSOs may violate the prohibition against corporate practice of medicine. Some of the relevant laws, regulations, and agency interpretations in California and other states that have corporate practice prohibitions have been subject to limited judicial and regulatory interpretation. Moreover, state laws and regulatory interpretations are subject to change. Other parties, including our affiliated physicians, may assert that, despite these arrangements, ApolloMed and its subsidiaries are engaged in the prohibited corporate practice of medicine or that such arrangements constitute unlawful fee-splitting between physicians and non-physicians. If this occurred, we could be subject to civil or criminal penalties, our MSAs could be found legally invalid and unenforceable in whole or in part, and we could be required to restructure arrangements with our affiliated IPAs and medical groups. If we were required to change our operating structures due to determination that a corporate practice of medicine violation existed, such a restructuring might require revising our MSOs’ management fees.
False Claims Acts
The False Claims Act, 31 U.S.C. §§ 3729 - 3733, imposes civil liability on individuals or entities that submit false or fraudulent claims for payment to the federal government. The False Claims Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly or recklessly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim for payment approved. Private parties may initiate qui tam whistleblower lawsuits against any person or entity under the False Claims Act in the name of the federal government and may share in the proceeds of a successful suit. The federal government has used the False Claims Act to prosecute a wide variety of alleged false claims and fraud allegedly perpetrated against Medicare and state healthcare programs. By way of illustration, these prosecutions may be based upon alleged coding errors, billing for services not rendered, billing services at a higher payment rate than appropriate, and billing for care that is not considered medically necessary. The federal government and a number of courts have taken the position that claims presented in violation of certain other statutes, including the federal Anti-Kickback Statute or the Stark Law, can also be considered a violation of the False Claims Act based on the theory that a provider impliedly certifies compliance with all applicable laws, regulations, and other rules when submitting claims for reimbursement.
18


Penalties for False Claims Act violations include substantial fines for each false claim, plus up to three times the amount of damages sustained by the government. A False Claims Act violation may provide the basis for the imposition of administrative penalties as well as exclusion from participation in governmental healthcare programs, including Medicare and Medicaid. In addition to the provisions of the False Claims Act, which provide for civil enforcement, the federal government also can use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims to the government for payments.
A number of states including California have enacted laws that are similar to the federal False Claims Act. Under Section 6031 of the Deficit Reduction Act of 2005 (“DRA”), as amended, if a state enacts a false claims act that is at least as stringent as the federal statute and that also meets certain other requirements, the state will be eligible to receive a greater share of any monetary recovery obtained pursuant to certain actions brought under the state’s false claims act. As a result, more states are expected to enact laws that are similar to the federal False Claims Act in the future along with a corresponding increase in state false claims enforcement efforts. In addition, Section 6032 of the DRA requires entities that make or receive annual Medicaid payments of $5.0 million or more from any one state to provide their employees, contractors, and agents with written policies and employee handbook materials on federal and state False Claims Acts and related statues.
Anti-Kickback Statutes
The federal Anti-Kickback Statute is a provision of the Social Security Act of 1972 that prohibits as a felony offense the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (1) the referral of a patient for items or services for which payment may be made in whole or part under Medicare, Medicaid, or other federal healthcare programs, (2) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid, or other federal healthcare programs or (3) the purchase, lease, or order or arranging or recommending the purchasing, leasing, or ordering of any item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs. The Patient Protection and Affordable Care Act (“ACA”) amended section 1128B of the Social Security Act to make it clear that a person need not have actual knowledge of the statute, or specific intent to violate the statute, as a predicate for a violation. The OIG, which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation, which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals. A violation of the Anti-Kickback Statute is a felony punishable by imprisonment, criminal fines, civil fines, and three times the amount of the unlawful remuneration. A violation also can result in exclusion from Medicare, Medicaid, or other federal healthcare programs. In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act.
Due to the breadth of the Anti-Kickback Statute’s broad prohibitions, statutory exceptions exist that protect certain arrangements from prosecution. In addition, the OIG has published safe harbor regulations that specify arrangements that are deemed protected from prosecution under the Anti-Kickback Statute, provided all applicable criteria are met. The failure of an activity to meet all of the applicable safe harbor criteria does not necessarily mean that the particular arrangement violates the Anti-Kickback Statute, but these arrangements may be subject to scrutiny and prosecution by enforcement agencies. We may be less willing than some competitors to take actions or enter into arrangements that do not clearly satisfy the OIG safe harbors and suffer a competitive disadvantage.
On December 2, 2020, in conjunction with HHS’s Regulatory Sprint to Coordinated Care, the OIG finalized modifications to existing safe harbors to the Anti-Kickback Statute and added new safe harbors and a new exception to the civil monetary penalty provision prohibiting inducements to beneficiaries, the purpose of which was to remove potential barriers to more effective coordination and management of patient care and delivery of value-based care. The changes implemented by the final rules went into effect on January 19, 2021. These or other changes implemented by OIG in the future may impact our business, results of operations and financial condition.
Some states have enacted statutes and regulations similar to the Anti-Kickback Statute, but which may be applicable regardless of the payor source for the patient. These state laws may contain exceptions and safe harbors that are different from and/or more limited than those of the federal law and that may vary from state to state. For example, California has adopted the Physician Ownership and Referral Act of 1993 (“PORA”). PORA makes it unlawful for physicians, surgeons, and other licensed professionals to refer a person for certain healthcare services if they have a financial interest with the person or entity that receives the referral. While PORA also provides certain exemptions from this prohibition, failure to fit within an exemption in violation of PORA can lead to a misdemeanor offense that may subject a physician to civil penalties and disciplinary action by the Medical Board of California.
    
19


For example, Section 445 of the California Health and Safety Code, provides that “no person, firm, partnership, association or corporation, or agent or employee thereof, shall for profit refer or recommend a person to a physician, hospital, health-related facility, or dispensary for any form of medical care or treatment of any ailment or physical condition. The imposition of a fee or charge of any such referral or recommendation creates a presumption that the referral or recommendation is for profit.” A violation of Section 445 is a misdemeanor and may subject the offender to imprisonment and/or monetary fines. Further, a violation of Section 445 may be enjoined by the California Attorney General. Section 650 of the California Business and Professions Code contains prohibitions against self-referral and kickbacks. Business & Professions Code Section 650 makes it unlawful for a “licensee,” including a physician, to pay or receive any compensation or inducement for referring patients, clients, or customers to any person or entity, irrespective of any membership or proprietary interest in or with the person or entity receiving the referral. Violation of the statute is a public offense punishable by imprisonment and/or monetary fines. Section 650 further provides that it is not unlawful for a physician to refer a patient to a healthcare facility solely because the physician has a proprietary interest or co-ownership in a healthcare facility, provided that (1) the physician’s return on investment for that proprietary interest or co-ownership is based upon the amount of capital investment or proportional ownership of the physician; and (2) the ownership interest is not based on the number or value of any patients referred. A violation of Section 650 is a misdemeanor and may subject the offender to imprisonment and/or monetary fines.
We cannot assure that the applicable regulatory authorities will not determine that some of our arrangements with physicians violate the federal Anti-Kickback Statute or other applicable laws. An adverse determination could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other healthcare programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
Antitrust Laws

The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-competitive. These laws prohibit price fixing, market allocation, concerted refusal to deal, market monopolization, price discrimination, tying arrangements, acquisitions of competitors and other practices that have, or may have, an adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the health care industry is currently a priority of the Federal Trade Commission and the DOJ. A review or action by regulatory authorities or the courts that is negative in nature as to the relationship between us and the physician groups or IPAs which we manage or contract with, could force us to terminate those contractual relationships. We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations.
Stark Laws
The federal Stark Law, 42 U.S.C. 1395nn, also known as the physician self-referral law, generally prohibits a physician from referring Medicare and Medicaid patients to an entity (including hospitals) providing “designated health services,” if the physician or a member of the physician’s immediate family has a “financial relationship” with the entity, unless a specific exception applies. Designated health services include, among other services, inpatient hospital services, outpatient prescription drug services, clinical laboratory services, certain imaging services (e.g., MRI, CT, ultrasound), and other services that our affiliated physicians may order for their patients. The prohibition applies regardless of the reasons for the financial relationship and the referral, and therefore, unlike the federal Anti-Kickback Statute, intent to violate the law is not required. Like the Anti-Kickback Statute, the Stark Law contains statutory and regulatory exceptions intended to protect certain types of transactions and arrangements. Unlike safe harbors under the Anti-Kickback Statute with which compliance is voluntary, an arrangement must comply with every requirement of a Stark Law exception or the arrangement is in violation of the Stark Law.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure its relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted. The penalties for violating the Stark Law can include the denial of payment for services ordered in violation of the statute, mandatory refunds of any sums paid for such services, and civil penalties for each violation, double damages, and possible exclusion from future participation in the governmental healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may face substantial fines for each applicable arrangement or scheme.
20


On December 2, 2020, in conjunction with HHS’s Regulatory Sprint to Coordinated Care, CMS issued a final rule intended to address the regulatory impact and burden of the Stark Law that impeded the healthcare system’s move toward value-based reimbursement. CMS added new exceptions to attempt to address potential barriers to coordinated care and value-based care. The changes implemented by the final rules went into effect on January 19, 2021. These or other changes implemented by CMS in the future may impact our business, results of operations, and financial condition.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payor source and which may apply to different types of services. These state laws may contain statutory and regulatory exceptions that are different from those of the federal law and that may vary from state to state. For example, California has adopted the Physician Ownership and Referral Act of 1993 (“PORA”). PORA makes it unlawful for physicians, surgeons, and other licensed professionals to refer a person for certain healthcare services if they have a financial interest with the person or entity that receives the referral. While PORA also provides certain exemptions from this prohibition, failure to fit within an exemption in violation of PORA can lead to a misdemeanor offense that may subject a physician to civil penalties and disciplinary action by the Medical Board of California.
An adverse determination under these state laws and/or the federal Stark Law could subject us to different liabilities, including criminal penalties, civil monetary penalties, and exclusion from participation in Medicare, Medicaid, or other healthcare programs, any of which could have a material adverse effect on our business, financial condition, or results of operations.
Health Information Privacy and Security Standards
The privacy regulations promulgated under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, contain detailed requirements concerning the use and disclosure of individually identifiable patient health information (“PHI”) by entities like our MSOs and affiliated IPAs and medical groups. HIPAA covered entities must implement certain administrative, physical, and technical security standards to protect the integrity, confidentiality, and availability of certain electronic health information received, maintained, or transmitted. HIPAA also implemented standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including billing and claim collection activities. New health information standards could have a significant effect on the manner in which we do business, and the cost of complying with new standards could be significant.
Violations of the HIPAA privacy and security rules may result in civil and criminal penalties, including a tiered system of civil money penalties. A HIPAA-covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report annually any breaches affecting fewer than 500 individuals.
State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations. Many states also have laws that protect the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Where state laws are more protective than HIPAA, we have to comply with the stricter provisions. Some of these state laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for monetary penalties and permit injured parties to sue for damages. Both state and federal laws are subject to modification or enhancement of privacy protection at any time.
If we fail to comply with HIPAA or similar state laws, we could incur substantial civil monetary or criminal penalties. We expect increased federal and state privacy and security enforcement efforts.
Knox-Keene Act and State Insurance Laws
21


The Knox-Keene Health Care Service Plan Act of 1975 (Health and Safety Code Section 1340, et seq.), as amended (the “Knox-Keene Act”), is the California law that regulates managed care plans. Neither our MSOs nor their managed medical groups and IPAs hold a Knox-Keene license. Some of the medical groups and IPAs that have entered into MSAs with our MSOs have historically contracted with health plans and other payors to receive capitation payments and assumed the financial responsibility for professional services. In many of these cases, the health plans or other payors separately enter into contracts with hospitals that receive payments and assume some type of contractual financial responsibility for their institutional services. In some instances, our affiliated medical groups and IPAs have been paid by their contracting payors or hospitals for the financial outcome of managing the care costs associated with both the professional and institutional services received by patients, and have recognized a percentage of the surplus of institutional revenues less institutional expense as the medical groups’ and IPAs’ net revenues; and, under certain circumstances, may be responsible for a percentage of any shortfall in the event that institutional expenses exceed institutional revenues. While our MSOs and their managed medical groups and IPAs are not contractually obligated to pay claims to hospitals or other institutions under these arrangements, if it is determined that our MSOs or the medical groups and IPAs have been inappropriately taking financial risk for institutional and professional services without Knox-Keene license or regulatory exemption as a result of their hospital and physician arrangements, we may be required to obtain a restricted Knox-Keene license to resolve such violations and we could be subject to civil and criminal liability, any of which could have a material adverse effect on our business, financial condition, or results of operations.
In addition, some states require ACOs to be registered or otherwise comply with state insurance laws. Our ACOs are not registered with any state insurance agency. If it is determined that we have been inappropriately operating an ACO without state registration or licensure, we may be required to obtain such registration or licensure to resolve such violations and we could be subject to liability, which could have a material adverse effect on our business, financial condition, or results of operations.
Environmental and Occupational Safety and Health Administration Regulations
We are subject to federal, state, and local regulations governing the storage, use, and disposal of waste materials and products. Although we believe that our safety procedures for storing, handling, and disposing of these materials and products comply with the standards prescribed by law and regulation, we cannot eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we could be held liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance policies, which we may not be able to maintain on acceptable terms, or at all. We could incur significant costs and the attention of our management could be diverted to comply with current or future environmental laws and regulations. Federal regulations promulgated by the Occupational Safety and Health Administration impose additional requirements on us, including those protecting employees from exposure to elements such as blood-borne pathogens. We cannot predict the frequency of compliance, monitoring, or enforcement actions to which we may be subject as those regulations are being implemented, which could adversely affect our operations.
Other Federal and State Healthcare Laws
22


We are also subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations. The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payor plan. Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in fines, imprisonment, or both. The Health Care False Statement Statute prohibits, in any matter involving a federal healthcare program, anyone from knowingly and willfully falsifying, concealing, or covering up, by any trick, scheme, or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement. A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both. Under the Civil Monetary Penalties Law of the Social Security Act, a person (including an organization) is prohibited from knowingly presenting or causing to be presented to any United States officer, employee, agent, or department, or any state agency, a claim for payment for medical or other items or services where the person knows or should know (a) the items or services were not provided as described in the coding of the claim, (b) the claim is a false or fraudulent claim, (c) the claim is for a service furnished by an unlicensed physician, (d) the claim is for medical or other items or service furnished by a person or an entity that is in a period of exclusion from the program, or (e) the items or services are medically unnecessary items or services. Violations of the law may result in substantial penalties, treble damages, and exclusion from federal healthcare programs. In addition, the OIG may impose civil monetary penalties against any physician who knowingly accepts payment from a hospital (as well as against the hospital making the payment) as an inducement to reduce or limit medically necessary services provided to Medicare or Medicaid program beneficiaries. Further, except as permitted under the Civil Monetary Penalties Law, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider of Medicare or Medicaid payable items or services may be liable for civil money penalties for each wrongful act.
In addition to the state laws previously described, we may also be subject to other state fraud and abuse statutes and regulations if we expand our operations beyond California. Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition. The scope and interpretations of these laws vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach to all healthcare services and not just those covered under a governmental healthcare program. A determination of liability under any of these laws could result in fines, penalties, and restrictions on our ability to operate in these states. We cannot assure that our arrangements or business practices will not be subject to government scrutiny or be found to violate applicable fraud and abuse laws.
Licensure, Certification, Accreditation, and Related Laws and Guidelines
23


Our clinical personnel are subject to numerous federal, state, and local licensing laws and regulations, relating to, among other things, professional credentialing and professional ethics. Clinical professionals are also subject to state and federal regulation regarding prescribing medication and controlled substances. Our affiliated physicians and hospitalists must satisfy and maintain their individual professional licensing in each state where they practice medicine, including California, and many states require that nurse practitioners and physician assistants work in collaboration with or under the supervision of a physician. Each state defines the scope of practice of clinical professionals through legislation and through the respective Boards of Medicine and Nursing. Activities that qualify as professional misconduct under state law may subject our clinical personnel to sanctions, or to even lose their license and could, possibly, subject us to sanctions as well. Some state boards of medicine impose reciprocal discipline, that is, if a physician is disciplined for having committed professional misconduct in one state where they are licensed, another state where they are also licensed may impose the same discipline even though the conduct occurred in another state. Since we and our affiliated medical groups perform services at hospitals and other healthcare facilities, we may indirectly be subject to laws, ethical guidelines, and operating standards of professional trade associations and private accreditation commissions (such as the American Medical Association and The Joint Commission) applicable to those entities. Penalties for non-compliance with these laws and standards include loss of professional license, civil or criminal fines and penalties, loss of hospital admitting privileges, and exclusion from participation in various governmental and other third-party healthcare programs. In addition, our affiliated facilities are subject to state and local licensing regulations ranging from the adequacy of medical care to compliance with building codes and environmental protection laws. Our ability to operate profitably will depend, in part, upon our ability, and the ability of our affiliated physicians and facilities, to obtain and maintain all necessary licenses and other approvals and operate in compliance with applicable healthcare and other laws and regulations that evolve rapidly. We provide home health, hospice, and palliative care, which require compliance with additional regulatory requirements. Reimbursement for palliative care and house call services is generally conditioned on clinical professionals providing the correct procedure and diagnosis codes and properly documenting both the service and the medical necessity for the service. Incorrect or incomplete documentation and billing information, or the incorrect selection of codes for the level and type of service provided, could result in non-payment for services rendered or lead to allegations of billing fraud. We must also comply with laws relating to hospice care eligibility, development, and maintenance of care plans and coordination with nursing homes or assisted living facilities where patients live.
Professional Liability and Other Insurance Coverage
Our business has an inherent and significant risk of claims of medical malpractice against us and our affiliated physicians. We and our affiliated physician groups pay premiums for third-party professional liability insurance that provides indemnification on a claims-made basis for losses incurred related to medical malpractice litigation in order to carry out our operations. Our physicians are required to carry first dollar coverage with limits of liability equal to not less than $1.0 million for claims based on occurrence up to an aggregate of $3.0 million per year. Our IPAs purchase stop-loss insurance, which will reimburse them for claims from service providers on a per enrollee basis. The specific retention amount per enrollee per policy period is $45,000 to $100,000 for professional coverage. We also maintain workers’ compensation, director and officer, and other third-party insurance coverage subject to deductibles and other restrictions that we believe are in accordance with industry standards. While we believe that our insurance coverage is adequate based upon claims experience and the nature and risks of our business, we cannot be certain that our insurance coverage will be adequate to cover liabilities arising out of pending or future claims asserted against us or our affiliated physician groups in the future where the outcomes of such claims are unfavorable. The ultimate resolution of pending and future claims in excess of our insurance coverage may have a material adverse effect on our business, financial position, results of operations, or cash flows.
Human Capital
As of December 31, 2022, ApolloMed, its subsidiaries, and consolidated VIEs had 1,362 employees. None of our employees are members of a labor union, and we have not experienced any work stoppage.
We are committed to supporting the professional development of our employees, providing competitive compensation and benefits and a safe and inclusive workplace. We measure employee engagement on an ongoing basis to create a more innovative, productive, and profitable company. The results from engagement surveys are used to implement programs and processes designed to support employee retention and satisfaction. The Company believes a diverse workforce fosters innovation and cultivates an environment filled with unique perspectives and growth. Respect for human rights is fundamental to the Company’s business and its commitment to ethical business conduct.

Available Information
24


We maintain a website at www.apollomed.net and make available there, free of charge, our periodic reports filed with the SEC, as soon as is reasonably practicable after filing. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers such as us that file electronically with the SEC.
Item 1A.    Risk Factors (Restated)
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and our consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business, financial condition, operating results, and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, discussed in more detail in the following section. These include, among others, the following key risks:

The ongoing coronavirus (COVID-19) pandemic may negatively impact certain aspects of our business, financial condition, results of operations, and growth.

We may need to raise additional capital to grow, which might not be available.

Potential changes in laws, accounting principles, and regulations related to VIEs could impact our consolidation of total revenues derived from our affiliated physician groups.

The arrangements we have with our VIEs are not as secure as direct ownership of such entities.

We currently derive a substantial portion of our revenues in California and are vulnerable to changes in that state.

Our business strategy involves acquisitions and strategic partnerships, which can be costly, risky, and complex.
The Company’s complex legal structure may cause tax authorities to question our tax filing status. The Company can be adversely impacted if a tax authority does not agree with our position.

We may encounter difficulties in managing our growth, and the nature of our business and rapid changes in the healthcare industry make it difficult to reliably predict future growth and operating results.

We could experience significant losses under capitation contracts if our expenses exceed revenues.

If our agreements with affiliated physician groups are deemed invalid or are terminated under applicable law, our results of operations and financial condition will be materially impaired.

Our revenues and operations are dependent on a limited number of key payors.

We may be impacted by a shift in payor mix, including eligibility changes to government and private insurance programs.

Many of our agreements with hospitals and medical groups have limited durations, may be terminated without cause by them, and prohibit us from acquiring physicians or patients from or competing with them.

Changes to federal, state, and local healthcare law, including the ACA and/or the adoption of a primarily publicly funded healthcare system, may negatively impact our business.

The success of our emphasis on the GPDC / ACO REACH Model is not guaranteed, due to political risks, uncertainties of GPDC / ACO REACH administration, program economics, and the requirement of the Company to maintain significant capital reserves.
25



Laws regulating the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business and the failure to comply with such laws could subject us to penalties and restructuring.

The healthcare industry is intensely regulated at the federal, state, and local levels, and government authorities may determine that we fail to comply with applicable laws or regulations and take actions against us.

Controls designed to reduce inpatient services and associated costs may reduce our revenues.

If our affiliated physician groups are not able to satisfy California regulations related to financial solvency and operational performance, they could become subject to sanctions and their ability to do business in California could be limited or terminated.

Our current principal stockholders, executive officers, and directors have significant influence over our operations and strategic direction, and they could cause us to take actions with which other stockholders might not agree and could delay, deter, or prevent a change of control or a business combination with respect to us.

We have had to restate our previously issued financial statements and, in connection with such process, identified a material weakness in our internal control over financial reporting.
Risks Relating to Our General Business and Operations.

    In 2019, the Company, AP-AMH, and APC consummated a series of interrelated transactions that may expose the Company and its subsidiaries and VIEs to additional risks, including the inability to repay a significant loan made in connection with such transactions.
On September 11, 2019, the Company, AP-AMH, and APC, concurrently consummated a series of interrelated transactions (collectively, the “APC Transactions”). As disclosed elsewhere in this Annual Report on Form 10-K and in the Company’s other reports on file with the SEC, the APC Transactions included the following agreements and transactions: (i) the Company made a $545.0 million ten-year secured loan to AP-AMH; (ii) AP-AMH used all of the proceeds of that loan to purchase 1,000,000 shares of Series A Preferred Stock of APC; (iii) the Company obtained the funds to make the AP-AMH Loan (x) by entering into a credit agreement with Truist Bank, in its capacity as administrative agent for various lenders, and the lenders from time to time party thereto, for a $290.0 million senior secured credit facility (the “Credit Agreement” and the credit facility thereunder, the “Credit Facility”), and then immediately drawing down $250.0 million in cash, and (y) by selling $300.0 million shares of the Company’s common stock to APC, the purchase price of which was offset against $300.0 million of AP-AMH’s purchase price for its APC Preferred Stock. NMM guaranteed the obligations of the Company under the Credit Facility, and both the Company and NMM have granted the lenders a security interest in all of their assets, including, without limitation, in all stock and other equity issued by their subsidiaries (including the shares of NMM) and all rights with respect to the AP-AMH Loan. The Credit Agreement was amended and restated on June 16, 2021 by an amended and restated credit agreement (the “Amended Credit Agreement” and the credit facility thereunder, the “Amended Credit Facility”) among the Company, Truist Bank, in its capacity as administrative agent for the lenders, issuing bank, swingline lender and a lender, Truist Securities, Inc., JPMorgan Chase Bank, N.A., MUFG Union Bank, N.A., Preferred Bank, Royal Bank of Canada, and Fifth Third Bank, National Association, in their capacities as joint lead arrangers and/or lenders, and the lenders from time to time party thereto.
The APC Transactions may expose the Company, its subsidiaries and its VIEs to additional risks, including without limitation, the following: AP-AMH may never be able to repay the AP-AMH Loan; even if AP-AMH does not, or cannot repay the loan, the Company will be obligated to pay principal and interest on the Amended Credit Facility; in connection with the Credit Facility, the lenders were granted a first priority perfected security interest over all of the assets of the Company and its subsidiaries, and such lenders have the right to foreclose on those assets if the Company defaults on its obligations under the Amended Credit Facility; a disconnect could arise between APC achieving net income, declaring and paying dividends to AP-AMH, and AP-AMH making its required payments to the Company, which disconnect could materially impact the Company’s financial results and its ability to make its required payments under the Amended Credit Facility; APC may be prohibited from paying, or may be unable to pay the dividends on its Series A Preferred Stock, including under the California Corporations Code; regulators could determine that the current, post-APC Transactions consolidated structure amounts to the Company violating California’s corporate practice of medicine doctrine; and the Company may be deemed an investment company, which could impose burdensome compliance requirements on the Company and restrict its future activities.
26


The “Risk Factors” section of the definitive proxy statement of the Company’s board of directors that the Company filed with the SEC on July 31, 2019 (the “2019 Proxy Statement”) described these and certain other risks related to the APC Transactions, which are hereby incorporated herein by reference.
If our internal controls over financial reporting are not considered effective, our business and stock price could be adversely affected.

    Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for that fiscal year. Section 404 also requires our independent registered public accounting firm to attest to, and report on, management’s assessment of our internal controls over financial reporting. Our management, including our principal executive officer and principal financial officer, does not expect that our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud involving a company have been, or will be, detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become ineffective because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected, such as those that resulted in the restatement of our previously issued consolidated financial statements and related material weakness as described in this Form 10-K Amendment No. 1 and as further described below under “Risks Related to Restatement of our Consolidated Financial Statements”. We identified a material weakness in our internal control over financial reporting in connection with the restatement, and we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future. A material weakness in our internal controls over financial reporting would require management and our independent registered public accounting firm to consider our internal controls as ineffective. If our internal controls over financial reporting are not considered effective, we may experience a loss of public confidence, which could have an adverse effect on our business and on the market price of our common stock.
We may need to raise additional capital to grow, which might not be available.
We may in the future require additional capital to grow our business and may have to raise additional funds by selling equity, issuing debt, borrowing, refinancing our existing debt, or selling assets or subsidiaries. These alternatives may not be available on acceptable terms to us or in amounts sufficient to meet our needs. The failure to obtain any required future financing may require us to reduce or curtail certain existing operations.
The Company has a complex legal structure, and tax regulatory authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs or non-realization of expected benefits.
The Company has a complex legal structure, and a tax authority may disagree with tax positions that we have taken. For example, the Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our legal structure. A tax authority may take the position that material income tax liabilities, interest, and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly, and if we were unsuccessful in disputing the assessment, the implications could be materially adverse to us and affect our anticipated effective tax rate or operating income, and we could be required to pay substantial penalties and interest where applicable.
Our net operating loss carryforwards and certain other tax attributes will be subject to limitations.
27


If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, its net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Additional ownership changes in the future could result in additional limitations on our net operating loss carryforwards. Consequently, we may not be able to utilize a material portion of our net operating loss carryforwards and other tax attributes, to offset our tax liabilities, which could have a material adverse effect on our cash flows and results of operations.
Uncertain or adverse economic conditions could adversely impact us.
A downturn in economic conditions could have a material adverse effect on our results of operations, financial condition, business prospects, and stock price. Historically, government budget limitations have resulted in reduced spending. Given that Medicaid is a significant component of state budgets, an economic downturn would put continued cost containment pressures on Medicaid outlays for healthcare services in California. The existing federal deficit and continued deficit spending by the federal government can lead to reduced government expenditures, including for government-funded programs in which we participate such as Medicare. An economic downturn and sustained unemployment may also impact the number of enrollees in managed care programs and the profitability of managed care companies, which could result in reduced reimbursement rates. Although we attempt to stay informed, any sustained failure to identify and respond to these trends could have a material adverse effect on our results of operations, financial condition, business, and prospects.
The ongoing COVID-19 pandemic may impact certain aspects of our business, financial condition, results of operation, and growth.
The global spread of the COVID-19 pandemic and measures introduced by local, state, and federal governments to contain the virus and mitigate its public health effects have created significant impact to the global economy. We expect the evolving COVID-19 pandemic to continue to impact certain aspects of our business, results of operations, and financial condition and liquidity, but given the uncertainty around the duration and severity of the pandemic, we cannot accurately predict at this time the future potential impact on our business, results of operations, financial condition, and liquidity.

Throughout the pandemic, COVID-19 impacted certain aspects of our business as community self-isolation practices and shelter-in-place requirements reduced our inpatient visits. Continued shelter-in-place, quarantine, executive order, or related measures to combat the spread of COVID-19, as well as the perceived need by individuals to continue such practices to avoid infection, among other factors, have impacted and are expected to continue to impact certain aspects of our results of operations, business, and financial condition. These measures and practices resulted in temporary closures of outpatient clinics, and may result in delays in entry into new markets and expansion in existing markets. Governmental authorities in California began reopening and lifting or relaxing shelter-in-place and quarantine measures only to revert back to such restrictions in the face of increases in new COVID-19 cases. In addition, due to the shelter-in-place orders across the country, we have implemented work-from-home policies for many employees, which may impact productivity and disrupt our business operations.
Healthcare organizations around the world, including our medical offices, have faced, and will continue to face, substantial challenges in treating patients with COVID-19, such as the diversion of hospital staff and resources from ordinary functions to the treatment of COVID-19, supply, resource, and capital shortages, and overburdening of staff and resource capacity. In the United States, governmental authorities have also recommended, and in certain cases required, that elective, specialty, and other procedures and appointments, including certain primary care services, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19, and to focus limited resources and personnel capacity toward the treatment of COVID-19. Some of these measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and will harm the results of operations, liquidity, and financial condition of these healthcare organizations, including certain of our health network partners. We cannot accurately predict at this time the ultimate severity or duration that the foregoing measures and challenges may have on these healthcare organizations, including us and our health network partners.
The COVID-19 pandemic and similar crises could also diminish the public’s trust in healthcare facilities, especially facilities that fail to accurately or timely diagnose, or are treating (or have treated) patients affected by infectious diseases. As certain of our medical offices treat patients with COVID-19 or other infectious disease, patients may be discouraged from visiting our offices, including cancelling appointments.
28


Our affiliated physician groups also face an increased risk of infection with COVID-19, which may result in staffing shortages at our offices or increased workers’ compensation claims.
While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, potentially reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.
The global outbreak of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We cannot at this time precisely predict what effects the COVID-19 outbreak will have on certain aspects of our business, results of operations, and financial condition, including due to uncertainties relating to the severity of the disease, the duration of the pandemic, and the governmental responses to the pandemic.
We may be required to take write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations, and stock price.
There can be no assurances that all material issues that may be present in our operations, including from prior to the 2017 Merger, have been uncovered, or that factors outside of our control will not later arise. As a result, we may be forced to write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in losses. Unexpected risks may arise and previously known risks may materialize in a manner not consistent with each company’s preliminary risk analysis. Even though these charges may not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities and may make our future financing difficult to obtain on favorable terms or at all.
From time to time, our intangible assets are subject to impairment testing. Under current accounting standards, our goodwill, including acquired goodwill, is tested for impairment on an annual basis and may be subject to impairment losses as circumstances change (e.g., after an acquisition). If we record an impairment loss, it could have a material adverse effect on our results of operations for the year in which the impairment is recorded. 
A prolonged disruption of or any actual or perceived difficulties in the capital and credit markets may adversely affect our future access to capital, our cost of capital, and our ability to continue operations.
Our operations and performance depend primarily on California and U.S. economic conditions and their impact on purchases of, or capitated rates for, our healthcare services, and our business is significantly exposed to risks associated with government spending and private payor reimbursement rates. As a result of inflation and the current impact on the market and the COVID-19-related 2020 recession, general economic conditions deteriorated significantly. Although the markets have improved significantly, the overall economic recovery since that time has been uneven. Declines in consumer and business confidence, as well as private and government spending, together with significant reductions in the availability and increases in the cost of credit and volatility in the capital and credit markets, have adversely affected the business and economic environment in which we operate and our profitability. Market disruption, increases in interest rates, and/or sluggish economic growth in any future period could adversely affect our patients’ spending habits, private payors’ access to capital, and governmental budgetary processes, which, in turn, could result in reduced revenue for us. The continuation or recurrence of any of these conditions may adversely affect our cash flows, results of operations, and financial condition. As economic uncertainty may continue in future periods, our patients, private payors, and government payors may alter their purchasing activities of healthcare services. Our patients may scale back healthcare spending, and private and government payors may reduce reimbursement rates, which may also cause delay or cancellation of consumer spending for discretionary and non-reimbursed healthcare. This uncertainty may also affect our ability to prepare accurate financial forecasts or meet specific forecasted results, and we may be unable to adequately respond to or forecast further changes in demand for healthcare services. Volatility and disruption of capital and credit markets may adversely affect our access to capital and increase our cost of capital. Should current economic and market conditions deteriorate, our ability to finance ongoing operations and our expansion may be adversely affected, we may be unable to raise necessary funds, our cost of debt or equity capital may increase significantly, and future access to capital markets may be adversely affected.
If there is a change in accounting principles or the interpretation thereof affecting consolidation of VIEs, it could impact our consolidation of total revenues derived from our affiliated physician groups.
29


Our financial statements are consolidated and include the accounts of our majority-owned subsidiaries and various non-owned affiliated physician groups that are VIEs, which consolidation is effectuated in accordance with applicable accounting rules promulgated by the Financial Accounting Standards Board (“FASB”). Such accounting rules require that, under some circumstances, the VIE consolidation model be applied when a reporting enterprise holds a variable interest (e.g., equity interests, debt obligations, certain management, and service contracts) in a legal entity. Under this model, an enterprise must assess the entity in which it holds a variable interest to determine whether it meets the criteria to be consolidated as a VIE. If the entity is a VIE, the consolidation framework next identifies the party, if one exists, that possesses a controlling financial interest in the VIE, and then requires that party to consolidate as the primary beneficiary. An enterprise’s determination of whether it has a controlling financial interest in a VIE requires that a qualitative determination be made, and is not solely based on voting rights. If an enterprise determines the entity in which it holds a variable interest is not subject to the VIE consolidation model, the enterprise should apply the traditional voting control model which focuses on voting rights.
In our case, the VIE consolidation model applies to our controlled, but not owned, physician-affiliated entities. Our determination regarding the consolidation of our affiliates, however, could be challenged, which could have a material adverse effect on our operations. In addition, in the event of a change in accounting rules or FASB’s interpretations thereof, or if there were an adverse determination by a regulatory agency or a court or a change in state or federal law relating to the ability to maintain present agreements or arrangements with our affiliated physician groups, we may not be permitted to continue to consolidate the revenues of our VIEs.
Breaches or compromises of our information security systems or our information technology systems or infrastructure could result in exposure of private information, disruption of our business, and damage to our reputation, which could harm our business, results of operation, and financial condition.
As a routine part of our business, we utilize information security and information technology systems and websites that allow for the secure storage and transmission of proprietary or private information regarding our patients, employees, vendors, and others, including individually identifiable health information. A security breach of our network, hosted service providers, or vendor systems, may expose us to a risk of loss or misuse of this information, litigation, and potential liability. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks, including on companies within the healthcare industry. Although we believe that we take appropriate measures to safeguard sensitive information within our possession, we may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks targeted at us, our patients, or others who have entrusted us with information. Actual or anticipated attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. We invest in industry-standard security technology to protect personal information. Advances in computer capabilities, new technological discoveries, or other developments may result in the technology used by us to protect personal information or other data being breached or compromised. In addition, data and security breaches can also occur as a result of non-technical failures. To our knowledge, we have not experienced any material breach of our cybersecurity systems. If we or our third-party service providers systems fail to operate effectively or are damaged, destroyed, or shut down, or there are problems with transitioning to upgraded or replacement systems, or there are security breaches in these systems, any of the aforementioned could occur as a result of natural disasters, software or equipment failures, telecommunications failures, loss or theft of equipment, acts of terrorism, circumvention of security systems, or other cyberattacks, we could experience delays or decreases in service, and reduced efficiency of our operations. Additionally, any of these events could lead to violations of privacy laws, loss of customers, or loss, misappropriation or corruption of confidential information, trade secrets or data, which could expose us to potential litigation, regulatory actions, sanctions, or other statutory penalties, any or all of which could adversely affect our business, and cause it to incur significant losses and remediation costs.
We rely on complex software systems and hosted applications to operate our business, and our business may be disrupted if we are unable to successfully or efficiently update these systems or convert to new systems.
30


We are increasingly dependent on technology systems to operate our business, reduce costs, and enhance customer service. These systems include complex software systems and hosted applications that are provided by third parties. Software systems need to be updated on a regular basis with patches, bug fixes, and other modifications. Hosted applications are subject to service availability and reliability of hosting environments. We also migrate from legacy systems to new systems from time to time. Maintaining existing software systems, implementing upgrades, and converting to new systems are costly and require personnel and other resources. The implementation of these systems upgrades, and conversions is a complex and time-consuming project involving substantial expenditures for implementation activities, consultants, system hardware and software, often requires transforming our current business and processes to conform to new systems, and therefore, may take longer, be more disruptive, and cost more than forecast and may not be successful. If the implementation is delayed or otherwise is not successful, it may hinder our business operations and negatively affect our financial condition and results of operations. There are many factors that may materially and adversely affect the schedule, cost, and execution of the implementation process, including, without limitation, problems in the design and testing of new systems; system delays and malfunctions; the deviation by suppliers and contractors from the required performance under their contracts with us; the diversion of management attention from our daily operations to the implementation project; reworks due to unanticipated changes in business processes; difficulty in training employees in the operation of new systems and maintaining internal control while converting from legacy systems to new systems; and integration with our existing systems. Some of such factors may not be reasonably anticipated or may be beyond our control.
We may be unable to renew our leases on favorable terms or at all as our leases expire, which could adversely affect our business, financial condition, and results of operations.
We operate several leased premises. There is no assurance that we will be able to continue to occupy such premises in the future. For example, we currently rent our corporate headquarters on a month-to-month basis. We could thus spend substantial resources to meet the current landlords’ demands or look for other premises. We may be unable to timely renew such leases or renew them on favorable terms, if at all. If any current lease is terminated or not renewed, we may be required to relocate our operations at substantial costs or incur increased rental expenses, which could adversely affect our business, financial condition, and results of operations.
We currently derive a substantial portion of our revenues in California and are vulnerable to changes in that state.
We primarily operate in California. Any material changes with respect to consumer preferences, taxation, reimbursements, financial requirements, or other aspects of the healthcare delivery in California or the state’s economic conditions could have an adverse effect on our business, results of operations, and financial condition.
Our success depends, to a significant degree, upon our ability to adapt to the ever-changing healthcare industry and continued development of additional services.
Although we expect to provide a broad and competitive range of services, there can be no assurance of acceptance of current services by the marketplace. Our ability to procure new contracts may be dependent upon the continuing results achieved at the current facilities, upon pricing and operational considerations, and the potential need for continuing improvement to our existing services. Moreover, the markets for our new services may not develop as expected nor can there be any assurance that we will be successful in marketing any such services.
Risks Relating to Our Growth Strategy and Business Model.
Our growth strategy may not prove viable and we may not realize expected results.
Our business strategy is to grow rapidly by building a network of medical groups and integrated physician networks and is significantly dependent on locating and acquiring, partnering or contracting with medical practices to provide healthcare delivery services. We seek growth opportunities both organically and through acquisitions of or alliances with other medical service providers. As part of our growth strategy, we regularly review potential strategic opportunities. Identifying and establishing suitable strategic relationships are time-consuming and costly. There can be no assurance that we will be successful. We cannot guarantee that we will be successful in pursuing such strategic opportunities or assure the consequences of any strategic transactions. If we fail to evaluate and execute strategic transactions properly, we may not achieve anticipated benefits and may incur increased costs.
Our strategic transactions involve a number of risks and uncertainties, including:
31


We may not be able to successfully identify suitable strategic opportunities, complete desired strategic transactions, or realize their expected benefits. In addition, we compete for strategic transactions with other potential players, some of whom may have greater resources than we do. This competition may intensify due to the ongoing consolidation in the healthcare industry, which may increase our costs to pursue such opportunities.
We may not be able to establish suitable strategic relationships and may fail to integrate them into our business. We cannot be certain of the extent of any unknown, undisclosed or contingent liabilities of any acquired business, including liabilities for failure to comply with applicable laws. We may incur material liabilities for past activities from strategic relationships. Also, depending on the location of the strategic transactions, we may be required to comply with laws and regulations that may differ from those of California, the state in which we currently operate.
We may form strategic relationships with medical practices that operate with lower profit margins as compared with ours or which have a different payor mix than our other practice groups, which would reduce our overall profit margin. Depending upon the nature of the local market, we may not be able to implement our business model in every local market that we enter, which could negatively impact our revenues and financial condition.
We may incur substantial costs to complete strategic transactions, integrate strategic relationships into our business, or expand our operations, including hiring more employees and engaging other personnel, to provide services to additional patients that we are responsible for managing pursuant to the new relationships. If such relationships terminate or diminish before we can realize their expected benefits, any costs that we have already incurred may not be recovered.
If we finance strategic transactions by issuing our equity securities or securities convertible thereto, our existing stockholders could be diluted. If we finance strategic transactions with debt, it could result in higher leverage and interest costs for us.
If we are not successful in our efforts to identify and execute strategic transactions on beneficial terms, our ability to implement our business plan and achieve our targets could be adversely affected.
The process of integrating strategic relationships also involves significant risks, including:
difficulties in coping with demands on management related to the increased size of our business;
difficulties in not diverting management’s attention from our daily operations;
difficulties in assimilating different corporate cultures and business practices;
difficulties in converting other entities’ books and records and conforming their practices to ours;
difficulties in integrating operating, accounting, and information technology systems of other entities with ours and in maintaining uniform procedures, policies, and standards such as internal accounting controls;
difficulties in retaining employees who may be vital to the integration of the acquired entities; and
difficulties in maintaining contracts and relationships with payors of other entities.
We may be required to make certain contingent payments in connection with strategic transactions from time to time. The fair value of such payments is reevaluated periodically based on changes in our estimate of future operating results and changes in market discount rates. Any changes in our estimated fair value are recognized in our results of operations. The actual payments, however, may exceed our estimated fair value. Increases in actual contingent payments compared to the amounts recognized may have an adverse effect on our financial condition.
There can be no assurance that we will be able to effectively integrate strategic relationships into our business, which may negatively impact our business model, revenues, results of operations, and financial condition. In addition, strategic transactions are time-intensive, requiring significant commitment of our management’s focus. If our management spends too much time on assessing potential opportunities, completing strategic transactions, and integrating strategic relationships, our management may not have sufficient time to focus on our existing operations. This diversion of attention could have material and adverse consequences on our operations and profitability.
Obligations in our credit or loan documents could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions. An event of default could harm our business, and creditors having security interests over our assets would be able to foreclose on our assets.
32


The terms of our credit agreements and other indebtedness from time to time require us to comply with a number of financial and other obligations, which may include maintaining debt service coverage and leverage ratios and maintaining insurance coverage, that impose significant operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our interests. These obligations may limit our flexibility in our operations, and breaches of these obligations could result in defaults under the agreements or instruments governing the indebtedness, even if we had satisfied our payment obligations. Moreover, if we defaulted on these obligations, creditors having security interests over our assets could exercise various remedies, including foreclosing on and selling our assets. Unless waived by creditors, for which no assurance can be given, defaulting on these obligations could result in a material adverse effect on our financial condition and ability to continue our operations.
We may encounter difficulties in managing our growth, and the nature of our business and rapid changes in the healthcare industry makes it difficult to reliably predict future growth and operating results.
We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, including potentially rapid and substantial growth, which could result in an increase in the level of responsibility for management personnel and strain on our human and capital resources. To manage growth effectively, we will be required, among other things, to continue to implement and improve our operating and financial systems, procedures, and controls and to expand, train, and manage our employee base. If we are unable to implement and scale improvements to our existing systems and controls in an efficient and timely manner or if we encounter deficiencies, we will not be able to successfully execute our business plans. Failure to attract and retain sufficient numbers of qualified personnel could also impede our growth. If we are unable to manage our growth effectively, it will have a material adverse effect on its business, results of operations, and financial condition.
The evolving nature of our business and rapid changes in the healthcare industry makes it difficult to anticipate the nature and amount of medical reimbursements, third-party private payments, and participation in certain government programs and thus to reliably predict our future growth and operating results.
We could experience significant losses under capitation contracts if our expenses exceed revenues.
Under a capitation contract, a health plan typically prospectively pays an IPA periodic capitation payments based on a percentage of the amount received by the health plan. Capitation payments, in the aggregate, represent a prospective budget from which an IPA manages care-related expenses on behalf of the population enrolled with that IPA. If our affiliated IPAs are able to manage care-related expenses under the capitated levels, we realize operating profits from capitation contracts. However, if care-related expenses exceed projected levels, our affiliated IPAs may realize substantial operating deficits, which are not capped and could lead to substantial losses. Additionally, factors beyond our control, such as natural disasters, the potential effects of climate change, major epidemics, pandemics, or newly emergent viruses (such as COVID-19), could reduce our ability to effectively manage the costs of providing healthcare.
If our agreements with affiliated physician groups are deemed invalid or are terminated under applicable law, our results of operations and financial condition will be materially impaired.
There are various state laws, including laws in California, regulating the corporate practice of medicine, which prohibit us from directly owning medical professional entities. These prohibitions are intended to prevent unlicensed persons from interfering with or inappropriately influencing a physician’s professional judgment. These and other laws may also prevent fee-splitting, which is the sharing of professional service income with non-professional or business interests. The interpretation and enforcement of these laws vary significantly from state to state. We currently derive revenues from MSAs or similar arrangements with our affiliated IPAs, whereby we provide management and administrative services to them. If these agreements and arrangements were held to be invalid under laws prohibiting the corporate practice of medicine and other laws or if there are new laws that prohibit such agreements or arrangements, a significant portion of our revenues will be lost, resulting in a material adverse effect on our results of operations and financial condition.
The arrangements we have with our VIEs are not as secure as direct ownership of such entities.
33


Because of corporate practice of medicine laws, we entered into contractual arrangements to manage certain affiliated physician practice groups, which allow us to consolidate those groups for financial reporting purposes. We do not have direct ownership interests in any of our VIEs and are not able to exercise rights as an equity holder to directly change the members of the boards of directors of these entities so as to affect changes at the management and operational level. Under our arrangements with our VIEs, we must rely on their equity holders to exercise our control over the entities. If our affiliated entities or their equity holders fail to perform as expected, we may have to incur substantial costs and expend additional resources to enforce such arrangements.
Any failure by our affiliated entities or their owners to perform their obligations under their agreements with us would have a material adverse effect on our business, results of operations and financial condition.
Our affiliated physician practice groups are owned by individual physicians who could die, become incapacitated, or become no longer affiliated with us. Although our MSAs with these affiliates provide that they will be binding on successors of current owners, as the successors are not parties to the MSAs, it is uncertain in case of the death, bankruptcy, or divorce of a current owner whether their successors would be subject to such MSAs.
Our revenues and operations are dependent on a limited number of key payors.
Our operations are dependent on a concentrated number of payors. Four payors accounted for an aggregate of 59.0% and 49.6% of our total net revenue for the years ended December 31, 2022 and 2021, respectively. We believe that a majority of our revenues will continue to be derived from a limited number of key payors, which may terminate their contracts with us, or our physicians credentialed by them, upon the occurrence of certain events. They may also amend the material terms of the contracts under certain circumstances. Failure to maintain such contracts on favorable terms, or at all, would materially and adversely affect our results of operations and financial condition.
An exodus of our patients could have a material adverse effect on our results of operations. We may also be impacted by a shift in payor mix, including eligibility changes to government and private insurance programs.
A material decline in the number of patients that we and our affiliated physician groups serve, whether a government or a private entity is paying for their healthcare, could have a material adverse effect on our results of operations and financial condition, which could result from increased competition, new developments in the healthcare industry, or regulatory overhauls. In light of the repeal of the individual mandate requirement under the Patient Protection and Affordable Care Act of 2010 (also known as Affordable Care Act or Obamacare) via the Tax Cuts and Jobs Act of 2017, some people are expected to lose their health insurance and thus may not continue to afford services by our managed medical groups. In addition, due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. A shift in payor mix from managed care and other private payors to government payors or the uninsured may result in a reduction in our rates of reimbursement or an increase in our uncollectible receivables or uncompensated care, with a corresponding decrease our net revenue. Changes in the eligibility requirements for governmental programs could also change the number of patients who participate in such programs or the number of uninsured patients. For those patients who remain with private insurance, changes in those programs could increase patient responsibility amounts, resulting in a greater risk for uncollectible receivables. Such events could have a material adverse effect on our business, results of operations and financial condition.
Our future growth could be harmed if we lose the services of our key management personnel.
Our success depends to a significant extent on the continued contributions of our key management personnel, particularly our Co-Chief Executive Officer and President, Dr. Lam, and our Co-Chief Executive Officer Brandon Sim for the management of our business and implementation of our business strategy. The loss of their services could have a material adverse effect on our business, financial condition, and results of operations.
If having our key management personnel serving as nominee equity holders of our VIEs is invalid under applicable laws, or if we lost the services of key management personnel for any reason, it could have a material adverse impact on our results of operations and financial condition.
34


There are various state laws, including laws in California, regulating the corporate practice of medicine, which prohibit us from owning various healthcare entities. These corporate practice of medicine prohibitions are intended to prevent unlicensed persons from interfering with or inappropriately influencing a physician’s professional judgment. The interpretation and enforcement of these laws vary significantly from state to state. As a result, many of our affiliated physician practice groups are either wholly owned or primarily owned by Dr. Lam as the nominee shareholder for our benefit. If these arrangements were held to be invalid under applicable laws, which may change from time to time, a significant portion of our consolidated revenues would be affected, which may result in a material adverse effect on our results of operations and financial condition. Similarly, if Dr. Lam died, was incapacitated, or otherwise was no longer affiliated with us, our relationships and arrangements with those VIEs could be in jeopardy, and our business could be adversely affected.
We are dependent in part on referrals from third parties and preferred provider status with payors.
Our business relies in part on referrals from third parties for our services. We receive referrals from community medical providers, emergency departments, payors, and hospitals in the same manner as other medical professionals receive patient referrals. We do not provide compensation or other remuneration to referral sources for referring patients to us. A decrease in these referrals due to competition, concerns about our services and other factors could result in a significant decrease in our revenues and adversely impact our financial condition. Similarly, we cannot assure that we will be able to obtain or maintain preferred provider status with significant third-party payors in the communities where we operate. If we are unable to maintain our referral base or our preferred provider status with significant third-party payors, it may negatively impact our revenues and financial performance.
Partner facilities may terminate agreements with our affiliated physician groups or reduce their fees.
Our hospitalist physician services net revenue is derived from contracts directly with hospitals and other inpatient and post-acute care facilities. Our current partner facilities may decide not to renew contracts with, impose unfavorable terms on, or reduce fees paid to our affiliated physician groups. Any of these events may impact the ability of our affiliated physician groups to operate at such facilities, which would negatively impact our revenues, results of operations, and financial condition.
Many of our agreements with hospitals and medical groups have limited durations, may be terminated without cause by them, and prohibit us from acquiring physicians or patients from or competing with them.
Many of our agreements with hospitals and medical groups are limited in their terms or may be terminated without cause by providing advance notice. If such agreements are not renewed or terminated, we would lose the revenue generated by them. Any such events could have a material adverse effect on our results of operations, financial condition, and future business plans. Because many of such agreements with hospitals and medical groups prohibit us from acquiring physicians or patients from or competing with them, our ability to hire physicians, attract patients, or conduct business in certain areas may be limited in some cases.
Our business model depends on numerous complex management information systems, and any failure to successfully maintain these systems or implement new systems could undermine our ability to receive payments and otherwise materially harm our operations and may result in violations of healthcare laws and regulations.
We depend on a complex, specialized, integrated management information system and standardized procedures for operational and financial information, as well as for our billing operations. We may be unable to enhance existing management information systems or implement new management information systems when necessary. We may experience unanticipated delays, complications, or expenses in implementing, integrating, and operating our systems. Our management information systems may require modifications, improvements, or replacements that may require both substantial expenditures, as well as interruptions in operations. Our ability to create and implement these systems depends on the availability of technology and skilled personnel. Our failure to successfully implement and maintain all of our systems could undermine our ability to receive payments and otherwise have a material adverse effect on our business, results of operations, and financial condition. Our failure to successfully operate our billing systems could also lead to potential violations of healthcare laws and regulations.
Risks Relating to the Healthcare Industry.
The healthcare industry is highly competitive.
35


We compete directly with national, regional, and local providers of inpatient healthcare for patients and physicians. There are many other companies and individuals currently providing healthcare services, many of which have been in business longer and/or have substantially more resources. Since there are virtually no substantial capital expenditures required for providing healthcare services, there are few financial barriers to entry into the healthcare industry. Other companies could enter the healthcare industry in the future and divert some or all of our business. On a national basis, our competitors include, but are not limited to, Team Health, EmCare, Optum, and Heritage, each of which has greater financial and other resources available to them. We also compete with physician groups and privately-owned healthcare companies in local markets. In addition, our relationships with governmental and private third-party payors are not exclusive and our competitors have established or could seek to establish relationships with such payors to serve their covered patients. Competitors may also seek to compete with us for acquisitions, which could have the effect of increasing the price and reducing the number of suitable acquisitions, which would have an adverse impact on our growth strategy. Individual physicians, physician groups, and companies in other healthcare industry segments, including those with which we have contracts, and some of which have greater financial, marketing, and staffing resources, may become competitors in providing healthcare services, and this competition may have a material adverse effect on our business operations and financial position.
We therefore may be unable to compete successfully and even after we expend significant resources.
New physicians and other providers must be properly enrolled in governmental healthcare programs before we can receive reimbursement for their services, and there may be delays in the enrollment process.
Each time a new physician joins us or our affiliated groups, we must enroll the physician under our applicable group identification number for Medicare and Medicaid programs and for certain managed care and private insurance programs before we can receive reimbursement for services the physician renders to beneficiaries of those programs. The estimated time to receive approval for the enrollment is sometimes difficult to predict and, in recent years, the Medicare program carriers often have not issued these numbers to our affiliated physicians in a timely manner. These practices result in delayed reimbursement that may adversely affect our cash flows.
Hospitals where our affiliated physicians provide services may deny privileges to our physicians.
In general, our affiliated physicians may only provide services in a hospital where they have maintained certain credentials, also known as privileges, which are granted by the medical staff according to the bylaws of the hospital. The medical staff could decide that our affiliated physicians can no longer receive privileges to practice there. Such a decision would limit our ability to furnish services at the hospital, decrease the number of our affiliated physicians, or preclude us from entering new hospitals. In addition, hospitals may attempt to enter into exclusive contracts for certain physician services, which would reduce our access to patient populations within the hospital.
Changes associated with reimbursements by third-party payors may adversely affect our operations.
The medical services industry is undergoing significant changes with government and other third-party payors that are taking measures to reduce reimbursement rates or, in some cases, denying reimbursement altogether. There is no assurance that government or other third-party payors will continue to pay for the services provided by our affiliated medical groups. Furthermore, there has been, and continues to be, a great deal of discussion and debate about the repeal and replacement of existing government reimbursement programs, such as the ACA. As a result, the future of healthcare reimbursement programs is uncertain, making long-term business planning difficult and imprecise. The failure of government or other third-party payors to cover adequately the medical services provided by us could have a material adverse effect on our business, results of operations, and financial condition.
36


Our business may be significantly and adversely affected by legislative initiatives aimed at or having the effect of reducing healthcare costs associated with Medicare and other government healthcare programs and changes in reimbursement policies. In order to participate in the Medicare program, our affiliated provider groups must comply with stringent and often complex enrollment and reimbursement requirements, failing which the provider group’s participation in the federal health care programs may be terminated, or civil and/or criminal penalties may be imposed. These programs generally provide for reimbursement on a fee-schedule basis rather than on a charge-related basis. As a result, we cannot increase our revenue by increasing the amount that we and our affiliates charge for services. To the extent that our costs increase, we may not be able to recover the increased costs from these programs. In addition, cost containment measures in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In attempts to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit or reduce Medicare reimbursement for various services. For example, the Medicare Access and CHIP Reauthorization Act of 2015 made numerous changes to Medicare, Medicaid, and other healthcare-related programs, including new systems for establishing annual updates to Medicare rates for physicians’ services.
We may have difficulty collecting payments from third-party payors in a timely manner.
We derive significant revenue from third-party payors, and delays in payment or refunds to payors may adversely impact our net revenue. We assume the financial risks relating to uncollectible and delayed payments. In particular, we rely on some key governmental payors. Governmental payors typically pay on a more extended payment cycle, which could require us to incur substantial expenses prior to receiving corresponding payments. In the current healthcare environment, as payors continue to control expenditures for healthcare services, including through revising their coverage and reimbursement policies, we may continue to experience difficulties in collecting payments from payors that may seek to reduce or delay such payments. If we are not timely paid in full or if we need to refund some payments, our revenues, cash flows, and financial condition could be adversely affected.
Decreases in payor rates could adversely affect us.
Decreases in payor rates, either prospectively or retroactively, could have a significant adverse effect on our revenues, cash flows, and results of operations.
Federal and state laws may limit our ability to collect monies owed by patients.
We use third-party collection agencies whom we do not control to collect from patients any co-payments and other payments for services that our physicians provide. The federal Fair Debt Collection Practices Act of 1977 (the “FDCPA”) restricts the methods that third-party collection companies may use to contact and seek payment from consumer debtors regarding past due accounts. State laws vary with respect to debt collection practices, although most state requirements are similar to those under the FDCPA. Therefore, such agencies may not be successful in collecting payments owed to us and our affiliated physician groups. If practices of collection agencies utilized by us are inconsistent with these standards, we may be subject to actual damages and penalties. These factors and events could have a material adverse effect on our business, results of operations, and financial condition.
We have established reserves for our potential medical claim losses, which are subject to inherent uncertainties, and a deficiency in the established reserves may lead to a reduction in our assets or net incomes.
We establish reserves for estimated IBNR claims. IBNR estimates are developed using actuarial methods and are based on many variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated.
Many of our contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of various services. Such interpretations may not come to light until a substantial period of time has passed. The inherent difficulty in interpreting contracts and estimating necessary reserves could result in significant fluctuations in our estimates from period to period. Our actual losses and related expenses therefore may differ, even substantially, from the reserve estimates reflected in our financial statements. If actual claims exceed our estimated reserves, we may be required to increase reserves, which would lead to a reduction in our assets or net income.
Competition for qualified physicians, employees, and management personnel is intense in the healthcare industry, and we may not be able to hire and retain qualified physicians and other personnel.
37


We depend on our affiliated physicians to provide services and generate revenue. We compete with many types of healthcare providers, including teaching, research and government institutions, hospitals, and other practice groups, for the services of clinicians and management personnel. The limited number of residents and other licensed providers on the job market with the expertise necessary to provide services within our business makes it challenging to meet our hiring needs and may require us to train new employees, contract temporary physicians, or offer more attractive wage and benefit packages to experienced professionals, which could decrease our profit margins. The limited number of available residents and other licensed providers also impacts our ability to renew contracts with existing physicians on acceptable terms. As a result, our ability to provide services could be adversely affected. Even though our physician turnover rate has remained stable over the last three years, if the turnover rate were to increase significantly, our growth could be adversely affected. Moreover, unlike some of our competitors who sometimes pay additional compensation to physicians who agree to provide services exclusively to that competitor, our affiliated IPAs have historically not entered into such exclusivity agreements and have allowed our affiliated physicians to affiliate with multiple IPAs. This practice may place us at a competitive disadvantage regarding the hiring and retention of physicians relative to those competitors who do enter into such exclusivity agreements.
The healthcare industry is increasingly reliant on technology, which could increase our risks.
The role of technology is greatly increasing in the delivery of healthcare, which makes it difficult for traditional physician-driven companies, such as us, to adopt and integrate electronic health records, databases, cloud-based billing systems, and many other technology applications in the delivery of healthcare services. Additionally, consumers are using mobile applications and care and cost research in selecting and usage of healthcare services. We may need to incur significant costs to implement these technology applications and comply with applicable laws. For example, the nature of our business and the requirements of healthcare privacy laws impose significant obligations on us to maintain privacy and protection of patient medical information. We rely on employees and third parties with technology knowledge and expertise and could be at risk if technology applications are not properly established, maintained, or secured. Any cybersecurity incident, even unintended, could expose us to significant fines and remediation costs and materially impair our business operations and financial position.
If we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting the U.S. healthcare reform, our business may be harmed.
Due to the importance of the healthcare industry in the lives of all Americans, federal, state, and local legislative bodies frequently pass legislation and promulgate regulations relating to healthcare reform or that affect the healthcare industry. As has been the trend in recent years, it is reasonable to assume that there will continue to be increased government oversight and regulation of the healthcare industry in the future. We cannot assure our stockholders as to the ultimate content, timing, or effect of any new healthcare legislation or regulations, nor is it possible at this time to estimate the impact of potential new legislation or regulations on our business. It is possible that future legislation enacted by Congress or state legislatures, or regulations promulgated by regulatory authorities at the federal or state level, could adversely affect our business or could change the operating environment of the hospitals and other facilities where our affiliated physicians provide services. It is possible that the changes to the Medicare, Medicaid, or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payors’ reimbursement policies in a manner adverse to us. Similarly, changes in private payor reimbursements could lead to adverse changes in Medicare, Medicaid, and other governmental healthcare programs, which could have a material adverse effect on our business, financial condition, and results of operations.
Although we do not anticipate that a single-payer national health insurance system will be enacted by the current Congress, several legislative initiatives have been proposed by members of Congress and presidential candidates that would establish some form of a single public or quasi-public agency that organizes healthcare financing, but under which healthcare delivery would remain private. If enacted, such a system could adversely affect our business.

Consolidation in the healthcare industry could have a material adverse effect on our business, financial condition, and results of operations.

Many healthcare industry participants and payers are consolidating to create larger and more integrated healthcare delivery systems with greater market power. We expect regulatory and economic conditions to result in additional consolidation in the healthcare industry in the future. As consolidation accelerates, the economies of scale of our partners’ organizations may grow. If a partner experiences sizable growth following consolidation, it may determine that it no longer needs to rely on us and may reduce its demand for our products and services. In addition, as healthcare providers consolidate to create larger and more integrated healthcare delivery systems with greater market power, these providers may try to use their market power to negotiate fee reductions for our products and services. Finally, consolidation may also result in the acquisition or future development by our partners of products and services that compete with our products and services. Any of these potential results of consolidation could have a material adverse effect on our business, financial condition and results of operations.
38


Risks Relating to GPDC/ACO REACH.
The success of our emphasis on the GPDC / ACO REACH Model is uncertain.
In February 2022, CMS announced that APAACO, our subsidiary, was approved to participate in the GPDC Model and APAACO began operations under this new model in 2022. The current Administration made changes to the model, and renamed it to the ACO REACH Model. ACO REACH commenced on January 1, 2023. To position us to participate in the GPDC / ACO REACH Model and meet its requirements, we have invested significant resources in reshaping our business and organizations and in establishing related infrastructure, and expect to continue to devote significant financial and other resources to the GPDC / ACO REACH Model. These efforts have required us to refocus away from certain other parts of our historic business and revenue streams, which will receive less emphasis and could result in reduced revenue from these activities for us.
There are uncertainties regarding the design and administration of the GPDC / ACO REACH Model and CMS’ financial reports to GPDC / ACO REACH participants, which could negatively impact our results of operations.
Due to the novelty of the GPDC / ACO REACH Model, we are subject to program challenges, including, but not limited to, process design, data, and other related aspects. We rely on CMS for design, oversight, and governance of the GPDC / ACO REACH Model. If CMS cannot provide accurate data, claims benchmarking and calculations, make timely payments, and conduct periodic process reviews, our results of operations and financial condition could be materially and adversely affected. CMS relies on various third parties to effect the GPDC / ACO REACH program, including other departments of the U.S. government, such as Centers for Medicare & Medicaid Services Innovation Center (“CMMI”). CMS also relies on multiple third-party contractors to manage the GPDC / ACO REACH Model program, including claims and auditing. As a result, there is the potential for errors, delays, and poor communication among the differing entities involved, which are beyond our control. As CMS is implementing extensive reporting protocols for the GPDC / ACO REACH Model, CMS has indicated that because of inherent biases in reporting the results, its initial financial reports under the GPDC / ACO REACH Model may not be indicative of final results of actual risk sharing and revenues that we receive. Were that to be the case, we might not report accurately our revenues for relevant periods, which could result in adjustment in a later period when we receive final results from CMS.
We chose to participate in the Total Care Capitation (“TCC”) mechanism and Global risk tracks of GPDC / ACO REACH, which entails certain special risks.
Under the TCC mechanism, CMS estimates the total annual Part A and Part B Medicare expenditures of our assigned Medicare beneficiaries and pays us that projected amount in per beneficiary per month payments. We chose the Global risk track, under which we assume 100% risk for Part A and Part B Medicare expenditures where shared savings and losses are less than 25% of the benchmark, with adjusted risk corridors taking effect for any portion of shared savings/losses equaling or exceeding 25% of the benchmark—for savings/losses of 25-35%, we assume 50% risk, for savings/losses 35%-50% we assume 25% of the risk, and for savings/losses exceeding 50% of the benchmark, we assume only 10% of the risk. Our preliminary benchmark for Medicare Part A and Part B expenditures for beneficiaries for the 2023 performance year, per CMS, is approximately $629.2 million. Therefore, under the Global risk track of the TCC mechanism, we could have profits or be liable for losses of up to 100% of the first 25% of such benchmarked expenditures, or approximately $157.3 million, with adjusted risk corridors taking effect afterwards. While performance can be monitored throughout the year, end results for any given performance year will not be known until the third quarter of the subsequent year.
Shared savings retained by APAACO are impacted by the amount of the Quality Withhold earned back.
Throughout the GPDC and ACO REACH programs, a substantial portion of APAACO’s spending benchmark is held at-risk by CMS, subject to APAACO meeting certain quality measures as determined by CMS. In the GPDC program, the portion of the benchmark held at-risk by CMS for quality was 5% of the benchmark. In the ACO REACH program, the portion of the benchmark held at-risk by CMS for quality is 2% of the benchmark. Failing to earn back all or part of the portion of APAACO’s spending benchmark held at-risk by CMS for quality metrics could materially affect our financial performance in the GPDC and ACO REACH programs.
GPDC/ACO REACH operations and benchmarking calculations are complex and could result in uncertainties for us.
39


GPDC / ACO REACH operations and benchmarking calculations are complex and can lead to errors in the application of the GPDC / ACO REACH Model, which could create reimbursement delays to our contracted, in-network providers and adversely affect our performance and results of operations. For example, historically under the NGACO program, we discovered a feature in the AIPBP claim processing system did not allow us to break down certain claims amounts by individual patient codes. This created confusion for our in-network providers in reconciling payments, causing some providers to terminate their agreements with us. There is no guarantee that similar obstacles and complexities will be absent from the GPDC / ACO REACH models, and could also create uncertainties for our operations, including under agreements with our contracted, in-network providers.
We may suffer losses and may not generate savings through our participation in the GPDC / ACO REACH Model.
Through the GPDC / ACO REACH Model, CMS provides an opportunity to provider groups that are willing to assume higher levels of financial risk and reward, to participate in this new attribution-based risk-sharing model. The GPDC / ACO REACH Model uses a prospectively set preliminary benchmark that is retrospectively adjusted at the end of the performance year. The preliminary benchmark is based on baseline historical expenditures by Participant Providers in the benchmark years trended forward using the US Per Capita Cost (“USPCC”) growth trend, and subsequently blended with regional expenditure rates, which are contained in the ACO REACH / Kidney Care Choices (“KCC”) Rate Book. The benchmark years are set at CY2017-2019 for the duration of the model. In PY2023, historical baseline expenditures are weighted at 65%, regional expenditures are weighted at 35%, and historical expenditures will be weighted less in future performance years. For full details on how the preliminary benchmark is calculated, please refer to CMS documentation. After the performance year concludes, the preliminary benchmark is adjusted for numerous factors, such as the ACO’s final risk score and beneficiaries who became ineligible for the program over the course of the performance year. If necessary at this stage, a Retrospective Trend Adjustment (“RTA”) may be applied as well. An RTA is applied if the USPCC trend differs by at least 1% from the observed expenditure trend in the National Reference Population. It adjusts the benchmark by the difference between the observed expenditure trend and the predicted USPCC trend. Once all adjustments are made to the preliminary benchmark, APAACO’s expenditures will be compared to this final benchmark to calculate shared savings or shared losses. For full details on how the final benchmark is calculated, please refer to CMS documentation. Under the GPDC / ACO REACH Model, we are responsible for savings and losses related to care received by assigned patients by covering claims from physicians, nurses, and other medical professionals. If claim costs exceed the benchmarked expenditures, or the baseline years used in benchmark calculations are statistical anomalies, we could experience losses, which could be significant. Among other things, this could result from factors beyond our control, such as natural disasters, the potential effects of climate change, major epidemics, pandemics, or newly emergent viruses (such as COVID-19). As we are providing care coordination through APAACO, but do not provide direct patient care, our influence could be limited. Because of our limited influence, it is possible that we may not be able to control care providers’ behavior, utilization, and costs. As a result, we may not be able to generate savings through our participation in the GPDC / ACO REACH Model to cover our administrative and care coordination operating costs, and any savings generated, if at all, will be earned in arrears and uncertain in both timing and amount. Furthermore, the process by which the final benchmark is calculated from the preliminary benchmark is complex, and we may have limited ability to understand what the final benchmark may be before the value is reported to us by CMS. Due to this dynamic, we may have limited ability to predict our final performance and shared savings/losses amount prior to receiving a final report from CMS in third quarter of the year following any given performance year.
We do not control, but are responsible for savings and losses related to, care received by assigned patients at out-of-network providers, which could negatively impact our ability to control claim costs.
Medicare beneficiaries in the GPDC / ACO REACH Model are not required to receive care from a specified network of contracted providers and facilities, which could make it difficult for us to control the financial risks of those beneficiaries. While we are not responsible for directly paying claims for out-of-network providers, we may have difficulty managing patient care and costs in relation to such out-of-network providers as compared to contracted, in-network providers, which, could adversely impact our financial results as we are responsible for savings and losses of assigned beneficiaries, irrespective of whether they are using in-network or out-of-network providers. In addition, even if we are successful in encouraging more assigned patients to receive care from our contracted, in-network providers, there is the possibility that the monthly TCC from CMS will be insufficient to cover our expenditures, since the TCC is generally based on historical in-network/out-of-network ratios. If CMS fails to monitor the in-network/out-of-network provider ratio for our assigned patients on a frequent basis, or CMS’ reconciliation payments to us are not timely made, this could result in negative cash flows for us, especially if increased payments will need to be made to our contracted, in-network providers.
We face competition from traditional MSSP ACOs and other ACOs.
40


Managed care providers experienced in coordinating care for populations of patients compete with each other to be selected by CMS to participate in the ACO REACH Model. Since MSSP and pioneer ACOs began in 2012, the number of Medicare ACOs continues to rise and have grown to several hundred nationwide, but there are still a growing number of ACOs in different program types that compete with us for resources and patients.
Following CMS’s termination of the NGACO Model, our continued participation in other CMS Advanced Alternative Payment Models, such as the GPDC / ACO REACH, cannot be guaranteed.
APAACO and CMS entered into a Next Generation ACO Model Participation Agreement with a term of four performance years through December 31, 2020. Subsequently due to the COVID-19 Public Health Emergency, the Next Generation ACO Model Participation Agreement was amended to add one additional 12-month Performance Year, such that the final Performance Year ended on December 31, 2021. For PY2022, we were approved to participate in the GPDC Model, which was subsequently transitioned to ACO REACH for performance year 2023. APAACO participated in the GPDC Model in 2022 and has an active participation agreement with CMS for 2023. However, the Participation Agreement for the GPDC / ACO REACH Model may be terminated sooner by CMS as specified therein and CMS has the flexibility to alter or change the program over time. Among many requirements to be eligible to participate in the ACO REACH Model, we must have at least 5,000 aligned Medicare beneficiaries and must maintain that number throughout each performance year. If that number were not maintained, we would become ineligible for the ACO REACH Model. In addition, we are required to comply with all applicable laws and regulations regarding provider-based risk-bearing entities. If these laws or regulations change, for example, to require a Knox-Keene license in California, which we do not currently have, we could be required to cease our ACO REACH operations. We could be terminated from the ACO REACH Model at any time if we do not continue to comply with the ACO REACH participation requirements. In October 2017, CMS notified us that our participation in the AIPBP mechanism for performance year 2018 would not be renewed due to alleged deficiencies in performance by us. We submitted a request for reconsideration to CMS. In December 2017, we received the official decision on our reconsideration request that CMS reversed the prior decision against our continued participation in the AIPBP mechanism. As a result, we were again eligible to receive monthly AIPBP from CMS. We, however, will need to continue to comply with all terms and conditions in the Participation Agreement and various regulatory requirements to be eligible to participate in the TCC mechanism and/or ACO REACH Model. If future compliance or performance issues arise, we may lose our current eligibility and may be subject to CMS’ enforcement or contract actions, including our potential inability to participate in the TCC mechanism (where the payment mechanism would default to traditional fee for service) or dismissal from the ACO REACH Model, which would have a material adverse effect on our revenues and cash flows. In addition, the payments from CMS to us will decrease if the number of beneficiaries assigned to our ACO declines or if the contracted providers terminate their relationships with us, which could have a material adverse effect on our results of operations on a consolidated basis.
Risks Relating to Regulatory Compliance.
Laws regulating the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business and the failure to comply with such laws could subject us to penalties and restructuring.
Some states have laws that prohibit business entities from practicing medicine, employing physicians to practice medicine, exercising control over medical decisions by physicians (also known collectively as the corporate practice of medicine) or engaging in some arrangements, such as fee-splitting, with physicians. In some states these prohibitions are expressly stated in a statute or regulation, while in other states the prohibition is a matter of judicial or regulatory interpretation. California is one of the states that prohibit the corporate practice of medicine.
In California, we operate by maintaining contracts with our affiliated physician groups, which are each owned and operated by physicians, and which employ or contract with additional physicians to provide physician services. Under these arrangements, we or our subsidiaries provide management services, receive a management fee for providing management services, do not represent to offer medical services, and do not exercise influence or control over the practice of medicine by the physicians or the affiliated physician groups.
41


In addition to the above management arrangements, in certain instances, we have contractual rights relating to the transfer of equity interests in our affiliated physician groups under physician shareholder agreements that we entered into with the controlling equity holder of such affiliated physician groups. However, even in such instances, such equity interests cannot be transferred to or held by us or by any non-professional organization. Accordingly, we do not directly own any equity interests in any affiliated physician groups in California. In the event that any of these affiliated physician groups or their equity holders fail to comply with these management or ownership transfer arrangements, these arrangements are terminated, we are unable to enforce such arrangements, or these arrangements are invalidated under applicable laws, there could be a material adverse effect on our business, results of operations, and financial condition and we may have to restructure our organization and change our arrangements with our affiliated physician groups, which may not be successful.
The healthcare industry is intensely regulated at the federal, state, and local levels, and government authorities may determine that we fail to comply with applicable laws or regulations and take actions against us.
As a company involved in providing healthcare services, we are subject to numerous federal, state, and local laws and regulations. There are significant costs involved in complying with these laws and regulations. If we are found to have violated any applicable laws or regulations, we could be subject to civil and/or criminal damages, fines, sanctions, or penalties, including exclusion from participation in governmental healthcare programs, such as Medicare and Medicaid, and we may be required to change our method of operations and business strategy. These consequences could be the result of our current conduct or even conduct that occurred a number of years ago, including prior to the completion of the 2017 Merger. We could incur significant costs to defend ourselves if we become the subject of an investigation or legal proceeding alleging a violation of these laws and regulations. We cannot predict whether a federal, state, or local government will determine that we are not operating in accordance with law, or whether, when or how the laws will change in the future and impact our business. The following is a non-exhaustive list of some of the more significant healthcare laws and regulations that could affect us:
The False Claims Act, that provides for penalties against entities and individuals who knowingly or recklessly make claims to Medicare, Medicaid, and other governmental healthcare programs, as well as third-party payors, that contain or are based upon false or fraudulent information;
A provision of the Social Security Act, commonly referred to as the “Anti-Kickback Statute,” that prohibits the knowing and willful offering, payment, solicitation, or receipt of any bribe, kickback, rebate, or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in or in part, by federal healthcare programs such as Medicare and Medicaid;
A provision of the Social Security Act, commonly referred to as the Stark Law or physician self-referral law, that (subject to limited exceptions) prohibits physicians from referring Medicare patients to an entity for the provision of specific “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship with the entity, and prohibits the entity from billing for services arising out of such prohibited referrals;
A provision of the Social Security Act that provides for criminal penalties on healthcare providers who fail to disclose known overpayments;
A provision of the Social Security Act that provides for civil monetary penalties on healthcare providers who fail to repay known overpayments within 60 days of identification or the date any corresponding cost report was due, if applicable, and also allows improper retention of known overpayments to serve as a basis for False Claims Act violations;
Provisions of the Social Security Act (emanating from the DRA) that require entities that make or receive annual Medicaid payments of $5 million or more from a single Medicaid program to provide its employees, contractors, and agents with written policies and employee handbook materials on federal and state false claims acts and related statutes, that establish a new Medicaid Integrity Program designed to enhance federal and state efforts to detect Medicaid fraud, waste, and abuse, and that increase financial incentives for both states and individuals to bring fraud and abuse claims against healthcare companies;
State law provisions pertaining to anti-kickback, self-referral, and false claims issues;
42


Provisions of, and regulations relating to, HIPAA that provide penalties for knowingly and willfully executing a scheme or artifice to defraud a healthcare benefit program or falsifying, concealing, or covering up a material fact or making any material false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services;
Provisions of HIPAA and the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) limiting how covered entities, business associates, and business associate sub-contractors may use and disclose PHI and the security measures that must be taken in connection with protecting that information and related systems, as well as similar or more stringent state laws;
Federal and state laws that provide penalties for providers for billing and receiving payments from a governmental healthcare program for services unless the services are medically necessary and reasonable, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered;
State laws that provide for financial solvency requirements relating to risk-bearing organizations (“RBOs”), plan operations, plan-affiliate operations and transactions, plan-provider contractual relationships, and provider-affiliate operations and transactions, such as California Business & Professions Code Section 1375.4 (§ 1375.4; Cal. Code Regs., tit. 28, § 1300.75.4 et seq.);
Federal laws that provide for administrative sanctions, including civil monetary penalties for, among other violations, inappropriate billing of services to federal healthcare programs, payments by hospitals to physicians for reducing or limiting services to Medicare or Medicaid patients, or employing or contracting with individuals or entities who/which are excluded from participation in federal healthcare programs;
Federal and state laws and policies that require healthcare providers to enroll in the Medicare and Medicaid programs before submitting any claims for services, to promptly report certain changes in its operations to the agencies that administer these programs, and to re-enroll in these programs when changes in direct or indirect ownership occur or in response to revalidation requests from Medicare and Medicaid;
State laws that prohibit general business entities from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians;
State laws that require timely payment of claims, including §1371.38, et al, of the California Health & Safety Code, which imposes time limits for the payment of uncontested covered claims and required healthcare service plans to pay interest on uncontested claims not paid promptly within the required time period;
Laws in some states that prohibit non-domiciled entities from owning and operating medical practices in such states;
Federal and state laws and regulations restricting the techniques that may be used to collect past due accounts from consumers, such as our patients, for services provided to the consumer; and
State laws that require healthcare providers that assume professional and institutional risk (i.e., global risk) to either obtain a license under the Knox-Keene Health Care Service Plan Act of 1975 or receive an exemption from the California Department of Managed Healthcare (“DMHC”) for the contract(s) under which the entity assumes global risk.
Any violation or alleged violation of any of these laws or regulations by us or our affiliates could have a material adverse effect on our business, financial condition and results of operations.
Changes in healthcare laws could create an uncertain environment and materially impact us. We cannot predict the effect that the ACA (also known as Obamacare) and its implementation, amendment, or repeal and replacement, may have on our business, results of operations, or financial condition.
Any changes in healthcare laws or regulations that reduce, curtail, or eliminate payments, government-subsidized programs, government-sponsored programs, and/or the expansion of Medicare or Medicaid, among other actions, could have a material adverse effect on our business, results of operations, and financial condition.
43


For example, the ACA dramatically changed how healthcare services are covered, delivered, and reimbursed. The ACA requires insurers to accept all applicants, regardless of pre-existing conditions, cover an extensive list of conditions and treatments, and charge the same rates, regardless of pre-existing condition or gender. The ACA and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Care Reform Acts”) also mandated changes specific to home health and hospice benefits under Medicare. In 2012, the U.S. Supreme Court upheld the constitutionality of the ACA, including the “individual mandate” provisions of the ACA that generally require all individuals to obtain healthcare insurance or pay a penalty. However, the U.S. Supreme Court also held that the provision of the ACA that authorized the Secretary of the U.S. Department of Health and Human Services (“HHS”) to penalize states that choose not to participate in the expansion of the Medicaid program by removing all of its existing Medicaid funding was unconstitutional. In response to the ruling, a number of state governors opposed its state’s participation in the expanded Medicaid program, which resulted in the ACA not providing coverage to some low-income persons in those states. In addition, several bills have been, and are continuing to be, introduced in U.S. Congress to amend all or significant provisions of the ACA, or repeal and replace the ACA with another law. In December 2017, the individual mandate was repealed via the Tax Cuts and Jobs Act of 2017. Afterwards, legal and political challenges as to the constitutionality of the remaining provisions of the ACA resumed. Just as the fate of the ACA is uncertain, so is the future of care organizations established under the ACA such as ACOs and NGACOs. Under its NGACO Participation Agreement with CMS, our operations are always subject to the nation’s healthcare laws, as amended, repealed, or replaced from time to time.
The net effect of the ACA on our business is subject to numerous variables, including the law’s complexity, lack of complete implementing regulations and interpretive guidance, gradual and potentially delayed implementation, or possible amendment, as well as the uncertainty as to the extent to which states will choose to participate in the expanded Medicaid program. The continued implementation of provisions of the ACA, the adoption of new regulations thereunder and ongoing challenges thereto, also added uncertainty about the current state of U.S. healthcare laws and could negatively impact our business, results of operations, and financial condition.
Healthcare providers could be subject to federal and state investigations and payor audits.
Due to our and our affiliates’ participation in government and private healthcare programs, we are from time to time involved in inquiries, reviews, audits, and investigations by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing, and documentation requirements. Federal and state government agencies have active civil and criminal enforcement efforts against healthcare companies, and their executives and managers. The DRA, which provides a financial incentive to states to enact their own false claims acts, and similar laws encourage investigations against healthcare companies by different agencies. These investigations could also be initiated by private whistleblowers. Responding to audit and investigative activities are costly and disruptive to our business operations, even when the allegations are without merit. If we are subject to an audit or investigation, a finding could be made that we or our affiliates erroneously billed or were incorrectly reimbursed, and we may be required to repay such agencies or payors, may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide, and may be subject to financial sanctions or required to modify our operations.
Controls designed to reduce inpatient services and associated costs may reduce our revenues.
Controls imposed by Medicare, Medicaid, and private payors designed to reduce admissions and lengths of stay, commonly referred to as “utilization review,” have affected and are expected to continue to affect our operations. Federal law contains numerous provisions designed to ensure that services rendered by hospitals and other care providers to Medicare and Medicaid patients meet professionally recognized standards and are medically necessary and that claims for reimbursement are properly filed. These provisions include a requirement that a sampling of admissions of Medicare and Medicaid patients must be reviewed by quality improvement organizations, which review the appropriateness of Medicare and Medicaid patient admissions and discharges, the quality of care provided, and the appropriateness of cases of extraordinary length of stay or cost on a post-discharge basis. Quality improvement organizations may deny payment for services or assess fines and also have the authority to recommend to the HHS that a provider is in substantial non-compliance with the standards of the quality improvement organization and should be excluded from participation in the Medicare program. The ACA potentially expands the use of prepayment review by Medicare contractors by eliminating statutory restrictions on its use, and, as a result, efforts to impose more stringent cost controls are expected to continue. Utilization review is also a requirement of most non-governmental managed care organizations and other third-party payors. Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payor-required pre-admission authorization and utilization review and by third-party payor pressure to maximize outpatient and alternative healthcare delivery services for less acutely ill patients. Although we are unable to predict the effect these controls and any changes thereto may have on our operations, significant limits on the scope of our services reimbursed and on reimbursement rates and fees could have a material, adverse effect on our business, financial position, and results of operations.
44


We do not have a Knox-Keene license.
The Knox-Keene Health Care Service Plan Act of 1975 was passed by the California State Legislature to regulate California managed care plans and is currently administered by the DMHC. A Knox-Keene Act license is required to operate a healthcare service plan, e.g., an HMO, or an organization that accepts global risk, i.e., accepts full risk for a patient population, including risk related to institutional services, e.g., hospital, and professional services. Applying for and obtaining such a license is a time-consuming and detail-oriented undertaking. We currently do not hold any Knox-Keene license. If the DMHC were to determine that we have been inappropriately taking risk for institutional and professional services as a result of our various hospital and physician arrangements without having any Knox-Keene license or applicable regulatory exemption, we may be required to obtain a Knox-Keene license and could be subject to civil and criminal liability, any of which could have a material adverse effect on our business, results of operations, and financial condition.
A Knox-Keene Act license or exemption from licensure, where applicable, is required to operate a healthcare service plan, e.g., an HMO, or an organization that accepts global risk, i.e., accepts full risk for a patient population, including risk related to institutional services, e.g., hospital, and professional services.
If our affiliated physician groups are not able to satisfy California regulations related to financial solvency and operational performance, they could become subject to sanctions and their ability to do business in California could be limited or terminated.
The DMHC has instituted regulations that are intended to provide a formal mechanism for monitoring the financial solvency and operational performance of a RBO in California, including capitated physician groups. Under current DMHC regulations, our affiliated physician groups, as applicable, are required to, among other things:
Maintain, at all times, a minimum “cash-to-claims ratio” (which means the organization’s cash, marketable securities, and certain qualified receivables, divided by the organization’s total unpaid claims liability) of 0.75; and
Submit periodic reports to the DMHC containing various data and attestations regarding their performance and financial solvency, including IBNR calculations, documentation, and attestations as to whether or not the organization (i) was in compliance with the “Knox-Keene Act” requirements related to claims payment timeliness, (ii) had maintained positive tangible net equity (“TNE”), and (iii) had maintained positive working capital.
In the event that a physician group is not in compliance with any of the above criteria, it would be required to describe in a report submitted to the DMHC the reasons for non-compliance and actions to be taken to bring it into compliance. Under such regulations, the DMHC can also make some of the information contained in the reports public, including, but not limited to, whether or not a particular physician organization met each of the criteria. In the event any of our affiliated physician groups are not able to meet certain of the financial solvency requirements, and fail to meet subsequent corrective action plans, it could be subject to sanctions, or limitations on, or removal of, its ability to do business in California. There can be no assurance that our affiliated physician groups, such as our IPAs, will remain in compliance with DMHC requirements or be able to timely and adequately rectify non-compliance. To the extent that we need to provide additional capital to our affiliated physician groups in the future in order to comply with DMHC regulations, we would have less cash available for other parts of our operations.
Our revenue will be negatively impacted if our physicians fail to appropriately document their services.
We rely upon our affiliated physicians to appropriately and accurately complete necessary medical record documentation and assign appropriate reimbursement codes for their services. Reimbursement is conditioned upon, in part, our affiliated physicians providing the correct procedure and diagnosis codes and properly documenting the services themselves, including the level of service provided and the medical necessity for the services. If our affiliated physicians have provided incorrect or incomplete documentation or selected inaccurate reimbursement codes, this could result in non-payment for services rendered or lead to allegations of billing fraud. This could subsequently lead to civil and criminal penalties, including exclusion from government healthcare programs, such as Medicare and Medicaid. In addition, third-party payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not covered, services provided were not medically necessary, or supporting documentation was not adequate. Retroactive adjustments may change amounts realized from third-party payors and result in recoupments or refund demands, affecting revenue already received.
Primary care physicians may seek to affiliate with our and our competitors’ IPAs at the same time.
45


It is common in the medical services industry for primary care physicians to be affiliated with multiple IPAs. Our affiliated IPAs therefore may enter into agreements with physicians who are also affiliated with our competitors. However, some of our competitors at times have agreements with physicians that require the physician to provide exclusive services. Our affiliated IPAs often have no knowledge, and no way of knowing, whether a physician is subject to an exclusivity agreement without being informed by the physician. Competitors have initiated lawsuits against us alleging in part interference with such exclusivity arrangements, and may do so again in the future. An adverse outcome from any such lawsuit could adversely affect our business, cash flows, and financial condition.
If we inadvertently employ or contract with an excluded person, we may face government sanctions.
Individuals and entities can be excluded from participating in the Medicare and Medicaid programs for violating certain laws and regulations, or for other reasons such as the loss of a license in any state, even if the person retains other licensure. This means that the excluded person and others are prohibited from receiving payments for such person’s services rendered to Medicare or Medicaid beneficiaries, and if the excluded person is a physician, all services ordered (not just provided) by such physician are also non-covered and non-payable. Entities that employ or contract with excluded individuals are prohibited from billing the Medicare or Medicaid programs for the excluded individual’s services, and are subject to civil penalties if it does. The U.S. Department of Health and Human Services Office of the Inspector General maintains a list of excluded persons. Although we have instituted policies and procedures to minimize such risks, there can be no assurance that we will not inadvertently hire or contract with an excluded person, or that our employees or contracts will not become excluded in the future without our knowledge. If this occurs, we may be subject to substantial repayments and civil penalties, and the hospitals at which we furnish services may also be subject to repayments and sanctions, for which they may seek recovery from us, which could adversely affect our business, cash flows, and financial condition.
Compliance with federal and state privacy and data security laws is expensive, and we may be subject to government or private actions due to privacy and security breaches.
We must comply with various federal and state laws and regulations governing the collection, dissemination, access, use, security, and confidentiality of PHI, including HIPAA and HITECH. As part of our medical record keeping, third-party billing, and other services, we collect and maintain PHI in paper and electronic format. Privacy and data security laws and regulations thus could have a significant effect on the manner in which we handle healthcare-related data and communicates with payors. In addition, compliance with these standards could limit our ability to offer services, thereby negatively impacting the business opportunities available to us. Despite our efforts to prevent privacy and security breaches, it may still occur. If any non-compliance with such laws and regulations results in privacy or security breaches, we could be subject to monetary fines, suits, penalties, or sanctions. As a result of the expanded scope of HIPAA through HITECH, we may incur significant costs in order to minimize the amount of “unsecured PHI” that we handle and retain, and/or to implement improved administrative, technical, or physical safeguards to protect PHI. We may have to demonstrate and document our compliance efforts, even if there is a low probability that PHI has been compromised, in order to overcome the presumption that an impermissible use or disclosure of PHI results in a reportable breach. We may incur significant costs to notify the relevant individuals, government entities and, in some cases, the media, in the event of a breach and to provide appropriate remediation and monitoring to mitigate any potential damage.
We may be subject to liability for failure to fully comply with applicable corporate and securities laws.
We are subject to various corporate and securities laws. Any failure to comply with such laws could cause government agencies to take action against us, which could restrict our ability to issue securities and result in fines or penalties. Any claim brought by such an agency could also cause us to expend resources to defend ourselves, divert the attention of our management from our business and could significantly harm our business, operating results, and financial condition, even if the claim is resolved in our favor.
A plaintiffs’ securities law firm announced that it was investigating ApolloMed and its pre-2017 Merger board of directors for potential federal law violations and breaches of fiduciary duties in connection with the 2017 Merger. This investigation purportedly focused on whether ApolloMed and its board of directors violated federal securities laws or breached their fiduciary duties to ApolloMed’s stockholders by failing to properly value the 2017 Merger and failing to disclose all material information in connection with the 2017 Merger. As of filing of this Annual Report on Form 10-K, no lawsuit has been filed against us by that firm.
We cannot preclude the possibility that claims or lawsuits brought relating to any alleged securities law violations or breaches of fiduciary duty in connection with the 2017 Merger could potentially require significant time and resources to defend and/or settle and distract our management and board of directors from focusing on our business.
46


We may face lawsuits not covered by insurance and related expenses may be material. Our failure to avoid, defend, and accrue for claims and litigation could negatively impact our results of operations or cash flows.
We are exposed to and become involved in various litigation matters arising out of our business, including from time to time, actual or threatened lawsuits. Malpractice lawsuits are common in the healthcare industry. The medical malpractice legal environment varies greatly by state. The status of tort reform, availability of non-economic damages, or the presence or absence of other statutes, such as elder abuse or vulnerable adult statutes, influence the incidence and severity of malpractice litigation. We may also be subject to other types of lawsuits, such as those initiated by our competitors, stockholders, employees, service providers, contractors, or by government agencies, including when we terminate relationships with them, which may involve large claims and significant defense costs. Many states have joint and several liabilities for providers who deliver care to a patient and are at least partially liable. As a result, if one provider is found liable for medical malpractice for the provision of care to a particular patient, all other providers who furnished care to that same patient, including possibly us and our affiliated physicians, may also share in the liability, which could be substantial individually or in aggregate.
The defense of litigation, including fees of legal counsel, expert witnesses, and related costs, is expensive and difficult to forecast accurately. Such costs may be unrecoverable even if we ultimately prevail in litigation and could consume a significant portion of our limited capital resources. To defend lawsuits, it may also be necessary for us to divert officers and other employees from our normal business functions to gather evidence, give testimony, and otherwise support litigation efforts. If we lose any material litigation, we could face material judgments or awards against them. An unfavorable resolution of one or more of the proceedings in which we are involved now or in the future could have a material adverse effect on our business, cash flows, and financial condition. We may also in the future find it necessary to file lawsuits to recover damages or protect our interests. The cost of such litigation could also be significant and unrecoverable, which may also deter us from aggressively pursuing even legitimate claims.
We currently maintain malpractice liability insurance coverage to cover professional liability and other claims for certain hospitalists and clinic physicians. All of our affiliated physicians are required to carry first dollar coverage with limits of coverage equal to $1.0 million for all claims based on occurrence up to an aggregate of $3.0 million per year. We cannot be certain that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us, our affiliated professional organizations, or our affiliated physicians. Liabilities incurred by us or our affiliates in excess of our insurance coverage, including coverage for professional liability and other claims, could have a material adverse effect on our business, financial condition, and results of operations. Our professional liability insurance coverage generally must be renewed annually and may not continue to be available to us in future years at acceptable costs and on favorable terms, which could increase our exposure to litigation.
We may also be subject to laws and regulations not specifically targeting the healthcare industry.
Certain regulations not specifically targeting the healthcare industry also could have material effects on our operations. For example, the California Finance Lenders Law (the “CFLL”), Division 9, Sections 22000-22780 of the California Financial Code, could be applied to us as a result of our various affiliate and subsidiary loans and similar arrangements. If a regulator were to take the position that such loans were covered by the California Finance Lenders Law, we could be subject to regulatory action that could impair our ability to continue to operate and may have a material adverse effect on our profitability and business as we currently do not hold a CFLL licensure. Pursuant to an exemption under the CFLL, a person may make five or fewer commercial loans in a 12-month period without a CFLL licensure if the loans are “incidental” to the business of the person. This exemption, however, creates some uncertainty as to which loans could be deemed as incidental to our business. In addition, a person without a CFLL licensure may also make a single commercial loan in a 12-month period without the loan being “incidental” to such person’s business but this single-loan exemption is currently set to expire on January 1, 2022.
Risks Relating to the Ownership of ApolloMed’s Common Stock.
We have to meet certain requirements in order to remain as a NASDAQ-listed public company.
As a public company, ApolloMed is required to comply with various regulatory and reporting requirements, including those required by the SEC. Because ApolloMed uplisted to NASDAQ in December 2017, it is also subject to NASDAQ listing rules. Complying with these requirements is time-consuming and expensive. No assurance can be given that ApolloMed can continue to meet the SEC reporting and NASDAQ listing requirements.
ApolloMed’s common stock may continue to be thinly traded and its market price may be subject to fluctuations and volatility. Stockholders may be unable to sell their shares at a profit and might incur losses.
47


The trading price of ApolloMed’s common stock was volatile and may continue to be so from time to time. The price at which ApolloMed’s common stock trades could be subject to significant fluctuation and may be affected by a variety of factors, including the trading volume, our results of operations, the announcement and consummation of certain transactions, our ability or inability to raise additional capital and the terms thereof, and therefore could fluctuate, and decline, significantly. Other factors that may cause the market price of ApolloMed’s common stock to fluctuate include:
Variations in our operating results, such as actual or anticipated quarterly and annual increases or decreases in revenue, gross margin or earnings;
Changes in our business, operations, or prospects, including announcements relating to strategic relationships, mergers, acquisitions, partnerships, collaborations, joint ventures, capital commitments, or other events by us or our competitors;
Announcements of acquisitions, dispositions, and other corporate transactions, as well as financings and other capital-raising transactions;
Developments, conditions, or trends in the healthcare industry;
Changes in the economic performance or market valuations of other healthcare-related companies;
General market conditions or domestic or international macroeconomic and geopolitical factors unrelated to our performance or financial condition, including economic or political instability, wars, civil unrest, terrorism, epidemics (including COVID-19), outbreak, and natural disasters;
Sales of stock by ApolloMed’s stockholders generally and ApolloMed’s larger stockholders, including insiders, in particular, including sale or distributions of large blocks of common stock by our executives and directors;
Volatility and limitations in trading volumes of ApolloMed’s common stock and the stock market;
Approval, maintenance, and withdrawal of our and our affiliates’ certificates, permits, registration, licensure, certification, and accreditation by the applicable regulatory or other oversight bodies;
Our financing activities, including our ability to obtain financings and prices that we sell our equity securities, including notes convertible to and warrants to purchase shares of ApolloMed’s common stock;
Failures to meet external expectations or management guidance;
Changes in our capital structure and cash position;
Analyst research reports on ApolloMed’s common stock, including analysts’ recommendations and changes in recommendations, price targets, and withdrawals of coverage;
Departures and additions of our key personnel, including our officers or directors;
Disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations;
Changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and
Other events or factors, many of which may be out of our control.
There may continue to be a limited trading market for ApolloMed’s common stock. A lack of an active market may contribute to stock price volatility or supply/demand imbalances, make an investment in ApolloMed’s common stock less attractive to certain investors, and/or impair the ability of ApolloMed’s stockholders to sell shares at the time they desire or at a price that they consider favorable. The lack of an active market may also reduce the fair market value of ApolloMed’s common stock, impair our ability to raise capital by selling shares of ApolloMed’s common stock, or use such stock as consideration to attract and retain talent or engage in business transactions.
If analysts do not report about us, or negatively evaluate us, ApolloMed’s stock price could decline.
48


The trading market for ApolloMed’s common stock will rely in part on the availability of research and reports that third-party analysts publish about us. There are many large companies active in the healthcare industry, which make it more difficult for us to receive widespread coverage. Furthermore, if one or more of the analysts who do cover us downgrade ApolloMed’s common stock, its price would likely decline. If one or more of these analysts cease coverage of us, we could lose market visibility, which in turn could cause ApolloMed’s stock price to decline.
Our current principal stockholders, executive officers, and directors have significant influence over our operations and strategic direction and they could cause us to take actions with which other stockholders might not agree and could delay, deter, or prevent a change of control or a business combination with respect to us.
As of December 31, 2022, our executive officers, directors, five percent or greater stockholders, and their respective affiliated entities in the aggregate own approximately 25.2% of our outstanding common stock. As a result, these stockholders, who are entitled to vote their shares in their own interests, acting together, exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change of control, merger, consolidation, sale of all or substantially all of our assets or other corporate transactions that other stockholders may view as beneficial, or conversely, this concentrated control could result in the consummation of a transaction that other stockholders may not support. This may harm the value of our shares and discourage investors from investing in us.
Provisions under Delaware law and ApolloMed’s charter and bylaws could deter takeover attempts or attempts to remove its board members or management that might otherwise be beneficial to its stockholders.
ApolloMed is subject to Section 203 of the Delaware General Corporation Law, which makes the acquisition of ApolloMed and the removal of its incumbent officers and directors more difficult for potential acquirers by prohibiting stockholders holding 15% or more of its outstanding voting stock from acquiring it without the consent of its board of directors for at least three years from the date they first hold 15% or more of the voting stock. These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in ApolloMed’s control or management, including transactions in which ApolloMed’s stockholders might otherwise receive a premium for their shares over then current market prices. These provisions may also limit the ability of ApolloMed’s stockholders to approve transactions that they may deem to be in their best interests.
Additionally, ApolloMed’s charter and bylaws contain additional provisions, such as the authorization for its board of directors to issue one or more classes of preferred stock and determine the rights, preferences, and privileges of the preferred stock, which could cause substantial dilution to a person or group that attempts to acquire ApolloMed on terms not approved by the board, and the ownership requirement for ApolloMed’s stockholders to call special meetings, that could deter, discourage, or make it more difficult for a change in control of ApolloMed or for a third party to acquire ApolloMed, even if such a change in control could be deemed in the interest of ApolloMed’s stockholders, or if such an acquisition would provide ApolloMed’s stockholders with a substantial premium for their shares over the market price of ApolloMed’s common stock.
As such, these provisions could discourage a potential acquirer from acquiring us or otherwise attempting to obtain our control and increase the likelihood that our incumbent directors and officers will retain their positions.
We may issue additional equity securities in the future, which may result in dilution to existing investors.
If ApolloMed issues additional equity securities, its existing stockholders may experience substantial dilution. ApolloMed may sell equity securities and may issue convertible notes and warrants in one or more transactions at prices and manners as we may determine from time to time, including at prices (or exercise prices) below the market price of ApolloMed’s common stock, for capital-raising purposes, including in any debt financing, registered offering, or private placement, and new investors could have superior rights such as liquidation and other preferences. To attract and retain the right talent, ApolloMed may also issue equity awards under its equity compensation plans to its officers, other employees, directors, and consultants from time to time. ApolloMed may also issue additional shares of its common stock or other securities that are convertible into or exercisable for common stock in connection with future acquisitions or for other business purposes. In addition, the exercise or conversion of outstanding options or warrants to purchase shares of ApolloMed’s stock may result in dilution to its existing stockholders upon any such exercise or conversion.
Risks Relating to Restatement of our Consolidated Financial Statements
49


We have had to restate our previously issued consolidated financial statements and, as part of that process, have identified a material weakness in our internal control over financial reporting as of December 31, 2022. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and may adversely affect our business, financial condition and results of operations.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could be an adverse effect on our business, financial condition and results of operations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can provide no assurance that the measures we are taking and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
We may face litigation and other risks as a result of the restatement as described in the “Explanatory Note” within this Form 10-K Amendment No. 1 and material weakness in our internal control over financial reporting.
As part of the restatement as described in the “Explanatory Note” within this Form 10-K Amendment No. 1, we identified a material weakness in our internal control over financial reporting. As a result of such material weakness, the restatement and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition and results of operations.
Item 1B.    Unresolved Staff Comments
None.
Item 2.    Properties
Our corporate headquarters are located in Alhambra, California, where we lease approximately 35,000 square feet of office spaces in two adjacent buildings from an entity that is wholly owned and consolidated by APC as a result of an acquisition that occurred on December 31, 2020. We also lease approximately 47,500 square feet of office space in Monterey Park, California, from an entity that is partially owned by APC.
We maintain other offices and medical spaces located in Monterey Park, Alhambra, City of Industry, Arcadia, Glendale, Daly City, San Gabriel, Pasadena, and El Monte, California. We also maintain offices and medical spaces in Nevada and Texas. These leases require monthly rental payments ranging from approximately $1,000 to $34,000 and have terms that expire between January 2024, subject to options to extend provided thereunder, and August 2035.
We believe our existing facilities are in good condition and are suitable and adequate for our current requirements. Based on current information and subject to future events and circumstances, we anticipate that we may extend leases on our various facilities as necessary, as they expire, and lease additional facilities to accommodate possible future growth.
50


Item 3.    Legal Proceedings
Certain of the pending or threatened legal proceedings or claims in which we are involved are discussed under Note 15 - “Commitments and Contingencies,” to our consolidated financial statements in this Annual Report on Form 10-K, which disclosure is incorporated by reference herein.
Item 4.    Mine Safety Disclosures
Not applicable.
51


PART II
Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Market Information
The information presented below is our historical data and not necessarily indicative of our future financial condition or results of operations.
ApolloMed’s common stock is listed on the NASDAQ Capital Market, under the symbol, “AMEH.”
Record Holders
As of February 16, 2023, there were approximately 562 holders of record of ApolloMed’s common stock based on our transfer agent’s report. Because many shares of ApolloMed’s common stock are held by brokers and other nominees on behalf of stockholders, including in trust, we are unable to estimate the total number of stockholders represented by these record holders.
Dividends
To date, we have not paid any cash dividends on ApolloMed’s common stock, and we do not contemplate the payment of cash dividends thereon in the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, financial condition, and other factors relevant to our ability to pay dividends.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.

52


Performance Measurement Comparison

    The following chart compares the cumulative total return of our common stock with the cumulative total return of the Russell 3000 Index and the S&P 500 Healthcare Index, from December 31, 2017 to December 31, 2022.

We believe the Russell 3000 Index is an appropriate independent broad market index, because it measures the performance of similar-sized companies in numerous sectors. In addition, we believe the S&P 500 Healthcare Index is an appropriate third-party published industry index because it measures the performance of healthcare companies.
1791
Indexed Returns for the Years Ended
Company/Index Base Period
12/31/2017
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022
ApolloMed 1.00  (0.17) (0.23) (0.24) 2.06  0.23 
Russell 3000 Index 1.00  (0.05) 0.24  0.50  0.89  0.52 
S&P 500 Healthcare 1.00  0.06  0.29  0.46  0.84  0.12 

Item 6.    [Reserved]
Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations (Restated)

The following management’s discussion and analysis should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

53


In this section, “we,” “our,” “ours,” and “us” refer to Apollo Medical Holdings, Inc. (“ApolloMed”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (VIEs).

Restatement of Previously Issued Financial Statements

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect to the restatement of our financial statements, as more fully described in Note 1–“Restatement of Prior Financial Information” to our consolidated financial statements under Item 8 in this Form 10-K Amendment No. 1. For further detail regarding the restatement, see “Explanatory Note”. This section does not substantively amend, update or change any disclosures or analysis contained in the Original Filing, and accordingly, does not reflect any information or events occurring after March 1, 2023, the filing date of the Original Filing, or modify or update those disclosures affected by events that occurred at a later date or facts that subsequently became known to the Company, except to the extent they are otherwise required to be included and discussed herein.
Overview
Apollo Medical Holdings, Inc. is a leading physician-centric, technology-powered, risk-bearing healthcare management company. Leveraging its proprietary population health management and healthcare delivery platform, ApolloMed operates an integrated, value-based healthcare model, which aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner. We, together with our affiliated physician groups and consolidated entities, provide coordinated outcomes-based medical care in a cost-effective manner.
Through our accountable care organization and our network of IPAs we were responsible for coordinating the care for approximately 1.3 million patients primarily in California as of December 31, 2022. These covered patients are comprised of managed care members whose health coverage is provided either through their employers, acquired directly from a health plan, or as a result of their eligibility for Medicaid or Medicare benefits. Our managed patients benefit from an integrated approach that places physicians at the center of patient care and utilizes sophisticated risk management techniques and clinical protocols to provide high-quality, cost-effective care.
On December 8, 2017, ApolloMed completed its business combination with NMM (i.e., the “2017 Merger”). The combination of ApolloMed and NMM brought together two complementary healthcare organizations to form one of the nation’s largest integrated population health management companies. As a result of the 2017 Merger, NMM became a wholly owned subsidiary of ApolloMed and the former NMM shareholders received a majority of the issued and outstanding common stock of ApolloMed. For accounting purposes, NMM was considered the accounting acquirer and, accordingly, as of the closing of the 2017 Merger, NMM’s historical results of operations replaced ApolloMed’s historical results of operations for periods prior to the 2017 Merger, and the results of operations of both companies are included in the accompanying consolidated financial statements for periods following the 2017 Merger.
2022 Highlights
Shared Savings from Centers for Medicare and Medicaid Services for 2021 Performance Year
Following the end of each performance year and at such other times as may be required under the NGACO Participation Agreement between APAACO and CMS (the “Participation Agreement”), CMS will issue a settlement report to the Company setting forth the amount of any shared savings or shared losses and the amount of other monies. As APAACO does not have sufficient insight into the financial performance of the shared risk pool with CMS because of unknown factors related to IBNR claims, risk adjustment factors, and stop-loss provisions, among other factors, an estimate cannot be developed. Due to these limitations, APAACO cannot determine the amount of surplus or deficit that will likely be recognized in the future and, therefore, this shared-risk pool revenue is considered fully constrained until it is settled. The settlement for the 2021 performance year was finalized and the Company recognized $48.8 million related to savings as revenue in risk pool settlements and incentives in the accompanying consolidated statements of income for the year ended December 31, 2022.
54


Business and Asset Acquisitions
Orma Health, Inc., and Provider Growth Solutions, LLC
In January 2022, the Company acquired 100% of the capital stock of Orma Health, Inc., and Provider Growth Solutions, LLC (together, “Orma Health”). The purchase was paid in cash and in the Company’s capital stock. Orma Health’s real-time Clinical AI platform ingests data from multiple sources and utilizes advanced risk-stratification models to identify patients for various clinical programs, including remote patient monitoring (“RPM”), mental health support, chronic care management, and more. Its clinical platform is also deeply integrated with Orma Health’s proprietary RPM ecosystem, which consists of smart health devices and a suite of technology tools to manage patient health.
Jade Health Care Medical Group, Inc.
In April 2022, the Company acquired 100% of the capital stock of Jade. The purchase was paid in cash. Jade is a primary and specialty care physicians’ group focused on providing high-quality care to its patients in the San Francisco Bay Area in Northern California.
Tag-6 Medical Investment Group, LLC , and Tag-8 Medical Investment Group, LLC
In August 2022, using cash comprised solely of Excluded Assets, APC acquired the remaining 50% interest in Tag-6 Medical Investment Group, LLC (“Tag 6”) and Tag-8 Medical Investment Group, LLC (“Tag 8”) for $4.9 million and $4.1 million, respectively. As a result, Tag 6 and Tag 8 are now 100% owned subsidiaries of APC and are included in the consolidated financial statements.
Valley Oaks Medical Group (“VOMG”)
On October 14, 2022, a sole equity holder acquired 100% of the equity interest in VOMG. Under the terms of the Physician Equity Holder Agreement (the “Equity Agreement”) between ApolloMed and the equity holder, ApolloMed may designate a third party who is permitted under Nevada law to be an owner or equity holder of VOMG with the right (the “Acquisition Right”) (a) to acquire equity holder’s equity interest or (b) to acquire from VOMG. The Acquisition Right shall be exercisable by ApolloMed and equity holder shall be obligated to assign and transfer the equity interest or to cause VOMG to issue new equity interests (as applicable) to ApolloMed. As a result of the arrangement and in accordance with relevant accounting guidance, VOMG is determined to be a VIE of ApolloMed and is consolidated by the Company. VOMG owns nine primary care clinics consisting of seven in Nevada and two in Texas. The purchase price consists of cash funded upon close of the transaction and additional cash consideration contingent on VOMG meeting financial metrics for fiscal year 2023 and 2024.
All American Medical Group (“AAMG”)
On October 31, 2022, AP-AMH 2, a VIE of the Company, acquired 100% of the equity interest in AAMG. AAMG is an IPA operating in Northern California. The purchase price consists of cash funded upon close of the transaction and additional cash and stock consideration contingent on AAMG meeting financial metrics for fiscal year 2023 and 2024.

Recent Developments    
ApolloMed purchase of APC-LSMA’s entities
On February 23, 2023, AP-AMH 2, a VIE of ApolloMed, purchased 100% of the equity interest in each of AMG, a Professional Medical Corporation, 1 World Medicine Urgent Care Corporation, and Eleanor Leung, M.D., a Professional Medical Corporation from APC-LSMA, a VIE of APC. As a result of the purchase, these entities will become consolidated entities of AP-AMH 2.

Key Financial Measures and Indicators
Operating Revenues

55


Our revenue, which is recorded in the period in which services are rendered and earned, primarily consists of capitation revenue, risk pool settlements and incentives, GPDC revenue, management fee income, and fee-for-services (“FFS”) revenue. The form of billing and related risk of collection for such services may vary by type of revenue and the customer.
Operating Expenses

Our largest expenses consist of the cost of: (i) patient care paid to contracted providers; (ii) information technology equipment and software; and (iii) hiring staff to provide management and administrative support services to our affiliated physician groups, as further described in the following sections. These services include claims processing, utilization management, contracting, accounting, credentialing, and administrative oversight.


56


Results of Operations
2022 Compared to 2021
Our consolidated operating results for the year ended December 31, 2022, as compared to the year ended December 31, 2021 were as follows:
Apollo Medical Holdings, Inc.
Consolidated Statements of Income (in thousands)
  Years Ended December 31,
2022 2021 $ Change % Change
Restated Restated
Revenue
Capitation, net $ 930,131  $ 593,224  $ 336,907  57  %
Risk pool settlements and incentives 117,254  111,627  5,627  %
Management fee income 41,094  35,959  5,135  14  %
Fee-for-services, net 49,517  26,564  22,953  86  %
Other income 6,167  6,541  (374) (6) %
Total revenue 1,144,163  773,915  370,248  48  %
Operating expenses
Cost of services, excluding depreciation and amortization 944,685  596,142  348,543  58  %
General and administrative expenses 77,670  62,077  15,593  25  %
Depreciation and amortization 17,543  17,517  26  %
Total expenses 1,039,898  675,736  364,162  54  %
Income from operations 104,265  98,179  6,086  %
Other (expense) income
Income (loss) from equity method investments 5,622  (4,306) 9,928  (231) %
Gain on sale of equity method investment —  2,193  (2,193) (100) %
Interest expense (7,920) (5,394) (2,526) 47  %
Interest income 1,976  1,571  405  26  %
Unrealized loss on investments (21,271) (10,745) (10,526) 98  %
Other income (expense) 3,944  (3,750) 7,694  (205) %
Total other (expense) income, net (17,649) (20,431) 2,782  (14) %
Income before provision for income taxes 86,616  77,748  8,868  11  %
Provision for income taxes 40,875  31,693  9,182  29  %
Net income $ 45,741  $ 46,055  $ (314) (1) %
Net income (loss) attributable to noncontrolling interests 570  (22,868) 23,438  (102) %
Net income attributable to Apollo Medical Holdings, Inc.
$ 45,171  $ 68,923  $ (23,752) (34) %
Net Income
Our net income in 2022 was $45.7 million, as compared to $46.1 million in 2021, a decrease of $0.3 million or 1%.
Physician Groups and Patients
As of December 31, 2022 and 2021, the total number of affiliated physician groups we managed were 14 groups and 12 groups, respectively, and the total number of patients for whom we managed the delivery of healthcare services was approximately 1.3 million and 1.2 million, respectively.
57


Revenue
Our total revenue in 2022 was $1,144.2 million, as compared to $773.9 million in 2021, an increase of $370.2 million or 48%. The increase in total revenue was primarily attributable to the following:
(i) An overall increase of $336.9 million in capitation revenue primarily driven by organic membership growth in our core IPAs and participation in a value-based Medicare fee-for-service model.
(ii) An increase of $23.0 million in fee-for-services revenue attributable to fees generated from ApolloMed primary, multi-specialty, and ancillary care delivery entities.
Cost of Services, Excluding Depreciation and Amortization
Expenses related to cost of services, excluding depreciation and amortization, in 2022 were $944.7 million, as compared to $596.1 million in 2021, an increase of $348.5 million or 58%. The overall increase was primarily due to expected return to pre-COVID-19 medical expense run rates, participation in a value-based Medicare fee-for-service model and growth in membership, which was commensurate to our increase in revenue.
General and Administrative Expenses
General and administrative expenses in 2022 were $77.7 million, as compared to $62.1 million in 2021, an increase of $15.6 million or 25%. This increase was primarily due to a $14.8 million increase in personnel-related costs to support the continued growth in the depth and breadth of our operations.
Depreciation and Amortization
Depreciation and amortization expense was $17.5 million and $17.5 million for the years ended December 31, 2022 and 2021, respectively. These amounts included depreciation of property and equipment and the amortization of intangible assets.
Income (Loss) From Equity Method Investments
Income from equity method investments in 2022 was $5.6 million, as compared to a loss of $4.3 million in 2021, an increase of $9.9 million. The increase in income from equity method investments was primarily due to our investment partner having a favorable contract change including rate and division of financial responsibility on certain claims.
Gain on Sale of Equity Method Investment
Gain on sale of equity method investment in 2022 was $0, as compared to $2.2 million in 2021, a decrease of $2.2 million. The decrease in gain on sale of equity method investment is due to APC-LSMA selling 21.25% of its interest in LMA back to Dr. Arteaga for the year end December 31, 2021. There was no sale of our equity method investment for the year ended December 31, 2022.
Interest Expense
Interest expense in 2022 was $7.9 million, as compared to $5.4 million in 2021, an increase of $2.5 million. The increase in interest expense for the year was primarily due to higher interest rates. On December 31, 2022, the interest rate on the Amended Credit Agreement was 5.92% compared to 1.71% on December 31, 2021.
Interest Income
Interest income in 2022, was $2.0 million, as compared to $1.6 million in 2021, an increase of $0.4 million. Interest income reflects interest earned on cash held in money market and certificate of deposit accounts and the interest from notes receivable.
Unrealized Loss on Investments
58


Unrealized loss on investments in 2022 was $21.3 million, as compared to an unrealized loss on investments of $10.7 million in 2021, an increase of $10.5 million. The increase in unrealized loss on investments was primarily driven by a decrease in the stock price of a payor partner in which we hold shares and Nutex.
Other Income (Expense)
Other income in 2022 was $3.9 million, as compared to other expense of $3.8 million in 2021, an increase of $7.7 million. The increase was primarily due to the write-off of certain beneficial interest related to the UCI disposition totaling $15.7 million for the year ended December 31, 2021. The beneficial interest was an Excluded Assets that was deemed solely for the benefit of APC and its shareholders. As such, the write-off did not result in any impact to net income attributable to Apollo Medical Holdings, Inc. This was offset by non-recurring income recognized for the year ended December 31, 2021 relating to $2.8 million income from consolidating an equity method investment, $5.3 million income from the stock purchase agreement with Nutex, and $1.7 million income in stimulus checks. In addition, the Company recognized a $2.3 million gain on sale of equity securities for the year ended December 31, 2022.
Provision for Income Taxes
Provision for income taxes was $40.9 million in 2022, as compared to $31.7 million in 2021, an increase of $9.2 million or 29%. This was primarily attributable to an increase in pre-tax income in 2022, as compared to 2021, due to the factors described above.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income attributable to non-controlling interests was $0.6 million in 2022, as compared to net loss of $22.9 million in 2021, an increase of $23.4 million. The increase in net income attributable to noncontrolling interest was primarily due to non-recurring write-offs recognized for the year ended December 31, 2021 related to certain beneficial interest related to the UCI disposition totaling $15.7 million.
59


2021 Compared to 2020
Our consolidated operating results for the year ended December 31, 2021, as compared to the year ended December 31, 2020, were as follows:
Apollo Medical Holdings, Inc.
Consolidated Statements of Income (in thousands)
  Years Ended December 31,
2021 2020 $ Change % Change
Restated Restated
Revenue
Capitation, net $ 593,224  $ 557,326  $ 35,898  %
Risk pool settlements and incentives 111,627  77,367  34,260  44  %
Management fee income 35,959  34,850  1,109  %
Fee-for-services, net 26,564  12,683  13,881  109  %
Other income 6,541  4,954  1,587  32  %
Total revenue 773,915  687,180  86,735  13  %
Operating expenses
Cost of services, excluding depreciation and amortization 596,142  539,211  56,931  11  %
General and administrative expenses 62,077  49,116  12,961  26  %
Depreciation and amortization 17,517  18,350  (833) (5) %
Total expenses 675,736  606,677  69,059  11  %
Income from operations 98,179  80,503  17,676  22  %
Other income (expense)
(Loss) income from equity method investments (4,306) 3,694  (8,000) (217) %
Gain on sale of equity method investment 2,193  99,839  (97,646) (98) %
Interest expense (5,394) (9,499) 4,105  (43) %
Interest income 1,571  2,813  (1,242) (44) %
Unrealized loss on investments (10,745) —  (10,745) 100  %
Other (expense) income (3,750) 1,077  (4,827) (448) %
Total other income (expense), net (20,431) 97,924  (118,355) (121) %
Income before provision for income taxes 77,748  178,427  (100,679) (56) %
Provision for income taxes 31,693  56,344  (24,651) (44) %
Net income $ 46,055  $ 122,083  $ (76,028) (62) %
Net (loss) income attributable to noncontrolling interests (22,868) 84,395  (107,263) (127) %
Net income attributable to Apollo Medical Holdings, Inc. $ 68,923  $ 37,688  $ 31,235  83  %
Net Income
Our net income in 2021 was $46.1 million, as compared to $122.1 million in 2020, a decrease of $76.0 million or 62%.
Physician Groups and Patients
As of December 31, 2021 and 2020, the total number of affiliated physician groups we managed were 12 groups and 14 groups, respectively, and the total number of patients for whom we managed the delivery of healthcare services was 1.2 million and 1.1 million, respectively.
Revenue
60


Our total revenue in 2021 was $773.9 million, as compared to $687.2 million in 2020, an increase of $86.7 million or 13%. The increase in total revenue was primarily attributable to the following:
(i) An overall increase of $35.9 million in capitation revenue primarily driven by membership growth at APC and Alpha Care and higher average capitation rate at APC. APC and Alpha Care contributed additional capitation revenue of approximately $38.2 million and $7.0 million, respectively. This was offset with a decrease in capitation revenue of $11.5 million at Accountable Health Care due to decreased membership.
(ii) An increase of $34.3 million in risk pool settlements and incentives revenue due to an increase of $14.7 million in shared savings generated from our full risk pool arrangements driven by reduced utilization at ApolloMed’s partner hospitals resulting from the suspension of non-emergency medical procedures in early 2020 when the COVID-19 pandemic first began, revenues from ApolloMed’s partner hospitals reflect a 15-18 month lag, $13.1 million from health plan incentives and settlements from various payor partners, which was mainly attributable to increased membership and timing of settlements, $4.5 million resulting from a settlement with a health plan within our full risk pool arrangement, and a $2.0 million increase in the shared savings settlement earned from ApolloMed’s participation in an ACO related to performance year 2020, as compared to prior year.
(iii) An increase of $13.9 million in fee-for-services revenue attributable to fees generated from Sun Labs and DMG totaling $7.2 million due to the consolidation of Sun Labs in August 2021, and DMG in October 2021. In addition, there was an increase of $5.4 million from increased visits to our surgery and heart centers, which were partially closed in the prior year due COVID-19.
Cost of Services, Excluding Depreciation and Amortization
Expenses related to cost of services, excluding depreciation and amortization, in 2021 were $596.1 million, as compared to $539.2 million in 2020, an increase of $56.9 million or 11%. The overall increase was due to an increase in medical claims incurred of $33.4 million, $12.1 million in additional costs as a result of the consolidation of Sun Labs in August 2021 and DMG in October 2021, and $8.3 million in increased sub-capitation payments due to a new oncology vendor joining in November 2020.
General and Administrative Expenses
General and administrative expenses in 2021 were $62.1 million, as compared to $49.1 million in 2020, an increase of $13.0 million or 26%. This increase was primarily due to an $8.9 million increase in personnel-related costs to support the continued growth in the depth and breadth of our operations and $2.7 million in a one-time cost related to vendor settlement and execution of the Amended Credit Facility agreement.
Depreciation and Amortization
Depreciation and amortization expense was $17.5 million and $18.4 million for the years ended December 31, 2021 and 2020, respectively. These amounts included depreciation of property and equipment and the amortization of intangible assets.
Income (Loss) From Equity Method Investments
Loss from equity method investments in 2021 was $4.3 million, as compared to income of $3.7 million in 2020, a decrease of $8.0 million. The $8.0 million decrease in income from equity method investments was primarily due to the sale of UCI in April 2020. For the nine months ended September 30, 2020, UCI contributed equity earnings of $3.6 million. The additional decrease is from our investment in LMA. The Company incurred a loss of $5.8 million from LMA as a result of increased claims expense for the year ended December 31, 2021, as compared to equity earnings of $0.3 million for the year ended December 31, 2020. The loss was partially offset by increases in income from One MSO, Tag 6, and CAIPA MSO of $0.5 million, $0.3 million, and $0.3 million, respectively.
Gain on Sale of Equity Method Investment
Gain on sale of equity method investment in 2021 was $2.2 million, as compared to $99.8 million in 2020, a decrease of $97.6 million. The $97.6 million decrease in sale of equity method investment is primarily driven by a $99.6 million gain from the sale of UCI in 2020, as compared to a $2.2 million gain from sale of 21.25% interest in LMA in 2021.
61


Interest Expense
Interest expense in 2021 was $5.4 million, as compared to $9.5 million in 2020, a decrease of $4.1 million. The decrease in interest expense for the year was primarily due to the Company refinancing their Credit Facility to the Amended Credit Facility in June 2021 which resulted in lower interest rates, as compared to the same periods in 2020.
Interest Income
Interest income in 2021, was $1.6 million, as compared to $2.8 million in 2020, a decrease of $1.2 million. Interest income reflects interest earned on cash held in money market and certificate of deposit accounts and the interest from notes receivable.
Unrealized (Loss) on Investments
Unrealized loss on investments in 2021 was $10.7 million, as compared to unrealized loss on investment of $0 for the same period in 2020, an increase of $10.7 million. The $10.7 million unrealized loss on investments is primarily driven by an unrealized loss of $12.1 million due to fluctuations in the stock price of a payor partner in which we hold shares. These shares are recorded as marketable securities and deemed an Excluded Assets that are solely for the benefit of APC and its shareholders. Any resulting gain or loss does not impact net income attributable to Apollo Medical Holdings, Inc. The unrealized loss was partially offset by an unrealized gain of $1.3 million due to fluctuations in the stock price of our equity holdings in Clinigence.
Other (Expense) Income
Other expense in 2021 was $3.8 million, as compared to other income of $1.1 million for the same period in 2020, a decrease of $4.8 million. The decrease was primarily due to the write-off of certain beneficial interest related to the UCI disposition totaling $15.7 million. The beneficial interest was an Excluded Assets that was deemed solely for the benefit of APC and its shareholders. As such, the write-off did not result in any impact to net income attributable to Apollo Medical Holdings, Inc. This was offset by non-recurring income recognized for the year ended December 31, 2021 relating to $2.8 million income from consolidating an equity method investment, $5.3 million income from the stock purchase agreement with Nutex, and $1.7 million income in stimulus checks.
Provision for Income Taxes
Provision for income taxes was $31.7 million in 2021, as compared to $56.3 million in 2020, a decrease of $24.7 million or 44%. This was primarily attributable to the decrease in pre-tax income in 2021, as compared to 2020, due to the factors described above.
Net Income Attributable to Noncontrolling Interests
Net loss attributable to non-controlling interests was $22.9 million in 2021, as compared to net income of $84.4 million in 2020, a decrease of $107.3 million. The decrease was primarily due to unrealized loss on investment recognized for the year ended December 31, 2021, related to a payor partner as compared to the gain on sale of UCI in April 2020.
Segment Financial Performance (Recasted)
Beginning in the first quarter of 2023, the Company began providing reporting for three reportable segments consisting of Care Enablement, Care Partners and Care Delivery. The Company evaluates the performance of its operating segments based on segment revenue growth as well as operating income. Management uses revenue growth and total segment operating income as a measure of the performance of operating businesses separate from non-operating factors. For more information about our segments, refer to Note 2 — “Description of Business” and Note 21 - “Segments” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
2022 Segments Compared to 2021 Segments
The following table sets forth our revenue and operating income by segment for the year ended December 31, 2022, as compared to the year ended December 31, 2021:
62


Years Ended December 31,
Segment Revenue (in thousands) 2022 2021
$ Change
% Change
Care Enablement $ 120,200  $ 107,693  $ 12,507  12  %
Care Partners $ 1,051,521  $ 709,714  $ 341,807  48  %
Care Delivery $ 96,132  $ 46,691  $ 49,441  106  %
Years Ended December 31,
Segment Operating Income (Loss) (in thousands) 2022 2021
$ Change
% Change
Care Enablement $ 27,041  $ 37,499  $ (10,458) (28) %
Care Partners $ 85,222  $ 72,578  $ 12,644  17  %
Care Delivery $ 8,971  $ (540) $ 9,511  (1761) %

Care Enablement Segment

    Revenue was $120.2 million in 2022, as compared to $107.7 million in 2021, an increase of $12.5 million. Operating income was $27.0 million in 2022, as compared to $37.5 million in 2021, a decrease of $10.5 million. The increase in revenue was due to more managed independent physician groups. As of December 31, 2022 and 2021, the total number of affiliated physician groups we managed were 14 groups and 12 groups, respectively. The decrease in operating income is due to an increase in personnel-related costs to support the increase in our managed independent physician groups.

Care Partners Segment

Revenue was $1,051.5 million in 2022, as compared to $709.7 million in 2021, an increase of $341.8 million. Operating income was $85.2 million in 2022, as compared to $72.6 million in 2021, an increase of $12.6 million. The increase in revenue and operating income was primarily driven by organic membership growth in our core IPAs and participation in a value-based Medicare fee-for-service model.

Care Delivery Segment

    Revenue was $96.1 million in 2022, as compared to $46.7 million in 2021, an increase of $49.4 million. Operating income was $9.0 million in 2022, as compared to a loss of $0.5 million in 2021, an increase in operating income of $9.5 million, The increase in revenue and operating income was primarily due increased visits from our primary, multi-specialty, and ancillary care delivery entities.

2021 Segments Compared to 2020 Segments
The following table sets forth our revenue and operating income by segment for the year ended December 31, 2021, as compared to the year ended December 31, 2020:

Years Ended December 31,
Segment Revenue (in thousands) 2021 2020
$ Change
% Change
Care Enablement $ 107,693  $ 99,348  $ 8,345  %
Care Partners $ 709,714  $ 638,865  $ 70,849  11  %
Care Delivery $ 46,691  $ 26,070  $ 20,621  79  %


63


Years Ended December 31,
Segment Operating Income (Loss) (in thousands) 2021 2020
$ Change
% Change
Care Enablement $ 37,499  $ 29,065  $ 8,434  29  %
Care Partners $ 72,578  $ 63,275  $ 9,303  15  %
Care Delivery $ (540) $ (3,927) $ 3,387  (86) %


Care Enablement Segment

    Revenue was $107.7 million in 2021, as compared to $99.3 million in 2020, an increase of $8.3 million. Operating income was $37.5 million in 2021, as compared to $29.1 million in 2020, an increase of $8.4 million. The increase in revenue and operating income was primarily due to an increase in healthcare income from our managed independent physician groups.

Care Partners Segment

Revenue was $709.7 million in 2021, as compared to $638.9 million in 2020, an increase of $70.8 million. Operating income was $72.6 million in 2021, as compared to $63.3 million in 2020, an increase of $9.3 million. The increase in revenue and operating income was primarily driven by organic membership growth in our consolidated IPAs and an increase in shared savings settlement earned from ApolloMed’s participation in an ACO.

Care Delivery Segment

    Revenue was $46.7 million in 2021, as compared to $26.1 million in 2020, an increase of $20.6 million. Operating loss was $0.5 million in 2021, as compared to a loss of $3.9 million in 2020, a decrease in operating loss of $3.4 million, The increase in revenue and decrease in operating loss was primarily due to the consolidation of Sun Labs and DMG in 2021 and increased visits to our surgery and heart centers, which were partially closed in the prior year due COVID-19.



64


2023 Guidance

ApolloMed is providing the following guidance for total revenue, net income, EBITDA, Adjusted EBITDA, and earnings per share — diluted. The net income and EBITDA guidance ranges below include the impact of the excluded assets held by APC, which are solely for the benefit of APC and its shareholders. Any gains or losses associated with these excluded assets do not have an impact on Adjusted EBITDA and earnings per share — diluted. These guidance assumptions are based on the Company's existing business, current view of existing market conditions and assumptions for the year ending December 31, 2023.


($ in millions, except per share amounts) 2023 Guidance Range
Low High
Total revenue $ 1,300.0  $ 1,500.0 
Net income $ 49.5  $ 71.5 
EBITDA $ 89.5  $ 129.5 
Adjusted EBITDA $ 120.0  $ 160.0 
Earnings per share – diluted $ 0.95  $ 1.20 

See “Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA” and “Use of Non-GAAP Financial Measures” below for additional information. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. See “Note About Forward-Looking Statements” above for additional information.

Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(in thousands) 2023 Guidance Range
Low High
Net income $ 49,500  $ 71,500 
Interest expense 1,000  1,000 
Provision for income taxes 23,000  38,000 
Depreciation and amortization 16,000  19,000 
EBITDA 89,500  129,500 
Loss (income) from equity method investments (750) (750)
Other, net 3,250  3,250 
Stock-based compensation 16,000  16,000 
APC excluded assets costs 12,000  12,000 
Adjusted EBITDA $ 120,000  $ 160,000 

Set forth below are reconciliations of Net Income to EBITDA and Adjusted EBITDA for the years ended December 31, 2022 and 2021:

65


Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Restated)
Year Ended
 December 31,
 (in thousands)