BrightSpring Health Services (BTSG) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We operate in a highly competitive industry
2. 02If we are unable to maintain relationships with existing patient referral sources or establish new referral sources, our business, financial condition, and results of operations could be materially adversely affected
3. 03Changes to Medicare and Medicaid rates or methods governing Medicare and Medicaid payments for our services could materially adversely affect our business
4. 04the reclassification of long-term care diagnosis-related groups
5. 05Cost containment initiatives of third-party payors, including post-payment audits, could adversely impact our business, financial condition, and results of operations
6. 06The implementation of alternative payment models and the transition of Medicaid and Medicare beneficiaries to managed care organizations may limit our market share and could adversely affect our revenues
7. 07Changes in the case mix of patients, as well as payor mix and payment methodologies, and decisions and operations of third-party organizations may have a material adverse effect on our business, financial condition, and results of operations
8. 08Our business is reliant on federal and state spending, budget decisions, and continuous governmental operations which may fluctuate under different political conditions
9. 09Changes in drug utilization and/or pricing, PBM contracts, and Medicare Part D/Medicaid reimbursement may negatively impact our profitability
10. 10inflation in the price of drugs
11. 11Changes in our relationships with pharmaceutical suppliers, including changes in drug availability or pricing, could adversely affect our business and financial results
12. 12and on acceptable terms, or at all. Should a supply disruption result in the inability to obtain pharmaceutical solutions necessary for patient care, our business, financial condition, and results of operations could be negatively impacted
13. 13Our business relies on the continual recruitment and retention of nurses, pharmacists, therapists, caregivers, direct support professionals, and other qualified personnel, including senior management
14. 14Our results of operations fluctuate on a quarterly basis
15. 15Our business may be harmed by labor relation matters
16. 16Because we are limited in our ability to control reimbursement rates received for our services, our business could be materially adversely affected if we are not able to maintain or reduce our costs to provide such services
17. 17Delays in collection or non-collection of our accounts receivable, particularly during the business integration process, could adversely affect our business, financial condition, and results of operations
18. 18If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and satisfaction, or adequately address competitive challenges
19. 19The sale of our Community Living business may not occur on the terms agreed to by the parties, in the expected time frame, or at all and, as a result, could adversely affect the Company’s business and financial condition
20. 20If we are unable to provide consistently high quality of care, our business will be adversely impacted
21. 21If we are unable to maintain our corporate reputation, or there is adverse publicity, including negative information on social media, or changes in public perception of our services, our business may suffer
22. 22Our business depends on our ability to effectively invest in, implement improvements to, and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems
23. 23We currently accept credit cards and debit cards. As a result, we pay interchange and other related acceptance and transaction processing fees, which may increase over time and raise our operating costs and lower profitability
24. 24We may be subject to substantial malpractice or other similar claims
25. 25We are exposed to various risks related to governmental inquiries, regulatory actions, and whistleblower and other lawsuits that could adversely affect our operating results. Our insurance may not cover all claims against us
26. 26Our current insurance program may expose us to unexpected costs and negatively affect our business, financial condition, and results of operations, particularly if we incur losses not covered by our insurance or if claims or losses differ from our estimates
27. 27Factors outside of our control, including those listed, have required, and could in the future require us to record an asset impairment of goodwill
28. 28Inclement weather, natural disasters, acts of terrorism, riots, civil insurrection or social unrest, looting, protests, strikes, or street demonstrations may impact our ability to provide services
29. 29We may be unable to adequately protect our intellectual property rights, which could harm our business
30. 30KKR Stockholder controls us and its interests may conflict with yours in the future
31. 31amount of our voting power, even if such amount is less than 50%, it is able to strongly influence or effectively control our decisions, and KKR Stockholder has the right to nominate individuals to our board of directors under the existing stockholders agreement

Risks Related to Our Regulatory Framework

1. 32We conduct business in a heavily regulated industry, and changes in regulations, the enforcement of these regulations, or violations of regulations may result in increased costs or sanctions that reduce our revenues and profitability
2. 33federal and state laws and policies that require healthcare providers to maintain licensure, certification or accreditation to enroll and participate in the Medicare and Medicaid programs, and to report certain changes in their operations to the agencies that administer these programs
3. 34Many states have CON laws or other regulatory provisions that may adversely impact our ability to expand into new markets and thereby limit our ability to grow and increase revenue
4. 35If we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S. healthcare reform, our business may be harmed
5. 36could increase our liabilities, harm our reputation, and have a material adverse effect on our business, financial condition, and results of operations
6. 37We face and are currently subject to reviews, audits, and investigations under our licenses and/or contracts with federal and state government agencies and other payors, and these reviews, audits, and investigations could have adverse findings that may negatively impact our business
7. 38sanctions, could disrupt operations, require significant attention by management, or have a material adverse effect on our reputation, business, financial condition, and results of operations
8. 39Quality reporting requirements may negatively impact Medicare reimbursement

Risks Related to Our Indebtedness

1. 40react to competitive pressures or compete with competitors with less debt
2. 41These limitations could adversely affect our operating performance, growth, profitability, and financial condition, which would make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness
3. 42Despite our high level of indebtedness, we may still be able to incur substantially more debt, which could further increase the risks to our financial condition described above
4. 43If we are unable to generate sufficient cash to service all of our indebtedness, we may be forced to take other actions to fund the satisfaction of our obligations under our indebtedness, which may not be successful
5. 44The terms of our outstanding indebtedness may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions
6. 45consolidate, merge, or sell all or substantially all of our assets
7. 46Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. In addition, the phase-out of LIBOR and transition to SOFR as a benchmark interest rate will have uncertain and possibly adverse effects
8. 47If the financial institutions that are lenders under the Revolving Credit Facility fail to extend credit under the facility or reduce the borrowing base, our liquidity and results of operations may be adversely affected
9. 48Our high level of indebtedness may hinder our ability to negotiate favorable terms with our suppliers, which could negatively impact our operating performance and, thus, could make it more difficult for us to generate cash flow sufficient to satisfy all of our obligations under our indebtedness
10. 49We are a “controlled company” within the meaning of the rules of Nasdaq and the rules of the SEC and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of other companies that are subject to such requirements
11. 50the compensation of our executive officers be determined, or recommended to our board of directors for determination, by a compensation committee comprised solely of independent directors
12. 51We incur additional costs associated with the requirements as a result of being a public company, and our management is required to devote substantial time to compliance adding complexity to running our business
13. 52Failure to comply with requirements to design, implement, and maintain effective internal controls could have a material adverse effect on our business and stock price
14. 53significant documentation, testing, and possible remediation. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business
15. 54You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise
16. 55We have 7,968,779 Units outstanding, and each purchase contract that is a component of a Unit will settle automatically on the mandatory settlement date into between 3.2733 and 3.8461 shares of our common stock, subject to certain anti-dilution adjustments, which may result in dilution to investors
17. 56The Units may adversely affect the market price of our common stock
18. 57Our ability to raise capital in the future may be limited
19. 58Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it
20. 59BrightSpring Health Services, Inc. depends on its subsidiaries for cash to fund its operations and expenses, including future dividend payments, if any, and to meet its debt obligations
21. 60Future sales or issuances, or the perception of future sales or issuances, by us or our existing stockholders, or the settlement of the purchase contracts, could cause the market price for our common stock to decline
22. 61Anti-takeover provisions in our organizational documents could delay or prevent a change of control
23. 62If tax laws change or we experience adverse outcomes resulting from examination of our tax returns or disagreements with taxing authorities, it could adversely affect our business, financial condition, and results of operations