Surgery Partners (SGRY) risk factors, FY2024 10-K

Business and Operational Risks

1. 01We depend on payments from third-party payors, including government health care programs and private insurance organizations. If these payments are reduced or eliminated, our revenue and profitability could be materially and adversely affected
2. 02could materially adversely affect payments we receive from these government programs, as well as affect the timing of payments to our facilities
3. 03If we are unable to negotiate and enter into favorable contracts or maintain satisfactory relationships and renew existing contracts on favorable terms with private insurance payors, our revenue and profitability may decrease
4. 04Significant changes in our payor mix or surgical case mix resulting from fluctuations in the types of cases performed at our facilities could have a material adverse effect on our business, prospects, results of operations and financial condition
5. 05A significant shift in our case mix toward a higher percentage of lower revenue cases, which could occur for reasons beyond our control, could result in a material adverse effect on our business, prospects, results of operations and financial condition
6. 06non-elective may be delayed or may not be performed if the patient cannot afford the procedure due to a lack of insurance or money to pay their portion of our facilities’ fee. It is difficult to predict the degree to which our business will continue to be impacted by economic conditions in the future
7. 07Our ability to provide medical services at our facilities would be impaired and our revenue reduced if we are not able to maintain good relationships with affiliated physicians who utilize our surgical facilities
8. 08Shortages of surgery-related products, equipment and medical supplies and quality control issues with such products, equipment and medical supplies could disrupt our operations and adversely affect our case volume, surgical case mix and profitability
9. 09We face competition from other health care facilities and providers
10. 10Competition for physicians and clinical personnel, including nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, profitability and cash flows
11. 11temporary personnel. We also depend on the available labor pool of semi-skilled and unskilled workers in each of the markets in which we operate
12. 12Our surgical facilities are sensitive to regulatory, economic and other conditions in the states where they are located
13. 13Certain of our partnership and operating agreements contain provisions giving rights to our partners and other members that may be adverse to our interests
14. 14We may have a special legal responsibility to the holders of ownership interests in the entities through which we own our facilities, which may conflict with, and prevent us from acting solely in, our own best interests or the interests of our stockholders
15. 15Growth of patient receivables or deterioration in the ability to collect on these accounts, due to changes in economic conditions or otherwise, could have a material adverse effect on our business, prospects, results of operations and financial condition
16. 16If we are unable to integrate and operate our information systems effectively or implement new systems and processes, our operations could be disrupted
17. 17A pandemic, epidemic or outbreak of a contagious disease in the markets in which we operate or that otherwise impacts our facilities could adversely impact our business

Financial and Accounting Risks

1. 18We have a history of net losses and may not achieve or sustain profitability in the future
2. 19To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations may adversely affect our business, financial condition and results of operations
3. 20Restrictive covenants in our debt instruments may adversely affect us
4. 21Despite our current indebtedness levels, we and our subsidiaries may still be able to incur more debt, which could further exacerbate the risks associated with our leverage
5. 22We are a holding company with no operations of our own
6. 23We make significant loans to, and are generally liable for debts and other obligations of, the partnerships and limited liability companies that own and operate some of our surgical facilities
7. 24Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly
8. 25We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability

Cybersecurity and Data Risks

1. 26Cybersecurity attacks or intrusions could adversely impact our businesses
2. 27Our use and disclosure of personally identifiable information, including health information, is subject to federal and state privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm

Legal and Regulatory Risks

1. 28If we fail to comply with or otherwise incur liabilities under the numerous federal and state laws and regulations relating to the operation of our facilities, we could incur significant penalties or other costs or be required to make significant changes to our operations
2. 29We cannot predict the effect that health care reform and other changes in government programs may have on our business, financial condition or results of operations
3. 30If regulations change, we may be obligated to purchase some or all of the ownership of our physician partners or renegotiate some of our partnership and operating agreements with our physician partners and management agreements with surgical facilities
4. 31If we fail to comply with physician self-referral laws as they are currently interpreted or may be interpreted in the future, or if other legislative restrictions are issued, we could incur substantial monetary penalties and a significant loss of revenue
5. 32complies fully with the Stark Law. We also believe that certain services provided by our managed physician network are covered by the Stark Law, but referrals for those services are exempt from the Stark Law under its "in-office ancillary services exception," among others
6. 33Federal law restricts the ability of our surgical hospitals to expand capacity
7. 34Companies within the health care industry, including us, continue to be the subject of federal and state audits and investigations, including actions for false and other improper claims
8. 35An allegation or determination that we have violated the law could have a material adverse effect on our business, prospects, results of operations and financial condition
9. 36addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities. We are regularly subject to these external audits and we also perform both internal and third-party audits and monitoring
10. 37We may become involved in litigation which could negatively impact the value of our business
11. 38If we become subject to large malpractice or other legal claims, we could be required to pay significant damages, which may not be covered by insurance
12. 39Failure to comply with Medicare’s conditions for coverage and conditions of participation may result in loss of program payment or other governmental sanctions
13. 40Our facilities could face decreased Medicare payments if they fail to report and meet various quality metrics
14. 41State efforts to regulate the construction, acquisition or expansion of health care facilities could prevent us from acquiring additional surgical facilities, renovating our existing facilities or expanding the breadth of services we offer
15. 42Our largest stockholder has significant influence over us, including influence over decisions that require the approval of stockholders, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control
16. 43Provisions in our charter documents and Delaware law may deter takeover efforts that could be beneficial to stockholder value