Apollo Medical(AMEH) - 2019 Q4 - Annual Report

Patient Care Coordination - Apollo Medical Holdings, Inc. coordinates care for over 980,000 patients in California as of December 31, 2019[19]. - The company has a network of more than 7,000 contracted physicians through independent practice associations (IPAs)[19]. - The company has a broader physician network comprising 36 additional independent contractors providing medical services as of December 31, 2019[124]. - The company’s affiliated medical groups provide hospitalist services at multiple facilities, generating revenue through administrative and clinical services[21]. - The company has developed expertise in population health management, resulting in improved Risk Adjustment Factor (RAF) scores and higher payments from health plans[87]. Revenue Streams - The company operates under one reportable segment, the healthcare delivery segment, with diversified revenue streams including capitation payments, risk pool settlements, management fees, and fee-for-service reimbursements[24]. - ApolloMed's revenue from capitation payments includes payments made by CMS from the NGACO model[24]. - Revenue streams include capitation revenue primarily from managed care providers, with payments based on the number of enrollees[66]. - Management fee income includes fees for non-medical services provided to IPAs and healthcare providers, which may vary based on performance metrics[74]. - The company participates in shared risk arrangements that can generate additional revenue based on enrollee utilization of institutional services[71]. Value-Based Care - The company emphasizes value-based healthcare focusing on patient satisfaction, high-quality care, and cost efficiency[18]. - The shift to value-based care models is driving the healthcare market to seek more efficient delivery methods, moving away from fee-for-service models[42]. - Integrated medical systems are positioned to leverage scale and expertise to improve care quality and lower costs, benefiting from industry trends[47]. - The company is positioned to benefit from trends in the U.S. healthcare industry towards value-based care, emphasizing patient satisfaction, high-quality care, and cost efficiency[18]. Regulatory Environment - The company operates under extensive regulations from federal, state, and local agencies, which could adversely affect its business and financial condition[94]. - Violations of the False Claims Act can result in fines ranging from $5,500 to $11,000 per false claim, plus treble damages[101]. - The federal Anti-Kickback Statute imposes criminal fines of up to $25,000 and civil fines of up to $50,000 per violation, along with potential exclusion from federal healthcare programs[104]. - The Stark Law prohibits physicians from referring patients to entities with which they have a financial relationship, with civil penalties of up to $15,000 per violation[109]. - The company expects increased enforcement efforts related to privacy and security regulations under HIPAA, which could lead to civil penalties ranging from $100 to $50,000 per violation[112]. - The Knox-Keene Act regulates managed care plans in California, and the company may face liabilities if found to be operating without the necessary licenses[115]. Financial Performance - The company completed a merger with NMM, resulting in NMM becoming a wholly owned subsidiary and former NMM shareholders owning over 80% of ApolloMed's common stock[20]. - The company received excess payments of approximately $34.5 million for the first performance year and approximately $7.8 million for the second performance year under the NGACO alternative payment arrangement[65]. - Four key payors accounted for 51.6%, 61.5%, and 54.6% of total net revenue for the years ended December 31, 2019, 2018, and 2017, respectively[80]. - The average monthly AIPBP received from CMS was approximately $7.3 million starting February 2018, reduced to $5.5 million in October 2018, and adjusted to approximately $3.7 million from September 2019[78]. Market Trends - U.S. healthcare expenditures are projected to grow by 5.5% annually from 2018 to 2027, reaching $6.0 trillion by 2027[39]. - Medicare spending increased by 6.4% to $750.2 billion in 2018, while Medicaid spending rose by 3.0% to $597.4 billion, accounting for 21% and 16% of total health expenditures respectively[39]. - The healthcare spending in the U.S. was approximately $3.6 trillion in 2018, representing 17.7% of the U.S. GDP[42]. - The healthcare industry is highly competitive, with significant competition from larger healthcare management companies and provider networks[88]. Operational Structure - The company operates management service organizations (MSOs) that provide administrative and management services to affiliated physician groups[26]. - The company’s integrated operations include IPAs, MSOs, and outpatient clinics, focusing on risk- and value-based care for Medicare, Medicaid, and commercial patients[22]. - The company consolidates revenue and expenses of its medical affiliates as their primary beneficiary from the execution of the MSAs[97]. - As of December 31, 2019, ApolloMed and its subsidiaries had 555 employees, including 547 full-time and 8 part-time, with an additional 141 physicians and staff employed by consolidated VIEs[124].