Pediatrix Medical Group, Inc.

Previous wording

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” preceding Part I of this Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. The operating results for the periods presented were not significantly affected by inflation.

Current wording

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” preceding Part I of this Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.

Previous wording

Pediatrix is a leading provider of physician services including newborn, maternal-fetal and other pediatric subspecialty care. Our national network is comprised of affiliated physicians who provide clinical care in 36 states. At December 31, 2024, our national network comprised approximately 2,335 affiliated physicians, including 1,335 physicians who provide neonatal clinical care, primarily within hospital-based neonatal intensive care units (“NICUs”), to babies born prematurely or with medical complications. We have 490 affiliated physicians who provide maternal-fetal and obstetrical medical care to expectant mothers experiencing complicated pregnancies primarily in areas where our affiliated neonatal physicians practice. Our network also includes other pediatric subspecialists, including 240 physicians providing hospital-based pediatric care, over 230 physicians providing pediatric intensive care, and 20 physicians providing pediatric surgical care.

Current wording

Pediatrix is a leading provider of physician services including newborn, maternal-fetal and other pediatric subspecialty care. Our national network is comprised of affiliated physicians who provide clinical care in 37 states. At December 31, 2025, our national network comprised approximately 2,295 affiliated physicians, including 1,350 physicians who provide neonatal clinical care, primarily within hospital-based neonatal intensive care units (“NICUs”), to babies born prematurely or with medical complications. We have 475 affiliated physicians who provide maternal-fetal and obstetrical medical care to expectant mothers experiencing complicated pregnancies primarily in areas where our affiliated neonatal physicians practice. Our network also includes other pediatric subspecialists, including over 230 physicians providing pediatric intensive care, 220 physicians providing hospital-based pediatric care and 20 physicians providing pediatric surgical care.

Previous wording

Our operations and performance depend significantly on economic conditions. During the year ended December 31, 2024, the percentage of our patient service revenue being reimbursed under government-sponsored or funded healthcare programs (“GHC Programs”) decreased as compared to the year ended December 31, 2023. We could, however, experience shifts toward GHC Programs if changes occur in economic behaviors or population demographics within geographic locations in which we provide services, including an increase in unemployment and underemployment as well as losses of commercial health insurance. Payments received from GHC Programs are substantially less for equivalent services than payments received from commercial insurance payors. In addition, costs of managed care premiums and patient responsibility amounts continue to rise, and accordingly, we may experience lower net revenue resulting from increased bad debt due to patients’ inability to pay for certain services. See Item 1A. Risk Factors, in this Form 10-K for additional discussion on the general economic conditions in the United States and recent developments in the healthcare industry that could affect our business.

Current wording

Our operations and performance depend significantly on economic conditions. During the year ended December 31, 2025, the percentage of our patient service revenue being reimbursed under government-sponsored or government-funded healthcare programs (“GHC Programs”) remained stable as compared to the year ended December 31, 2024. We could, however, experience shifts toward GHC Programs if changes occur in economic behaviors or population demographics within geographic locations in which we provide services, including an increase in unemployment and underemployment as well as losses of commercial health insurance. Payments received from GHC Programs are substantially less for equivalent services than payments received from commercial insurance payors. In addition, costs of managed care premiums and patient responsibility amounts continue to rise, and accordingly, we may experience lower net revenue resulting from increased bad debt due to patients’ inability to pay for certain services. See Item 1A. Risk Factors, in this Form 10-K for additional discussion on the general economic conditions in the United States and recent developments in the healthcare industry that could affect our business.

Previous wording

During the second quarter of 2024, we formalized our physician practice optimization plans, resulting in a decision to exit almost all of our affiliated office-based practices, other than maternal-fetal medicine. Over the course of many years, we expanded our pediatric service lines and footprint to provide specialized care to more patients, including through our office-based portfolio of practices. This added complexity to our operations over time and, accordingly, increased costs that resulted in operating challenges primarily for our office-based portfolio of practices. Recognizing this and our need to adapt to the current healthcare climate, during the second quarter, we made the decision to return to a hospital-based and maternal-fetal medicine-focused organization. Accordingly, a recoverability assessment for each impacted individual physician practice was performed, and the estimated future cash flows related to the physician practices did not support the carrying value of the specifically identified individual long-lived assets. As a result, we recorded fixed asset impairments of $20.1 million, operating lease right-of-use asset impairments of $12.5 million and intangible asset impairments of $7.7 million during the year ended December 31, 2024. The operating lease right-of-use impairments are recorded within the transformational and restructuring related expenses line item. As of December 31, 2024, the planned exits of our pediatric office-based practices were completed.

Current wording

During the second quarter of 2024, we formalized our physician practice optimization plans, resulting in a decision to exit almost all of our affiliated office-based practices, other than maternal-fetal medicine. Over the course of many years, we expanded our pediatric service lines and footprint to provide specialized care to more patients, including through our office-based portfolio of practices. This added complexity to our operations over time and, accordingly, increased costs that resulted in operating challenges primarily for our office-based portfolio of practices. Recognizing this and our need to adapt to the current healthcare climate, we made the decision to return to a hospital-based and maternal-fetal medicine-focused organization. As of December 31, 2024, the exits of our pediatric office-based practices were completed. Additionally, we exited our primary and urgent care service line during 2024 based on a review of the cost and time that would be required to build the platform to scale.

Previous wording

For claims subject to the NSA, insurers are required to calculate the patient’s total cost-sharing amount pursuant to rules set forth in the NSA and its implementing regulations which, in some cases, can be calculated by reference to the applicable qualifying payment amount for the items or services received. The patient’s cost-sharing amount for out-of-network services covered by the NSA must be no more than the patient’s in-network cost-sharing amounts. Patient cost-sharing amounts for items and services subject to the NSA count toward the patient’s health plan deductible and out-of-pocket cost-sharing limits. For claims subject to the NSA, providers are generally not permitted to balance bill patients beyond this cost-sharing amount. An out-of-network provider is only permitted to bill a patient more than the cost-sharing amount allowed under the NSA for certain types of services if the provider satisfies all aspects of an informed consent process set forth in the NSA’s implementing regulations. Providers that violate these surprise billing prohibitions may be subject to enforcement actions by CMS or by states, one or both of which may be tasked with investigating potential non-compliance as a result of patient complaints, as well as any state-specific penalties enforcement action and federal civil monetary penalties.

Current wording

For claims subject to the NSA, insurers are required to calculate the patient’s total cost-sharing amount pursuant to rules set forth in the NSA and its implementing regulations which, in some cases, can be calculated by reference to the applicable qualifying payment amount for the items or services received. The patient’s cost-sharing amount for out-of-network services covered by the NSA must be no more than the patient’s in-network cost-sharing amounts. Patient cost-sharing amounts for items and services subject to the NSA count toward the patient’s health plan deductible and out-of-pocket cost-sharing limits. For claims subject to the NSA, providers are generally not permitted to balance bill patients beyond this cost-sharing amount. An out-of-network provider is only permitted to bill a patient more than the cost-sharing amount allowed under the NSA for certain types of services if the provider satisfies all aspects of an informed consent process set forth in the NSA’s implementing regulations. Providers that violate these surprise billing prohibitions may be subject to enforcement actions by CMS, the U.S. Department of Labor, or by states, one or multiple of which may be tasked with investigating potential non-compliance as a result of patient complaints, as well as any state-specific penalties enforcement action and federal civil monetary penalties.

Previous wording

For claims subject to the NSA, including many emergency care services, out-of-network providers will be paid an initial amount determined by the plan; if a provider is not satisfied with the initial amount paid for the services, the provider can pursue recourse through an independent dispute resolution ("IDR") process. The outcome of each IDR dispute is generally binding on both the provider and payor with respect to the particular claims at issue in that dispute but may not affect an insurer’s future offers of payment. Accordingly, we cannot predict how these IDR results will compare to the rates that our affiliated physicians customarily receive for their services. These measures could limit the amount we can charge and recover for services we furnish where we have not contracted with the patient’s insurer, and therefore could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities. See Item 1A. Risk Factors ─“Congress or states have, and may continue to, enact laws restricting the amount out-of-network providers of services can charge and recover for such services.”

Current wording

For claims subject to the NSA, including many emergency care services, out-of-network providers will be paid an initial amount determined by the plan; if a provider is not satisfied with the initial amount paid for the services, the provider can pursue recourse through an independent dispute resolution (“IDR”) process. The outcome of each IDR dispute is generally binding on both the provider and payor with respect to the particular claims at issue in that dispute but may not affect an insurer’s future offers of payment, though providers have had difficulty enforcing IDR awards against insurers. Accordingly, we cannot predict how these IDR results will compare to the rates that our affiliated physicians customarily receive for their services. These measures could limit the amount we can charge and recover for services we furnish where we have not contracted with the patient’s insurer, and therefore could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities. See Item 1A. Risk Factors ─ “Congress or states have, and may continue to, enact laws restricting the amount out-of-network providers of services can charge and recover for such services.”

Previous wording

The ACA has altered how health care is delivered and reimbursed in the U.S. and contains various provisions, including the establishment of health insurance exchanges to facilitate the purchase of qualified health plans, expanded Medicaid eligibility, subsidized insurance premiums and additional requirements and incentives for businesses to provide healthcare benefits. Other provisions of the ACA have expanded the scope and reach of the FCA and other healthcare fraud and abuse laws. The status of the ACA may be subject to change as a result of political, legislative, regulatory, and administrative developments, as well as judicial proceedings. As a result, we could be affected by potential changes to various aspects of the ACA, including changes to subsidies, healthcare insurance marketplaces and Medicaid expansion. We cannot say for certain whether there will be additional future challenges to the ACA or what impact, if any, such challenges may have on our business. Changes resulting from various legal proceedings, and any legislative or administrative change to the current healthcare financing system, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities. See Item 1A. Risk Factors ─ “Potential healthcare reform efforts may have a significant effect on our business.”

Current wording

The ACA has altered how health care is delivered and reimbursed in the U.S. and contains various provisions, including the establishment of health insurance exchanges to facilitate the purchase of qualified health plans, expanded Medicaid eligibility, subsidized insurance premiums and additional requirements and incentives for businesses to provide healthcare benefits. Other provisions of the ACA have expanded the scope and reach of the FCA and other healthcare fraud and abuse laws. The status of the ACA may be subject to change as a result of political, legislative, regulatory, and administrative developments, as well as judicial proceedings. As a result, we could be affected by potential changes to various aspects of the ACA, including changes to subsidies, tax credits, monthly premiums, healthcare insurance marketplaces and Medicaid expansion. We cannot say for certain whether there will be additional future challenges to the ACA or what impact, if any, such challenges may have on our business. Changes resulting from various legal proceedings, and any legislative or administrative change to the current healthcare financing system, could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our securities. See Item 1A. Risk Factors ─ “Potential healthcare reform efforts may have a significant effect on our business.”

Previous wording

In addition to the ACA, there could be changes to other GHC Programs, such as a change to the Medicaid program design or Medicaid coverage and reimbursement rates set forth under federal or state law. These changes, if implemented, could eliminate the guarantee that everyone who is eligible and applies for Medicaid benefits would receive them and could potentially give states new authority to restrict eligibility, cut benefits and/or make it more difficult for people to enroll. See Item 1. Business – “Relationship With Our Partners – Government Regulatory Requirements” and see also Item 1A. Risk Factors ─ “Potential healthcare reform efforts may have a significant effect on our business.” Moreover, the expiration of the COVID-19 national emergency and public health emergency declarations in May 2023 may impact the coverage for and access to certain services for Medicaid patients. Expiration of the national emergency and public health emergency declarations will also end waivers for the provision of certain services, and returning our services to a pre-pandemic regulatory state similarly may increase our exposure to legal, regulatory, compliance and clinical risks.

Current wording

In addition to the ACA, there could be changes to other GHC Programs, such as a change to the Medicaid program design or Medicaid coverage and reimbursement rates set forth under federal or state law. These changes, if implemented, could eliminate the guarantee that everyone who is eligible and applies for Medicaid benefits would receive them and could potentially give states new authority to restrict eligibility, cut benefits and/or make it more difficult for people to enroll. See Item 1. Business – “Relationship With Our Partners” – “Government Regulatory

Previous wording

The ACA also allows states to expand their Medicaid programs through federal payments that fund most of the cost of increasing the Medicaid eligibility income limit from a state’s historic eligibility levels to 133% of the federal poverty level. See Item 1. Business – “Relationship With Our Partners – Third-Party Payors.” All of the states in which we operate, however, already cover children in the first year of life and pregnant women if their household income is at or below 133% of the federal poverty level. Recently, Democrats in Congress have sought to expand Medicaid or Medicaid-like coverage in states that have not yet expanded Medicaid. They also have sought to reduce payments to certain hospitals in some of these states. See Item 1A. Risk Factors – “State budgetary constraints and the uncertainty over the future of Medicaid could have an adverse effect on our reimbursement from Medicaid programs.” Should any of these changes take effect, we cannot predict with any assurance the ultimate effect on reimbursements for our services.

Current wording

The ACA also allows states to expand their Medicaid programs through federal payments that fund most of the cost of increasing the Medicaid eligibility income limit from a state’s historic eligibility levels to 133% of the federal poverty level. See Item 1. Business – “Relationship With Our Partners – Third-Party Payors.” All of the states in which we operate, however, already cover children in the first year of life and pregnant women if their household income is at or below 133% of the federal poverty level. In recent years, members of Congress have introduced a number of proposals intended to reform the Medicaid program by cutting or expanding coverage and available benefits, and the program is in a state of flux. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act, which reforms the Medicaid program by eliminating certain financial incentives for states that have expanded their Medicaid programs under the ACA, imposing work requirements on certain adult beneficiaries, and requiring states to increase patient cost-sharing amounts for certain services. See Item 1A. Risk Factors – “State budgetary constraints and the uncertainty over the future of Medicaid could have an adverse effect on our reimbursement from Medicaid programs.” The Congressional Budget Office has estimated that the One Big Beautiful Bill Act will cut federal spending on Medicaid and Children’s Health Insurance Program benefits by $1 trillion, due in part to eliminating at least 10.5 million people from the programs by 2034. We cannot predict with any assurance the ultimate effect of these reforms on reimbursements for our services.

Previous wording

During 2024, we acquired one maternal-fetal medicine practice. Based on our experience, we expect that we can improve the results of acquired physician practices in various ways, including improved collections, identification of growth initiatives and operating and cost savings based upon the significant infrastructure that we have developed.

Current wording

During 2025, we acquired one maternal-fetal medicine practice and acquired several neonatology, maternal-fetal medicine and OB hospitalist practices in one transaction. Based on our experience, we expect that we can improve the results of acquired physician practices in various ways, including improved collections, identification of growth initiatives and operating and cost savings based upon the significant infrastructure that we have developed.

Previous wording

From time to time we develop strategic initiatives across our organization, in both our shared services functions and our operational infrastructure, with a goal of generating improvements in our general and administrative expenses and our operational infrastructure. We have included the expenses, which in certain cases represent estimates, related to such activity on a separate line item in our consolidated statements. During 2024, our transformation and restructuring related expenses relate specifically to our practice portfolio management activities, revenue cycle management transition activities and position eliminations across various shared services and operations departments.

Current wording

From time to time we develop strategic initiatives across our organization, in both our shared services functions and our operational infrastructure, with a goal of generating improvements in our general and administrative expenses and our operational infrastructure. We have included the expenses, which in certain cases represent estimates, related to such activity on a separate line item in our consolidated statements. During 2025, our transformation and restructuring related expenses relate specifically to position eliminations across various shared services departments and revenue cycle management transition activities.

Previous wording

During 2024 and 2023, approximately 67% of our net revenue from continuing operations was generated by operations in our five largest states. During 2024 and 2023, our five largest states consisted of Texas, Florida, Georgia, California, and Washington. During both 2024 and 2023, our operations in Texas accounted for approximately 32% of our net revenue.

Current wording

During 2025 and 2024, approximately 64% and 67%, respectively, of our net revenue was generated by operations in our five largest states. During 2025 and 2024, our five largest states consisted of Texas, Florida, Georgia, California, and Washington. During both 2025 and 2024, our operations in Texas accounted for approximately 32% of our net revenue.

Previous wording

The following is a summary of our payor mix, expressed as a percentage of net revenue from continuing operations, exclusive of administrative fees and miscellaneous revenue, for the periods indicated:

Current wording

The following is a summary of our payor mix, expressed as a percentage of net revenue, exclusive of hospital contract administrative fees and other revenue, for the periods indicated:

Previous wording

The payor mix shown in the table above is not necessarily representative of the amount of services provided to patients covered under these plans. For example, the gross amount billed to patients covered under GHC Programs for the years ended December 31, 2024 and 2023 represented approximately 53% and 55%, respectively, of our total gross patient service revenue. These percentages of gross revenue and the percentages of net revenue provided in the table above include the payor mix impact of acquisitions completed through December 31, 2024.

Current wording

The payor mix shown in the table above is not necessarily representative of the amount of services provided to patients covered under these plans. For example, the gross amount billed to patients covered under GHC Programs for the years ended December 31, 2025 and 2024 represented approximately 53% of our total gross patient service revenue. These percentages of gross revenue and the percentages of net revenue provided in the table above include the payor mix impact of acquisitions completed through December 31, 2025.

Previous wording

Some of our agreements require hospitals to pay us administrative fees. Some agreements provide for fees if the hospital does not generate sufficient patient volume in order to guarantee that we receive a specified minimum revenue level. We also receive fees from hospitals for administrative services performed by our affiliated physicians providing medical director or other services at the hospital.

Current wording

Some of our agreements require hospitals to pay us administrative fees. Some agreements provide for fees if the hospital does not generate sufficient patient volume in order to guarantee that we receive a specified minimum revenue level. We also receive fees from hospitals for administrative services performed by our affiliated physicians providing medical director or other administrative services at the hospital.

Previous wording

DSO is one of the key factors that we use to evaluate the condition of our accounts receivable and the related allowances for contractual adjustments and uncollectibles. DSO reflects the timeliness of cash collections on billed revenue and the level of reserves on outstanding accounts receivable. Any significant change in our DSO results in additional analyses of outstanding accounts receivable and the associated reserves. We calculate our DSO using a three-month rolling average of net revenue. Our net revenue, net income and operating cash flows may be materially and adversely affected if actual adjustments and uncollectibles exceed management’s estimated provisions as a result of changes in these factors. As of December 31, 2024, our DSO was 47.6 days. We had approximately $1.34 billion in gross accounts receivable for continuing operations outstanding at December 31, 2024, and considering this outstanding balance, based on our historical experience, a reasonably likely change of 0.5% to 1.50% in our estimated collection rate would result in an impact to net revenue of $6.4 million to $19.1 million. The impact of this change does not include adjustments that may be required as a result of audits, inquiries and investigations from government authorities and agencies and other third-party payors that may occur in the ordinary course of business. See Note 19 to our Consolidated Financial Statements in this Form 10-K.

Current wording

DSO is one of the key factors that we use to evaluate the condition of our accounts receivable and the related allowances for contractual adjustments and uncollectibles. DSO reflects the timeliness of cash collections on billed revenue and the level of reserves on outstanding accounts receivable. Any significant change in our DSO results in additional analyses of outstanding accounts receivable and the associated reserves. We calculate our DSO using a three-month rolling average of net revenue. Our net revenue, net income and operating cash flows may be materially and adversely affected if actual adjustments and uncollectibles exceed management’s estimated provisions as a result of changes in these factors. As of December 31, 2025, our DSO was 42.8 days. We had approximately $1.15 billion in gross accounts receivable outstanding at December 31, 2025, and considering this outstanding balance, based on our historical experience, a reasonably likely change of 0.5% to 1.50% in our estimated collection rate would result in an impact to net revenue of $5.5 million to $16.5 million. The impact of this change does not include adjustments that may be required as a result of audits, inquiries and investigations from government authorities and agencies and other third-party payors that may occur in the ordinary course of business. See Note 18 to our Consolidated Financial Statements in this Form 10-K.

Previous wording

We maintain professional liability insurance policies with third-party insurers generally on a claims-made basis, subject to self-insured retention, exclusions and other restrictions. Our self-insured retention under our professional liability insurance program is maintained primarily through a wholly owned captive insurance subsidiary. We record liabilities for self-insured amounts and claims incurred but not reported based on an actuarial valuation using historical loss information, claim emergence patterns and various actuarial assumptions. Liabilities for claims incurred but not reported are not discounted. The average lag period from the date a claim is reported to the date it reaches final settlement is approximately four years, although the facts and circumstances of individual claims could result in lag periods that vary from this average. Our actuarial assumptions incorporate multiple complex methodologies to determine the best liability estimate for claims incurred but not reported and the future development of known claims, including methodologies that focus on industry trends, paid loss development, reported loss development and industry-based expected pure premiums. The most significant assumptions used in the estimation process include the use of loss development factors to determine the future emergence of claim liabilities, the use of frequency and trend factors to estimate the impact of economic, judicial and social changes affecting claim costs, and assumptions regarding legal and other costs associated with the ultimate settlement of claims. The key assumptions used in our actuarial valuations are subject to constant adjustments as a result of changes in our actual loss history and the movement of projected emergence patterns as claims develop. We evaluate the need for professional liability insurance reserves in excess of amounts estimated in our actuarial valuations on a routine basis, and as of December 31, 2024, based on our historical experience for continuing operations, a reasonably likely change of 4.0% to 10.0% in our estimates would result in an increase or decrease to net income of $3.5 million to $8.7 million. However, because many factors can affect historical and future loss patterns, the determination of an appropriate professional liability reserve involves complex, subjective judgment, and actual results may vary significantly from estimates.

Current wording

We maintain professional liability insurance policies with third-party insurers generally on a claims-made basis, subject to self-insured retention, exclusions and other restrictions. Our self-insured retention under our professional liability insurance program is maintained primarily through a wholly owned captive insurance subsidiary. We record liabilities for self-insured amounts and claims incurred but not reported based on an actuarial valuation using historical loss information, claim emergence patterns and various actuarial assumptions. Liabilities for claims incurred but not reported are not discounted. The average lag period from the date a claim is reported to the date it reaches final settlement is approximately four years, although the facts and circumstances of individual claims could result in lag periods that vary from this average. Our actuarial assumptions incorporate multiple complex methodologies to determine the best liability estimate for claims incurred but not reported and the future development of known claims, including methodologies that focus on industry trends, paid loss development, reported loss development and industry-based expected pure premiums. The most significant assumptions used in the estimation process include the use of loss development factors to determine the future emergence of claim liabilities, the use of frequency and trend factors to estimate the impact of economic, judicial and social changes affecting claim costs, and assumptions regarding legal and other costs associated with the ultimate settlement of claims. The key assumptions used in our actuarial valuations are subject to constant adjustments as a result of changes in our actual loss history and the movement of projected emergence patterns as claims develop. We evaluate the need for professional liability insurance reserves in excess of amounts estimated in our actuarial valuations on a routine basis, and as of December 31, 2025, based on our historical experience, a reasonably likely change of 4.0% to 10.0% in our estimates would result in an increase or decrease to net income of $3.4 million to $8.5 million. However, because many factors can affect historical and future loss patterns, the determination of an appropriate professional liability reserve involves complex, subjective judgment, and actual results may vary significantly from estimates.

Previous wording

We record acquired assets, including identifiable intangible assets and liabilities at their respective fair values, recording to goodwill the excess of purchase price over the fair value of the net assets acquired. Goodwill is tested for impairment at a reporting unit level on at least an annual basis in accordance with the subsequent measurement provisions of the accounting guidance for goodwill. When testing goodwill for impairment, we may assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount, including goodwill. Alternatively, we may bypass this qualitative assessment and perform the quantitative goodwill impairment test. We may use income and market-based valuation approaches to determine the fair value of our reporting units. These approaches focus on various significant assumptions, including the weighted average cost of capital discount factor, revenue growth rates and market multiples for revenue and earnings before interest, taxes and depreciation and amortization (“EBITDA”). We also consider the economic outlook for the healthcare services industry and various other factors during the testing process, including hospital and physician contract changes, local market developments, changes in third-party payor payments and other publicly available information.

Current wording

Goodwill represents the excess of purchase price over the fair value of the net assets acquired. Goodwill is tested for impairment at a reporting unit level on at least an annual basis in accordance with the subsequent measurement provisions of the accounting guidance for goodwill. When testing goodwill for impairment, we may assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount, including goodwill. Alternatively, we may bypass this qualitative assessment and perform the quantitative goodwill impairment test. We may use income and market-based valuation approaches to determine the fair value of our reporting units. These approaches focus on various significant assumptions, including the weighted average cost of capital discount factor, revenue growth rates and market multiples for revenue and earnings before interest, taxes and depreciation and amortization (“EBITDA”). We also consider the economic outlook for the healthcare services industry and various other factors during the testing process, including hospital and physician contract changes, local market developments, changes in third-party payor payments and other publicly available information.

Previous wording

During the second quarter of 2024, we experienced a triggering event, due to a sustained decline in our stock price and a market capitalization below our book equity value. This assessment resulted in a non-cash impairment charge of $126.4 million for the year ended December 31, 2024. Recognition of this non-cash charge against goodwill resulted in a tax benefit which generated an additional deferred tax asset of $24.2 million that increased our book value. An incremental non-cash charge was required to reduce our book value to its previously determined fair value. Accordingly, we recorded the incremental non-cash charge of $24.2 million for a total non-cash charge of $150.6 million.

Current wording

Consistent with prior years, we performed our annual impairment analysis in the third quarter, specifically as of July 31, 2025. At that date, we elected to perform a quantitative assessment and determined no impairment existed. During the second quarter of 2024, we experienced a triggering event, due to a sustained decline in our stock price and a market capitalization below our book equity value. This assessment resulted in a non-cash impairment charge of $150.6 million for the year ended December 31, 2024.

Previous wording

In our analysis of our results of operations, we use various GAAP and certain non-GAAP financial measures. We have incurred certain expenses that we do not consider representative of our underlying operations, including transformational and restructuring related expenses. Accordingly, we report adjusted earnings before interest, taxes and depreciation and amortization (“Adjusted EBITDA”) from continuing operations, defined as income (loss) from continuing operations before interest, taxes, depreciation and amortization, and transformational and restructuring related expenses. Adjusted earnings per share (“Adjusted EPS”) from continuing operations has also been further adjusted for these items and consists of diluted income (loss) from continuing operations per common and common equivalent share adjusted for amortization expense, stock-based compensation expense, transformational and restructuring related expenses and any impacts from discrete tax events. For the years ended December 31, 2024, 2023 and 2022, both Adjusted EBITDA and Adjusted EPS are being further adjusted to exclude loss on disposal of businesses, impairment losses and the impacts from loss on the early extinguishment of debt, as relevant. We have included Adjusted EBITDA and Adjusted EPS in this Form 10-K because each is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions.

Current wording

In our analysis of our results of operations, we use various GAAP and certain non-GAAP financial measures. We have incurred certain expenses that we do not consider representative of our underlying operations, including transformational and restructuring related expenses. Accordingly, we report adjusted earnings before interest, taxes and depreciation and amortization (“Adjusted EBITDA”), defined as net income (loss) before interest, taxes, depreciation and amortization, and transformational and restructuring related expenses. Adjusted earnings per share (“Adjusted EPS”) has also been further adjusted for these items and consists of diluted net income (loss) per common and common equivalent share adjusted for amortization expense, stock-based compensation expense, transformational and restructuring related expenses and any impacts from discrete tax events. For the years ended December 31, 2025, 2024 and 2023, both Adjusted EBITDA and Adjusted EPS are being further adjusted to exclude net gain on investments in divested businesses, impairment losses and loss on disposal of businesses, as relevant. We have included Adjusted EBITDA and Adjusted EPS in this Form 10-K because each is a key measure used by our management and Board of Directors to evaluate our operating performance, generate future operating plans and make strategic decisions.

Previous wording

We believe these measures, in addition to income (loss) from continuing operations, net income (loss) and diluted net income (loss) from continuing operations per common and common equivalent share, provide investors with useful supplemental information to compare and understand our underlying business trends and performance across reporting periods on a consistent basis. These measures should be considered a supplement to, and not a substitute for, financial performance measures determined in accordance with GAAP. In addition, since these non-GAAP measures are not determined in accordance with GAAP, they are susceptible to varying calculations and may not be comparable to other similarly titled measures of other companies. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Current wording

We believe these measures, in addition to net income (loss), net income (loss) and diluted net income (loss) per common and common equivalent share, provide investors with useful supplemental information to compare and understand our underlying business trends and performance across reporting periods on a consistent basis. These measures should be considered a supplement to, and not a substitute for, financial performance measures determined in accordance with GAAP. In addition, since these non-GAAP measures are not determined in accordance with GAAP, they are susceptible to varying calculations and may not be comparable to other similarly titled measures of other companies. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Previous wording

For a reconciliation of each of Adjusted EBITDA from continuing operations and Adjusted EPS from continuing operations to the most directly comparable GAAP measures for the years ended December 31, 2024, 2023 and 2022, refer to the tables below (in thousands, except per share data).

Current wording

For a reconciliation of each of Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP measures for the years ended December 31, 2025, 2024 and 2023, refer to the tables below (in thousands, except per share data).

Previous wording

The following table sets forth, for the periods indicated, certain information related to our continuing operations expressed as a percentage of our net revenue:

Current wording

The following table sets forth, for the periods indicated, certain information related to our operations expressed as a percentage of our net revenue:

Previous wording

Our net revenue was $2.01 billion for the year ended December 31, 2024, as compared to $1.99 billion for 2023. The increase in revenue of $18.3 million, or 0.9%, was primarily attributable to an increase in same-unit revenue, partially offset by a decrease in revenue from non-same unit activity, primarily resulting from practice dispositions. Same units are those units at which we provided services for the entire current period and the entire comparable period. Same-unit net revenue increased by $81.4 million, or 4.8%. The increase in same-unit net revenue was comprised of an increase of $47.8 million, or 2.8%, from net reimbursement-related factors, and $33.6 million, or 2.0%, related to patient service volumes. The net increase in revenue related to net reimbursement-related factors was primarily due to an increase in revenue resulting from a favorable shift in payor mix and an increase in administrative fees from our hospital partners. The increase in revenue from patient service volumes was related to increases across all of our service lines.

Current wording

Our net revenue was $1.91 billion for the year ended December 31, 2025, as compared to $2.01 billion for 2024. The decrease in revenue of $99.1 million, or 4.9%, was primarily attributable to non-same unit revenue, primarily from practice dispositions, partially offset by an increase in same-unit revenue. Same units are those units at which we provided services for the entire current period and the entire comparable period. Same-unit net revenue increased by $106.8 million, or 6.2%. The increase in same-unit net revenue was comprised of an increase of $97.5 million, or 5.7%, from net reimbursement-related factors, and $9.3 million, or 0.5%, related to patient service volumes. The net increase in revenue related to net reimbursement-related factors was primarily due to an increase in revenue resulting from improved collection activity, increased patient acuity, primarily in neonatology, a favorable shift in payor mix, an increase in administrative fees from our hospital partners and modest improvements in managed care contracting. The increase in revenue from patient service volumes was primarily related to increases in our neonatology and maternal-fetal medicine services.

Previous wording

Practice salaries and benefits decreased by $7.4 million, or 0.5%, to $1.44 billion for the year ended December 31, 2024, as compared to $1.45 billion for 2023. The $7.4 million decrease was primarily related to non-same unit activity, primarily resulting from practice dispositions, partially offset by an increase in clinical compensation expense, including incentive compensation based on practice results and benefits, all at our existing units. The net increase in benefits primarily reflects increases in payroll taxes and group insurance costs.

Current wording

Practice salaries and benefits decreased by $100.0 million, or 6.9%, to $1.34 billion for the year ended December 31, 2025, as compared to $1.44 billion for 2024. The $100.0 million decrease was primarily related to non-same unit activity, primarily resulting from practice dispositions, partially offset by an increase in clinical compensation expense, including incentive compensation based on practice results and benefits, all at our existing units.

Previous wording

Practice supplies and other operating expenses decreased by $7.1 million, or 5.7%, to $117.7 million for the year ended December 31, 2024, as compared to $124.8 million for 2023. The decrease was primarily attributable to non-same unit activity, primarily resulting from practice dispositions.

Current wording

Practice supplies and other operating expenses decreased by $38.4 million, or 32.7%, to $79.3 million for the year ended December 31, 2025, as compared to $117.7 million for 2024. The decrease was primarily attributable to non-same unit activity, primarily resulting from practice dispositions.

Previous wording

General and administrative expenses primarily include all billing and collection functions and all other salaries, benefits, supplies and operating expenses not specifically identifiable to the day-to-day operations of our physician practices and services. General and administrative expenses increased by $10.9 million, or 4.8%, to $238.4 million for the year ended December 31, 2024, as compared to $227.5 million for 2023. The net increase of $10.9 million is primarily related to increases in incentive compensation based on financial results and salaries expense for enhancement of revenue cycle management staffing, partially offset by lower expenses from net staffing reductions, travel, information technology and insurance expenses. General and administrative expenses as a percentage of net revenue was 11.8% for the year ended December 31, 2024, as compared to 11.4% for the same period in 2023.

Current wording

General and administrative expenses primarily include all billing and collection functions and all other salaries, benefits, supplies and operating expenses not specifically identifiable to the day-to-day operations of our physician practices and services. General and administrative expenses increased by $2.4 million, or 1.0%, to $240.8 million for the year ended December 31, 2025, as compared to $238.4 million for 2024. The net increase of $2.4 million is primarily related to increases in collection fees and higher incentive-based compensation based on financial results. General and administrative expenses as a percentage of net revenue was 12.6% for the year ended December 31, 2025, as compared to 11.8% for the same period in 2024.

Previous wording

Depreciation and amortization expense was $32.2 million for the year ended December 31, 2024, as compared to $36.2 million for 2023. The decrease was primarily related to lower depreciation resulting from fixed asset impairments recognized during 2024.

Current wording

Depreciation and amortization expense was $21.8 million for the year ended December 31, 2025, as compared to $32.2 million for 2024. The decrease was primarily related to non-same unit activity, primarily resulting from practice dispositions, and lower capital expenditures at existing units.

Previous wording

Transformational and restructuring related expenses were $64.3 million for the year ended December 31, 2024, as compared to $2.2 million for 2023. The expenses during 2024 reflect lease impairment and severance expenses resulting from our practice portfolio management activities, revenue cycle management transition activities, and position eliminations across various shared services and operations departments. The expenses during 2023 are directly related to the termination of our prior contract for revenue cycle management services.

Current wording

Transformational and restructuring related expenses were $22.3 million for the year ended December 31, 2025, as compared to $64.3 million for 2024. The expenses during 2025 primarily related to position eliminations across various shared services departments and revenue cycle management transition activities. The expenses during 2024 primarily related to the impairment of various right-of-use lease assets resulting from our practice portfolio management activities, position eliminations across various shared services and operations departments and revenue cycle management transition activities.

Previous wording

Goodwill impairment was $150.6 million and $148.3 million for the years ended December 31, 2024 and 2023, respectively.

Current wording

Goodwill impairment was $150.6 million for the year ended December 31, 2024, resulting from the triggering event during the second quarter based on a sustained stock price decline.

Previous wording

Loss from operations was $68.7 million for the year ended December 31, 2024, as compared to income from operations of $7.3 million for 2023. Our operating margin was (3.4)% for the year ended December 31, 2024, as compared to 0.4% for the same period in 2023. The decrease in our operating margin was primarily due to impairment activity, transformational and restructuring expenses and loss on disposal of businesses, partially offset by net favorable impacts from same-unit results due to higher revenue. Excluding the impairment activity, transformational and restructuring related expenses and loss on disposal of businesses, our income from operations was $183.7 million and $157.9 million, and our operating margin was 9.1% and 7.9% for the years ended December 31, 2024 and 2023, respectively. We believe excluding the impacts from the impairment activity, transformational and restructuring related activity and loss on disposal of businesses provides a more comparable view of our operating income and operating margin.

Current wording

Income from operations was $208.8 million for the year ended December 31, 2025, as compared to loss from operations of $68.7 million for 2024. Our operating margin was 10.9% for the year ended December 31, 2025, as compared to (3.4)% for the same period in 2024. The increase in our operating margin was primarily due to the impact from practice disposition activity and favorable same-unit results, primarily related to same-unit revenue growth. Excluding the impairment activity, transformational and restructuring related expenses and loss on disposal of businesses, our income from operations was $231.1 million and $183.7 million, and our operating margin was 12.1% and 9.1% for the years ended December 31, 2025 and 2024, respectively. We believe excluding the impacts from the impairment activity, transformational and restructuring related expenses and loss on disposal of businesses provides a more comparable view of our operating income and operating margin.

Previous wording

Our effective income tax rate (“tax rate”) was 2.2% for the year ended December 31, 2024, compared to (24.9)% for the year ended December 31, 2023. The tax rates for the years ended December 31, 2024 and 2023 are not meaningful as calculated due to the pre-tax loss and related tax effects of the non-cash goodwill impairment charges in each period. Excluding the effect of these items, our effective tax rate was 45.5% and 35.8% for the years ended December 31, 2024 and 2023, respectively. The tax rate for the year ended December 31, 2024 reflects net discrete tax expense of $7.9 million, primarily related to a reduction in the carrying value of deferred tax assets due to practice management portfolio activities as well as stock-based compensation shortfalls. The tax rate for the year ended December 31, 2023 includes net discrete tax expense of $7.9 million, primarily related to the tax charge associated with the impairment of a cost-method investment as well as stock-based compensation shortfalls. After excluding discrete tax impacts and goodwill impairment-related effects for the years ended December 31, 2024 and 2023, our tax rates were 29.4% and 27.9%, respectively. We believe excluding discrete tax impacts and goodwill impairment-related impacts on our tax rate provides a more comparable view of our effective income tax rate.

Current wording

Our effective income tax rate (“tax rate”) was 23.6% for the year ended December 31, 2025, compared to 2.2% for the year ended December 31, 2024. The tax rate for the year ended December 31, 2024 is not meaningful as calculated due to the pre-tax loss and related tax effects of the non-cash goodwill impairment charge. Excluding the effect of these items, our effective tax rate was 45.5% for the year ended December 31, 2024. The tax rate for the year ended December 31, 2025 reflects a net discrete tax benefit of $6.6 million, primarily related to divested operations and a decrease in the liability for uncertain tax positions. The tax rate for the year ended December 31, 2024 reflects net discrete tax expense of $7.9 million, primarily related to a reduction in the carrying value of deferred tax assets due to practice management portfolio activities as well as stock-based compensation shortfalls. After excluding discrete tax impacts and goodwill impairment-related effects, as relevant, for the years ended December 31, 2025 and 2024, our tax rates were 26.6% and 29.4%, respectively. We believe excluding discrete tax impacts and goodwill impairment-related impacts from our tax rate provides a more comparable view of our effective income tax rate.

Previous wording

Loss from continuing operations was $99.1 million for the year ended December 31, 2024, as compared to $60.4 million for 2023. Adjusted EBITDA from continuing operations was $224.0 million for the year ended December 31, 2024, as compared to $200.4 million for 2023. The increase in our Adjusted EBITDA was primarily due to net favorable impacts in our same-unit results, primarily from higher revenue.

Current wording

Net income was $165.4 million for the year ended December 31, 2025, as compared to a net loss of $99.1 million for 2024. Adjusted EBITDA was $275.6 million for the year ended December 31, 2025, as compared to $224.0 million for 2024. The increase in our Adjusted EBITDA was primarily due to net favorable impacts in our same-unit results, primarily from higher revenue.

Previous wording

Diluted net loss per common and common equivalent share was $1.19 on weighted average shares outstanding of 83.3 million for the year ended December 31, 2024, as compared to $0.73 on weighted average shares outstanding of 82.2 million for 2023. Adjusted EPS was $1.51 for the year ended December 31, 2024, as compared to $1.26 for 2023.

Current wording

Diluted net income per common and common equivalent share was $1.94 on weighted average shares outstanding of 85.3 million for the year ended December 31, 2025, as compared to diluted net loss per common and common equivalent share of $1.19 on weighted average shares outstanding of 83.3 million for 2024. Adjusted EPS was $2.04 for the year ended December 31, 2025, as compared to $1.51 for 2024.

Previous wording

As of December 31, 2024, we had $229.9 million of cash and cash equivalents attributable to continuing operations as compared to $73.3 million at December 31, 2023. Additionally, we had working capital attributable to continuing operations of $205.5 million at December 31, 2024, an increase of $111.0 million from our working capital from continuing operations of $94.5 million at December 31, 2023. The increase in working capital is primarily due to net favorable impacts in our same-unit results, primarily from an increase in revenue.

Current wording

As of December 31, 2025, we had $375.2 million of cash and cash equivalents as compared to $229.9 million at December 31, 2024. Additionally, we had working capital of $304.6 million at December 31, 2025, an increase of $99.1 million from our working capital of $205.5 million at December 31, 2024. The increase in working capital is primarily due to net favorable impacts in our same-unit results, primarily from an increase in revenue.

Previous wording

We generated cash flow from operating activities for continuing operations of $217.3 million and $146.1 million for the years ended December 31, 2024 and 2023, respectively. The net increase in cash flow of $71.2 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to increases in cash flow from accounts payable and accrued expenses, other long-term assets, income taxes and long-term professional liabilities.

Current wording

We generated cash flow from operating activities for continuing operations of $274.7 million and $217.3 million for the years ended December 31, 2025 and 2024, respectively. The net increase in cash flow of $57.4 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024, was primarily due to higher earnings and increases in cash flow from accounts receivable.

Previous wording

During the year ended December 31, 2024, cash flow from accounts receivable for continuing operations was $10.3 million, as compared to $26.3 million for the same period in 2023.

Current wording

During the year ended December 31, 2025, cash flow from accounts receivable was $30.6 million, as compared to $10.3 million for the same period in 2024.

Previous wording

DSO is one of the key factors that we use to evaluate the condition of our accounts receivable and the related allowances for contractual adjustments and uncollectibles. DSO reflects the timeliness of cash collections on billed revenue and the level of reserves on outstanding accounts receivable. Our DSO for continuing operations was 47.6 days at December 31, 2024 as compared to 50.5 days at December 31, 2023. The 2.9 days decrease in DSO was primarily due to improved cash collections at existing units.

Current wording

DSO is one of the key factors that we use to evaluate the condition of our accounts receivable and the related allowances for contractual adjustments and uncollectibles. DSO reflects the timeliness of cash collections on billed revenue and the level of reserves on outstanding accounts receivable. Our DSO was 42.8 days at December 31, 2025 as compared to 47.6 days at December 31, 2024. The 4.8 days decrease in DSO was primarily due to improved cash collections at existing units.

Previous wording

Our cash flow from operating activities is significantly affected by the payment of physician incentive compensation. A large majority of our affiliated physicians participate in our performance-based incentive compensation program and almost all of the payments due under the program are made annually in the first quarter. As a result, we typically experience negative cash flow from operations in the first quarter of each year and fund our operations during this period with cash on hand or funds borrowed under our Credit Agreement. In addition, during the first quarter of each year, we use cash to make any discretionary matching contributions for participants in our qualified contributory savings plans.

Current wording

Our cash flow from operating activities is significantly affected by the payment of physician incentive compensation. A large majority of our affiliated physicians participate in our performance-based incentive compensation program and almost all of the payments due under the program are made annually in the first quarter. As a result, we typically experience negative cash flow from operations in the first quarter of each year and fund our operations during this period with cash on hand or funds borrowed under our Credit Agreement. In addition, during the first quarter of each year, we use cash to make any discretionary matching contributions for participants in our qualified contributory savings plan.

Previous wording

During the year ended December 31, 2024, our net cash used in investing activities of $35.4 million consisted primarily of capital expenditures of $22.0 million, net purchases from maturities or sale of investments of $12.1 million and acquisition payments of $8.2 million. During the year ended December 31, 2023, our net cash used in investing activities for continuing operations of $48.2 million consisted primarily of capital expenditures of $33.3 million, net purchases from maturities or sale of investments of $9.0 million and acquisition payments of $6.7 million.

Current wording

During the year ended December 31, 2025, our net cash used in investing activities of $18.3 million consisted primarily of acquisition payments of $23.2 million, capital expenditures of $18.5 million, net purchases of investments of $3.2 million and other activity of $3.5 million. These activities were partially offset by proceeds from an investment in a divested business of $30.0 million. During the year ended December 31, 2024, our net cash used in investing activities of $35.4 million consisted primarily of capital expenditures of $22.0 million, net purchases from maturities or sale of investments of $12.1 million and acquisition payments of $8.2 million.