InnovAge Holding Corp.
For the period ended Jun 30, 2026. Filed Sep 9, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Sep 9, 2026
INNV$9.21+2.7%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2025-06-30; filed 2025-09-09.
0001834376-25-000062
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2026-06-30; filed 2026-09-09.
0001834376-26-000049
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 256 previous paragraphs and 266 current paragraphs.
143 unchanged; 94 reworded; 23 added; 19 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
•Our dependence on Medicare and Medicaid exposes us to risks from government funding reductions, legislative changes, including the Reconciliation Act, and federal and state budgetary pressures. A majority of our capitation revenue is derived from a limited number of government payors, particularly Medicare and Medicaid, concentrated in Colorado and California. Federal cost-cutting measures could significantly decrease healthcare-related federal funding and modify our compliance landscape. The Reconciliation Act mandates significant reductions in federal Medicaid spending and other significant changes. These federal changes, combined with restrictions on state provider taxes, create budgetary pressures that may lead to reductions in optional Medicaid benefits, workforce shortages at government oversight entities, and downward pressure on our capitated fee payments, adversely affecting our operating results and limiting our expansion.
Current report
Beyond state laws requiring regulatory notice or review of transactions, other state laws or policies may constrain our ability to successfully complete acquisitions, joint ventures and other strategic partnerships. For example, effective November 20, 2025, California adopted a two-year pause to the PACE application process, expiring on November 19, 2027. During the application pause period, California will not accept applications for new PACE organizations and existing PACE organization service area expansions. The application pause will constrain our ability to open new PACE centers and expand the reach of our existing PACE centers in California, limiting our ability to grow our business in the state. While the application pause is set to expire in November 2027, it is possible that California will extend the application pause beyond that period.
Current report
Our operating expenses have increased, and we expect them to continue to increase, over the next several years as we continue to hire additional personnel, expand our operations and infrastructure, reimagine key operational areas through technology, and continue to provide services to an increasing number of participants in furtherance of our clinical and operational value initiatives. As we expect the rate environment for fiscal year 2027 to be more constrained than in recent years, to help manage medical costs and protect our profit margins, we are placing increased reliance on such initiatives, including deployment of artificial intelligence (“AI”) enabled scheduling and efforts to reduce unwarranted variation in provider practice patterns. If we are not able to execute or realize the benefits of our clinical and operational value initiatives, or if they otherwise prove insufficient to offset a more constrained rate environment, our profit margins could decrease, our operating loss could increase and we may not gain the anticipated efficiencies from such initiatives.
Current report
Our dependence on Medicare and Medicaid exposes us to risks from government funding reductions, legislative changes including the Reconciliation Act, and federal and state budgetary pressures.
Current report
The Trump Administration has implemented a series of measures to reduce expenditures and streamline operations across the federal government, including at HHS, the FDA, the National Institutes of Health and CMS. Although temporary commission of the Department of Government Efficiency (DOGE) formally concluded in July 2026, its efficiency directives, permanent personnel changes, and ongoing executive actions continue to reduce federal spending related to healthcare. Furthermore, the administration has reshaped the Center for Medicare and Medicaid Innovation (CMMI) to focus on cost reduction strategies and program integrity initiatives, such as the CMS “Comprehensive Regulations to Uncover Suspicious Healthcare” (CRUSH) initiative launched in 2026. These spending cuts, heightened audit environments and shifting reimbursement structures could significantly decrease federal funding related to healthcare, modify our compliance landscape, and create policy changes that could materially and adversely harm our business operations, financial condition, and results of operations.
Current report
In addition, CMS has begun a multi-year transition from the legacy PACE-specific 2020 CMS-Hierarchical Condition Category (“CMS-HCC”) (V22) risk adjustment model to the Medicare Advantage 2024 CMS-HCC (V28) risk adjustment model. Effective January 1, 2026, CMS began phasing in the V28 model with full implementation expected in calendar year 2028. The V28 model significantly revises the clinical conditions, coefficients, and hierarchies used to determine participant risk scores and places greater emphasis on coding specificity and diagnosis documentation. As a result, the transition may reduce risk scores for many PACE participants relative to the legacy model and could result in lower Medicare revenue growth than we have historically experienced.
Current report
During fiscal year 2026, we incurred approximately $57.0 million in litigation costs and settlements, including an approximately $37.0 million accrual as of June 30, 2026, substantially all of which is related to the 2021 and 2022 civil investigative demands described above. Based on the information currently available, we do not believe that a material additional loss in excess of the amount accrued is reasonably possible. However, there can be no assurance that any settlement will be reached with the DOJ, that the terms of any settlement will be consistent with the Company’s current expectations, or that the Company will not incur additional material losses.
Current report
The results of regulatory proceedings, investigations, inquiries, litigation, claims, and audits are inherently unpredictable and uncertain and their actual outcome could differ materially from amounts accrued. The outcomes of regulatory proceedings, investigations, inquiries, litigation, claims, and audits could be material to our financial condition and operating results for any particular period, depending in part, upon the operating results of such period. Regardless of the outcome, regulatory proceedings, investigations, inquiries, litigation, claims, and audits have the potential to have an adverse impact on us due to any related defense and settlement costs, diversion of management resources, and other factors.
Current report
CMS uses the CMS-HCC risk adjustment model to adjust capitation payments for Medicare Advantage organizations and PACE organizations based on enrollee health status. The records that we submit to CMS include data that factor in the risk scores attributable to participants, and these risk scores affect the risk-adjusted capitation payments we receive. The data submitted to CMS include diagnosis data received from providers, and CMS regulations reflect a requirement that PACE organizations, in their submission of risk-adjustment data, are subject to data submission requirements set forth in the regulation applicable to Medicare Advantage organizations (42 C.F.R. § 460.180(b)(3); 42 C.F.R. § 422.310). Any inaccuracies, omissions or other issues relating to the recording or documentation of diagnoses or other information submitted in connection with such data could adversely affect our risk scores and resulting revenue for future periods.
Current report
The submission of inaccurate, incomplete or erroneous data could result in inaccurate risk-adjusted payments, which may be subject to correction or risk adjustment reconciliations in later periods. Any such corrected or adjusted information may have an impact on, and be reflected in financial statements for, periods subsequent to the periods for which revenues were originally recorded. In such cases, we could be required to refund a portion of the revenues that we received, whether due to payment adjustments or government enforcement actions, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Moreover, if the government determines that we have received overpayments due to inaccurate or unsupportable risk-adjustment data, we could be subject to repayment obligations and penalties. We could be liable to the federal government under the federal False Claims Act (“FCA”), and to state governments under FCA cognates, for overpayments and related liability resulting from any such submissions. FCA liability may include an inflation-adjusted penalty for each violation, plus up to three times the amount of damages sustained by the federal government. For penalties assessed after July 3, 2025, with respect to covered violations occurring after November 2, 2015, the applicable FCA penalty range is $14,308 to $28,619 per violation. Such amounts remain unchanged for 2026. Accordingly, there is a potential for substantial liability in connection with any alleged FCA violations.
Current report
Our acquisition of certain pharmacy assets and the management of our own pharmacy services exposes us to novel risks.
Current report
Our use of AI and machine learning technologies, and the use of such technologies by our third-party vendors, may expose us to operational, competitive, regulatory, legal and reputational risks that could adversely affect our business, financial condition and results of operations.
Current report
We use, and expect to increasingly use, AI and machine learning technologies in our business, including in connection with care coordination and participant engagement, clinical documentation support, risk adjustment coding review, and administrative and operational functions, and we plan to further examine, develop and introduce machine learning algorithms, predictive analytics and other AI technologies to identify trends, anomalies and correlations, support decision-making and enhance our operational efficiency. We are placing increased reliance on AI-enabled tools, including AI-driven scheduling and analytics to reduce unwarranted variation in provider practice patterns to help offset a more constrained rate environment in fiscal year 2027. If these tools do not achieve the anticipated cost savings within expected timeframes, experience implementation delays, or require additional investment to deploy effectively across our centers, we may be unable to protect our operating margins in a period of limited rate growth, which could adversely affect our profitability and financial condition.
Current report
In addition, certain of our third-party service providers and vendors, including vendors that support our EMR and other information technology systems, utilize AI and machine learning technologies in furnishing products and services to us. As with many technological innovations, AI presents risks and challenges that could affect its adoption and, therefore, our business. AI and machine learning models may be flawed, or may produce outputs that are inaccurate, incomplete, unreliable or biased as a result of limitations in the data used to train such models, flaws in model design, or changes in underlying data patterns, and certain AI methodologies may lack transparency or explainability. If AI-supported processes adversely affect our clinical documentation, coding, risk adjustment submissions, care management or other operational or administrative activities, we could experience reduced revenue, increased medical costs, participant harm, regulatory scrutiny, litigation or reputational harm. Because our participants are frail, high-cost seniors, any errors or unintended consequences resulting from our or our vendors’ use of AI could disproportionately affect the individuals we serve and result in significant reputational and legal exposure.
Current report
The legal and regulatory framework governing the development and use of AI, including in healthcare, is rapidly evolving and, in many respects, uncertain. Federal agencies, including CMS and HHS, have issued or proposed guidance regarding the governance and permissible uses of AI in federal healthcare programs, and numerous states have enacted or proposed legislation regulating the use of AI in healthcare and other regulated contexts, including requirements relating to transparency, disclosure, bias testing, human oversight and consumer notice. These requirements, and any changes to them, or to their interpretation or enforcement, could restrict our or our vendors’ permissible uses of AI, require us to implement additional governance, validation, documentation or reporting measures, or increase our compliance costs, any of which could adversely affect our business. If our AI governance practices, or those of our third-party vendors, are found to be deficient or non-compliant with applicable laws or regulations, we could be subject to governmental investigations, enforcement actions, sanctions, contractual liability or other adverse consequences.
Current report
AI and machine learning technologies are complex and rapidly evolving, and we face significant competition from other companies that may be able to develop or deploy such technologies more quickly or effectively than we can, which could place us at a competitive disadvantage. Market acceptance of AI-enabled healthcare tools is also uncertain, and our efforts to develop or adopt such technologies may not succeed or may not be responsive to participant, provider, or regulatory expectations. In addition, the rapid evolution and increased sophistication of AI technologies may intensify cybersecurity and data privacy risks facing our business, including by making cyber-attacks, such as phishing and other social engineering attacks, more sophisticated and difficult to detect, and by introducing new vulnerabilities through our and our third-party vendors’ use of AI tools. See “-Security breaches, loss of data and other disruptions, including disruptions in our disaster recovery systems, have in the past and could in the future compromise sensitive information related to our business or our participants, or prevent us from accessing critical information and expose us to liability, and could adversely affect our business and our reputation” above. Any of the foregoing could adversely affect our business, financial condition and results of operations.
Current report
•loss of applicable licenses, certifications or other government approvals;
Current report
•recoupment of prior Medicare or Medicaid payments or withholding of future payments;
Current report
•termination of federal and state PACE contracts;
Current report
•enforcement actions by governmental agencies or private claims for monetary damages or otherwise, in connection with any data breach or impermissible use or disclosure of PHI, PII or other personal data in violation of applicable laws;
Current report
•legislative and regulatory changes and federal and state budgetary pressures.
Current report
•legislative and regulatory changes and federal and state budgetary pressures, and other political developments;
Removed paragraphs (19)
Previous report
•Our revenues and operations are dependent upon a limited number of government payors, particularly Medicare and Medicaid. When aggregating the revenue associated with Medicare and Medicaid by state, a majority of our revenue was derived from a limited number of government payors. We expect a majority of our revenues will continue to be derived from a limited number of key payors, who are able to terminate their contracts with us upon the occurrence of certain events, adversely affecting our operating results and limiting our expansion.
Previous report
A shortage of clinicians combined with an aging population creates increased demand on the limited number of existing residential facilities. As a result, the access of our participants to such facilities is uncertain, as such facilities may prioritize private payors or may be unable to accept participants at pre-determined rates. If we are unable to access residential facilities, we could be unable to retain existing participants who require such facilities.
Previous report
The results of regulatory proceedings, investigations, inquiries, litigation, claims, and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory and audit matters require significant judgment and assumptions. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, cause harm to our reputation, business, financial condition, results of operations and the market price of our common stock.
Previous report
•the occurrence of catastrophes, health emergencies, including epidemics or pandemics or acts of terrorism; and
Previous report
Our revenues and operations are dependent upon a limited number of government payors, particularly Medicare and Medicaid.
Previous report
The Trump Administration has called for a reduction in expenditures across the government, including at HHS, the FDA, the National Institutes of Health, CMS and related agencies. Implementation of efficiency directives, such as those issued by the Department of Government Efficiency (DOGE), and actions presently directed by executive order could decrease federal spending related to healthcare and create policy changes that could harm our business. These actions may, for example, include directives to reduce agency workforce and rescinding a Biden Administration executive order tasking the Center for Medicare and Medicaid Innovation (CMMI) to consider new payment and healthcare models to limit drug spending.
Previous report
Recent legislative, judicial and executive efforts to enact further healthcare reform legislation have caused the future state of reforms under the ACA and many core aspects of the current U.S. healthcare system to be unclear. While specific changes and their timing are not yet apparent, enacted reforms and future legislative, regulatory, judicial, or executive changes, particularly any changes to the PACE program, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Previous report
The claims and encounter records that we submit to government payors involve data that support the RAF scores attributable to participants. These RAF scores determine the payment we are entitled for the provision of medical care to such participants. The data submitted to CMS is based on diagnosis codes and medical charts that our employed, contracted and noncontracted providers identify, record and prepare. Any issues with recording and documenting identified medical conditions could adversely impact Medicare RAF scores and our resulting revenue for future periods. CMS periodically audits PACE organizations’ risk adjustment submissions. The submission of inaccurate, incomplete or erroneous data could result in inaccurate revenue and risk adjustment payments, which may be subject to correction or retroactive adjustment in later periods. This corrected or adjusted information may be reflected in financial statements for periods subsequent to the period in which the revenue was recorded. We could be required to refund a portion of the revenue that we received, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Historically, these true-up payments typically occur between May and August, but the timing of these payments is determined by CMS, and we have neither visibility nor control over the timing of such payments. From time to time, we may experience reconciliation issues as government payors modify or adopt new systems.
Previous report
If CMS seeks repayment from us for payment adjustments as a result of its audits, we could also be subject to liability for penalties for inaccurate or unsupportable RAF scores provided by us or our providers. In addition, we could be liable for penalties to the federal government under the FCA, which may include per claim penalties, plus up to three times the amount of damages caused by each false claim, which can be as much as the amounts received directly or indirectly from the government for each such false claim. As of January 15, 2025, the minimum FCA penalty increased from $13,946 to $14,308 per claim. The maximum penalty has increased from $27,894 to $28,619 per claim. There is a high potential for substantial penalties in connection with any alleged FCA violations.
Previous report
Elements of the risk adjustment mechanism continue to be challenged, reevaluated and revised by the U.S. DOJ, the OIG and CMS. On February 1, 2023, CMS published the Medicare Advantage RADV Program Final Rule, effective April 3, 2023, which allows CMS to extrapolate Risk Adjustment Data Validation (“RADV”) audit findings beginning with payment year 2018. On May 21, 2025, CMS announced a significant expansion of its RADV auditing: all eligible MA plans will now be audited annually, rather than a limited subset, and CMS intends to complete its backlog of RADV audits for payment years 2018 to 2024 by early 2026. Each audit will also review a larger sample of records, increasing the administrative burden and potential for recoupment. If CMS recovers overpayments from MA plans, those plans may seek to recover payments from us that the plans believe are attributable to risk adjustment data. These developments generally increase the risk of payment recoupment and compliance exposure for organizations participating in Medicare Advantage arrangements, like us.
Previous report
There can be no assurance that a PACE organization, including us, will not be randomly selected or targeted for review by CMS or that the outcome of such a review will not result in a material adjustment in our revenue and profitability, even if the information we submitted to CMS is accurate and supportable. Substantial changes in the risk adjustment mechanism, including changes that result from enforcement or audit actions, could materially affect our capitated reimbursement. For example, CMS released an updated PACE Medicaid Capitation Rate Setting Guide, effective January 1, 2025, which clarifies and expands requirements for state development and documentation of PACE Medicaid capitation rates. Under this new guidance, states must provide more detailed supporting data and methodologies when submitting proposed rates to CMS for approval.
Previous report
State and federal efforts to reduce healthcare spending could adversely affect our financial condition and results of operations.
Previous report
Most of our participants are dually eligible, meaning they are qualified for coverage under both Medicare and Medicaid when enrolled in our PACE program, and nearly all our revenue is derived from government payors. Medicaid is a joint federal and state funded program for healthcare services for low income as well as certain higher-income individuals who qualify for nursing home level of care. Under broad federal criteria, states establish rules for eligibility, services and payment. PACE programs are administered at the state level and are financed by both state and federal funds. Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This increase, combined with slower state revenue growth, has led both the federal government and many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending. Due to budget decisions and constraints, which can be unpredictable and influenced by shifting political and economic priorities or the result of macroeconomic conditions, including a potential recession, we may experience negative Medicaid capitated rate payment pressure from certain states where we operate, such as Colorado, where we conduct a significant percentage of our operations.
Previous report
In addition, as part of past attempts to repeal, replace or modify the ACA and as a means to reduce the federal budget deficit, there have in recent years been congressional efforts to move Medicaid from an open-ended program with coverage and benefits set by the federal government to one in which states receive a fixed amount of federal funds, either through block grants or per capita caps, and have more flexibility to determine benefits, eligibility or provider payments. If those changes or others are implemented, we cannot predict whether the amount of fixed federal funding to the states will be based on current payment amounts or on lower payment amounts, which would negatively impact those states that expanded their Medicaid programs in response to the ACA. We expect state and federal efforts to reduce healthcare spending to continue for the foreseeable future.
Previous report
We recently completed the acquisition of certain pharmacy assets and we have no previous experience managing our own pharmacy services.
Previous report
•enforcement actions by governmental agencies and/or state law claims for monetary damages for patients or employees relating to breach or impermissible use or disclosure of, or other incident relating to PHI and other types of personal data or PII that we collect, use, and disclose, in violation of federal or state privacy laws, including, for example and without limitation, HIPAA or state data privacy and security laws;
Previous report
If we are unable to comply with the continued listing requirements of the Nasdaq, our common stock could be delisted, affecting our common stock’s market price and liquidity and reducing our ability to raise capital.
Previous report
Our common stock is currently listed on Nasdaq. If we fail to satisfy the continued listing standards of Nasdaq, such as, for example, Nasdaq’s minimum bid price requirement or stockholders’ equity requirements, Nasdaq may issue a non-compliance letter or initiate delisting proceedings. If we are unable to maintain compliance with the continued listing requirements of Nasdaq, our common stock could be delisted, making it more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our securities could suffer a material decline. Delisting could also impair our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors and employees and fewer business development opportunities.
Reworded paragraphs (94)
Previous wording
Our business, results of operations, and financial condition are subject to numerous risks and uncertainties. You should carefully consider the following risk factors before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially and adversely affected. You should read these risk factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8 of this Annual Report.
Current wording
Our business, results of operations, and financial condition are subject to numerous risks and uncertainties. You should carefully consider the following risk factors before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially and adversely affected. You should read these risk factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Part II, Item 8 of this Annual Report.
Previous wording
•Our growth strategy may not prove viable. Our ability to grow depends upon a number of factors, including recruiting and retaining participants, finding suitable geographies for new centers, the outcome of our organizational and enterprise efficiency initiatives, entering into government payor arrangements in new jurisdictions, results of audits, investigations and ongoing or new remediation efforts, ensuring compliance with regulatory and contractual requirements, identifying appropriate locations for new and existing centers, and hiring members of our IDTs and other employees.
Current wording
•Our growth strategy may not prove viable. Our ability to grow depends upon a number of factors, including recruiting and retaining participants, finding suitable geographies for new centers, the adoption of government actions which may preclude us from acquiring or opening new centers in certain jurisdictions, the outcome of our organizational and enterprise efficiency initiatives, entering into government payor arrangements in new jurisdictions, results of audits and investigations, ensuring compliance with regulatory and contractual requirements, identifying appropriate locations for new and existing centers, and hiring members of our IDTs and other employees.
Previous wording
•Our overall business results have been and we expect will continue to be impacted by ongoing macroeconomic and industry-related challenges. Macroeconomic and industry challenges, including labor shortages, labor competition, high inflation, tariffs and trade disputes, have impacted and we expect will continue to impact our business operations.
Current wording
•Our overall business results have been, and we expect will continue, to be impacted by ongoing macroeconomic, geopolitical and industry-related challenges. Macroeconomic and industry challenges, including labor shortages, labor competition, high inflation, and supply chain disruptions as a result of tariffs and trade disputes, have impacted and we expect will continue to impact our business operations. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals due to higher demand for healthcare services, the pipeline of qualified professionals, and with respect to direct care roles, changes in federal immigration policy and enforcement.
Previous wording
•Under PACE contracts, we assume all of the risk that the cost of providing services will exceed our compensation. Most of our revenue was derived from capitation agreements with government payors in which we receive fixed PMPM fees. To the extent that our participants require more care than anticipated and/or the cost of care increases, aggregate fixed capitation payments may be insufficient to cover the costs and could have a material adverse effect on our business.
Current wording
•Under PACE contracts, we assume all of the risk that the cost of providing services will exceed our compensation. Most of our revenue was derived from capitation agreements with government payors in which we receive fixed per member, per month (“PMPM”) fees. To the extent that our participants require more care than anticipated and/or the cost of care increases, aggregate fixed capitation payments may be insufficient to cover the costs and could have a material adverse effect on our business.
Previous wording
•Reductions in PACE reimbursement rates or changes in the rules governing PACE programs could have a material adverse effect on our financial condition and results of operations. We receive nearly all of our revenue through the PACE program, which accounted for 99.8% of our revenue for each of the years ended June 30, 2025 and 2024. As a result, our operations are dependent on government funding levels for PACE programs. Any changes that limit or reduce general PACE rates could have a material adverse effect on our business.
Current wording
•Reductions in PACE reimbursement rates, changes in risk adjustment methodologies or changes in the rules governing PACE programs could have a material adverse effect on our financial condition and results of operations. We receive nearly all of our revenue through the PACE program. As a result, our operations are dependent on government funding levels for PACE programs. Any changes that limit or reduce general PACE rates could have a material adverse effect on our business.
Previous wording
•We are subject to legal proceedings, enforcement actions and litigation, malpractice and privacy disputes, which are costly and could materially harm our business. We are party to lawsuits and legal proceedings from various parties. These matters are often expensive and disruptive to our business operations. Among others, we are currently subject to civil investigative demands and stockholder lawsuits. These matters could result in significant cash settlements, and the time necessary to litigate could harm our business, financial condition, and results of operations.
Current wording
•We are subject to legal proceedings, enforcement actions and litigation, malpractice and privacy disputes, which are costly and could materially harm our business. From time to time, we are party to lawsuits and legal proceedings from various parties. These matters are often expensive and disruptive to our business operations. These matters could result in significant cash settlements, and the time necessary to litigate could harm our business, financial condition, and results of operations.
Previous wording
•Our records and submissions to government payors may contain inaccurate or unsupportable information regarding risk adjustment scores of participants, which could subject us to repayment obligations or penalties. CMS may audit PACE organizations’ risk adjustment data submissions. Erroneous data submissions could result in inaccurate revenue and risk adjustment payments. Correction or retroactive adjustments in later periods could require us to refund a portion of the revenue that we received, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Current wording
•Our records and other information and materials submitted to government payors may contain inaccurate or unsupportable information applicable to participants’ risk scores, which could subject us to repayment obligations or penalties. CMS may audit risk adjustment-related data. Erroneous data submissions could result in inaccurate revenue and risk-adjusted payments. Correction or risk adjustment reconciliations in later periods could require us to refund a portion of the revenue that we received, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Previous wording
•Ignite Aggregator LP (an investment vehicle owned by certain funds advised by Apax Partners LLP) and funds affiliated with Welsh, Carson, Anderson & Stowe (together, our “Principal Shareholders”) control us. Our Principal Shareholders beneficially own approximately 83% of our common stock, which means that together they control the vote of all matters submitted to a vote of our shareholders, including the election of members of the Board of Directors of the Company (the “Board”) and all other corporate decisions. For such period of time as our Principal Shareholders beneficially own a majority of the voting power, they will have significant influence.
Current wording
•Ignite Aggregator LP (an investment vehicle owned by certain funds advised by Apax Partners LLP) and funds affiliated with Welsh, Carson, Anderson & Stowe (together, our “Principal Shareholders”) control us. Our Principal Shareholders beneficially own approximately 82% of our common stock, which means that together they control the vote of all matters submitted to a vote of our shareholders, including the election of members of the Board of Directors of the Company (the “Board”) and all other corporate decisions. For such period of time as our Principal Shareholders beneficially own a majority of the voting power, they will have significant influence.
Previous wording
Our ability to grow depends upon a number of factors, including recruiting and retaining participants at new and existing centers, finding suitable geographies that have aging populations and viable rate structures, the outcome of our organizational and enterprise efficiency initiatives, entering into government payor arrangements in new jurisdictions, results of audits, investigations and ongoing or new remediation efforts, ensuring compliance with regulatory and contractual requirements, identifying appropriate locations for new and existing centers, completing build-outs of new centers within proposed timelines and budgets and hiring members of our IDTs and other employees.
Current wording
Our ability to grow depends upon a number of factors, including recruiting and retaining participants at new and existing centers, finding suitable geographies that have aging populations and viable rate structures, the adoption of government actions which may preclude us from acquiring or opening new centers in certain jurisdictions, the outcome of our organizational and enterprise efficiency initiatives, entering into government payor arrangements in new jurisdictions, results of audits, investigations and ongoing or new remediation efforts, ensuring compliance with regulatory and contractual requirements, identifying appropriate locations for new and existing centers, completing build-outs of new centers within proposed timelines and budgets and hiring members of our IDTs and other employees.
Previous wording
•implementation of our organizational and enterprise efficiency initiatives may be more expensive than anticipated and we may fail to realize the anticipated benefits thereof within the expected timeline, or at all;
Current wording
•implementation of our continuing clinical and operational value initiatives may be more expensive than anticipated and we may fail to realize the anticipated benefits thereof within the expected timeline, or at all;
Previous wording
•we may be subject to sanctions as a result of audits and other regulatory processes and proceedings that could include temporary or permanent suspension of enrollments, debarment or exclusion from participation in federal healthcare programs, and the revocation of a center’s license and suspension or revocation of required attestations to open de novo centers, which may in turn result in participant attrition and preclude us from opening de novo centers and conducting tuck-in acquisitions. As previously disclosed, the California Department of Health Care Services (“DHCS”), suspended the state-required attestations for a planned de novo center in Downey and for the de novo center we acquired in Bakersfield, California in 2023. There is no guarantee that such attestations will be reinstated or that similar situations will not occur in the future.
Current wording
•we may be subject to sanctions as a result of audits and other regulatory processes and proceedings that could include temporary or permanent suspension of enrollments, debarment or exclusion from participation in federal healthcare programs, and the revocation of a center’s license and suspension or revocation of required attestations to open de novo centers, which may in turn result in participant attrition and preclude us from opening de novo centers and conducting tuck-in acquisitions. As previously disclosed, the California Department of Health Care Services (“DHCS”), suspended the state-required attestations for a planned de novo center in Downey and for the de novo center we acquired in Bakersfield, California in 2023. While we have withdrawn our PACE application for the Downey center, there is no guarantee that the attestation for Bakersfield will be reinstated or that similar situations will not occur in the future.
Previous wording
An element of our growth strategy is to identify, pursue and successfully complete and integrate tuck-in acquisitions, joint ventures and other strategic partnerships to expand our operations and support our growth. For example, in December 2023, we acquired all of the issued and outstanding membership interests of two California-based PACE programs, ConcertoCare PACE of Bakersfield, LLC and ConcertoHealth PACE of Los Angeles, LLC (collectively, “Concerto”); in May 2024, we entered into a joint venture with Orlando Health with respect to the InnovAge Florida PACE - Orlando (“InnovAge Orlando”) center in Florida; and in August 2025, we entered into a joint venture with Tampa General Hospital with respect to InnovAge Florida PACE - Tampa center in Florida. We intend to continue pursuing relationships with key stakeholders, existing organizations and other care providers in order to form partnerships in target geographies.
Current wording
An element of our growth strategy is to identify, pursue and successfully complete and integrate tuck-in acquisitions, joint ventures and other strategic partnerships to expand our operations and support our growth. Most recently, we entered into a joint venture with Orlando Health with respect to the InnovAge Florida PACE - Orlando (“InnovAge Orlando”) center in Florida and with Tampa General Hospital with respect to the InnovAge Florida PACE - Tampa center in Florida. We intend to continue pursuing relationships with key stakeholders, existing organizations and other care providers in order to form partnerships in target geographies.
Previous wording
However, acquisitions, joint ventures and other strategic partnerships, involve numerous risks, including failure to consummate negotiated transactions, difficulties in successfully integrating the operations and personnel, navigating the necessary regulatory approval requirements, including securing regulatory safe harbors necessary for healthcare related join ventures under the Anti-Kickback Statute, distraction of management while overseeing the transactions, and disruption of, our existing operations, difficulties in entering new markets in which we have no or limited direct prior experience, difficulties in managing novel challenges in markets we have no or limited direct prior experience, and difficulties in achieving the synergies we anticipated.
Current wording
However, acquisitions, joint ventures and other strategic partnerships, involve numerous risks, including potential failure to consummate negotiated transactions, difficulties in successfully integrating operations and personnel, navigating the necessary regulatory approval requirements, including compliance with federal Anti-Kickback Statute regulatory safe harbors applicable to such transactions, time constraints and competing interests of management while overseeing such transactions, and disruption to our existing operations, operational and compliance challenges in entering new markets in which we have no or limited direct prior experience, and difficulties in achieving desired synergies.
Previous wording
In addition, we incur costs associated with potential acquisitions that we pursue or fail to close, including as a result of litigation related to a failed transaction. We also may need to expend resources to ensure target and acquired centers are operating in compliance with regulatory and contractual requirements, as well as any corrective action plans. Any failure to select suitable opportunities at fair prices, conduct appropriate due diligence, acquire, and successfully integrate the acquired center, including particularly when acquired centers operate in new geographic markets, could materially and adversely impact our growth strategies, financial condition and results of operations.
Current wording
In addition, we incur costs associated with potential acquisitions that we pursue and are not consummated, such as litigation or other dispute resolutions expenses associated with termination of transaction agreements. We also may need to deploy resources to ensure target and acquired PACE centers are operating in compliance with regulatory and contractual requirements, as well as any corrective action plans. Any failure to select suitable opportunities at fair prices, conduct appropriate due diligence, acquire, and successfully integrate the acquired center into our operations, particularly centers operating in new geographic markets, could materially and adversely impact our growth strategies, financial condition or results of operations.
Previous wording
Further, laws governing the review and approval of healthcare transactions could limit our ability to successfully complete acquisitions. Several states, including California, New Mexico, and Colorado have adopted laws focused on competition, quality, access, and cost that either authorize state agencies to review and approve certain healthcare transactions, or require notice prior to certain healthcare transactions, such as in California (requiring notice to the office of Health Care Affordability with certain transactions referred to their attorney general for further review) or New Mexico (requiring approval for certain transactions involving acquisitions and other changes in control of hospitals, including formation of a partnership or joint venture that results in an indirect change). Many other states, including Pennsylvania where several bills have been proposed, are currently voting on or considering similar legislation. These notices and approvals typically require a substantial amount of information, including supporting documentation. While certain of these proposed bills and restrictions are targeted at physician and dental practice management, they reflect a broader trend of increased regulatory scrutiny of healthcare transactions, which could negatively affect our ability to grow our business. These transactions may also cause us to significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition or investment, issue common stock that would dilute our current shareholders’ percentage ownership or incur asset write-offs and restructuring costs and other related expenses that could have a material adverse impact on our operating results. Acquisitions, joint ventures and strategic investments also involve numerous other risks, including potential exposure to assumed liabilities, as well as undetected internal control, regulatory or other issues, or unanticipated additional costs.
Current wording
Further, laws governing the review and approval of healthcare transactions could limit our ability to successfully complete acquisitions. Several states, including California, New Mexico, and Colorado have adopted laws focused on competition, quality, access, and cost that either authorize state agencies to review and approve certain healthcare transactions, or require notice prior to certain healthcare transactions, such as in California (requiring notice to the Office of Health Care Affordability with certain transactions referred to their attorney general for further review) or in New Mexico (requiring approval for certain transactions involving acquisitions and other changes in control, including formation of a partnership or joint venture that results in an indirect change in control). Many other states, including Pennsylvania have been considering similar legislation. Moreover, state attorneys general, including in California, hold approval authority with respect to certain other healthcare transactions.
Previous wording
Additionally, participant enrollment for PACE is ongoing each month and requires states to verify eligibility, a process which can result in delays in enrollment. We have experienced, and continue to experience, an increase in gaps of eligibility for both new enrollments and Medicaid redetermination applications due to processing delays and other enrollment and redetermination procedures that vary by State and county. While participants continue to receive care and remain enrolled with us during the redetermination process, the effect of such delays temporarily halts Medicaid revenue related to any closed application and simultaneously increases our risk of revenue recovery. The OBBBA, signed into law on July 4, 2025, generally requires redetermination to occur at least every 6 months instead of annually. As a result, enrollment delays may increase, due to insufficient staffing to handle the higher volume of work, and, if the additional redetermination requirement applies to our participants, the risk of revenue recovery may increase for those of our participants subject to such additional redetermination. In the State of California, processing delays resulted in lower estimated per member, per month (“PMPM”) amounts during fiscal year 2025, which triggered a negative adjustment for prior PMPM estimates and also reduced the reimbursements we received from the State. Even though our results of operations have not suffered a material adverse effect from these delays, there is no guarantee that further delays may not adversely impact our results.
Current wording
Additionally, participant enrollment for PACE is ongoing each month and requires states to verify eligibility, a process which can result in delays in enrollment. We have experienced, and continue to experience, an increase in gaps of eligibility for both new enrollments and Medicaid redetermination applications due to processing delays and other enrollment and redetermination procedures that vary by State and county. While participants continue to receive care and remain enrolled with us during the redetermination process, the effect of such delays temporarily halts Medicaid revenue related to any closed application and simultaneously increases our risk of revenue recovery. The Reconciliation Act, signed into law on July 4, 2025, generally requires redetermination to occur at least every 6 months instead of annually. As a result, enrollment delays may increase due to insufficient staffing to handle the higher volume of work.
Previous wording
Our overall business results have been, and we expect will continue to be, impacted by ongoing macroeconomic and industry-related challenges, including labor shortages, labor competition, inflation, tariffs and trade disputes.
Current wording
Our overall business results have been, and we expect will continue to be, impacted by ongoing macroeconomic, geopolitical and industry-related challenges, including labor shortages, labor competition, inflation, and supply chain disruption as a result of tariffs and trade disputes.
Previous wording
Macroeconomic and industry challenges, including uncertainty surrounding trade tensions and supply chain disruptions, labor shortages, labor competition and high inflation, have impacted and we expect will continue to impact our business operations and our overall business results. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals due to higher demand for healthcare services and systemic challenges related to workforce training and the pipeline of qualified professionals. We compete with other healthcare providers, primarily hospitals and other centers, and home health care providers in attracting physicians, nurses and medical staff to support our centers, and recruiting and retaining qualified management and support personnel responsible for the daily operations of each of our centers.
Current wording
Macroeconomic and industry challenges, including labor shortages, labor competition, high inflation, and supply chain disruptions as a result of tariffs and trade disputes have impacted and we expect will continue to impact our business operations and our overall business results. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals due to higher demand for healthcare services and the pipeline of qualified professionals, and with respect to direct care roles, changes in federal immigration policy and enforcement. We compete with other healthcare providers, primarily hospitals, other PACE organizations, skilled nursing facilities, Medicare Advantage plans, and other risk-bearing primary care, and other home health care providers in attracting, recruiting and retaining physicians, nurses, medical staff and other qualified management and support personnel to support our centers and their daily operations.
Previous wording
Furthermore, high inflation has increased the cost of living, and consequently, wage pressure for healthcare professionals, which has contributed to an increasingly competitive labor market. Increased wage pressure for healthcare professionals is also impacted by certain laws and regulations, such as the adoption of California Senate Bill No. 525 (“SB 525”), which raised minimum wage for many California healthcare workers and impacted many of our contractors and other third-party providers. As a result of competition generated by SB 525 and other California market conditions, we received rate increases from third party vendors, including those providing home health services and care partner services, increasing our cost of care in California. We also increased our wages for impacted healthcare workers and other comparable market positions in the California market. Because the vast majority of our revenue consists of prospective monthly capitated, or fixed, payments per participant, our ability to pass along increased costs is limited. In particular, if labor costs rise at an annual rate greater than our net annual consumer price index basket update from Medicare, our results of operations and cash flows will likely be adversely affected.
Current wording
Furthermore, high inflation has increased the cost of living, and consequently, wage pressure for healthcare professionals, which has contributed to an increasingly competitive labor market. Increased wage pressure for healthcare professionals has also been impacted by certain laws and regulations, such as the adoption of California Senate Bill No. 525 (“SB 525”), which raised minimum wage for many California healthcare workers and impacted many of our contractors and other third-party providers. As a result of competition generated by SB 525 and other California market conditions, we have received rate increases from third party vendors, including those providing home health services and care partner services, increasing our cost of care in California in fiscal year 2026. We also increased our wages in fiscal year 2026 for impacted healthcare workers and other comparable market positions in the California market. Because substantially all of our revenue consists of prospective monthly capitated, or fixed, payments per participant, our ability to pass along increased costs is limited. In particular, if labor costs rise at an annual rate greater than the annual increases in our Medicare and Medicaid capitation rates, our results of operations and cash flows will likely be adversely affected.
Previous wording
If labor market conditions disrupt our ability to recruit healthcare professionals, we may not be able to execute our growth plan and grow capacity in our existing centers or open de novo centers or we may have to do so at costs higher than originally budgeted, which, in turn, could increase our capital needs during a time of high interest rates and when conditions in the credit and capital markets are volatile. Cost of care and related cost per participant increased for fiscal year 2025 compared to 2024, partially as a result of higher wage rates. In addition, labor relations matters could have a material adverse effect on our business. Certain nurses in our Pennsylvania centers (less than 1% of our total workforce) are represented by unions. If additional employees seek to unionize in the future, employees may threaten and/or engage in work stoppages and strikes and our labor costs may materially increase.
Current wording
If labor market conditions disrupt our ability to attract, recruit and retain healthcare professionals, we may not be able to execute our growth plan and grow capacity in our existing centers or open de novo centers or we may have to do so at costs higher than originally budgeted, which, in turn, could increase our capital needs during a time of elevated interest rates and when conditions in the credit and capital markets are volatile. Cost of care and related cost per participant increased for fiscal year 2026 compared to 2025, partially as a result of higher wage rates. In addition, labor relations matters could have a material adverse effect on our business. Certain nurses in our Pennsylvania centers (less than 1% of our total workforce) are represented by unions. If additional employees seek to unionize in the future, employees may threaten and/or engage in work stoppages and strikes and our labor costs may materially increase.
Previous wording
We rely on both domestic and international suppliers for medical equipment and supplies, including pharmaceuticals used in our business. U.S. tariff announcements, retaliatory measures by other countries, and significant uncertainty surrounding trade tensions may result in higher prices for medical and other supplies and lead to supply chain disruptions and additional costs. Factors arising from supply chain challenges such as raw material shortages, longer lead times, and increased transportation expenses may affect our ability to grow our business effectively and may pose risks to our ability to acquire essential medical supplies in a timely and efficient manner. The degree to which tariffs affect the global supply chain and our business will depend on their timing, duration and magnitude, which may be changed at any time and with little or no prior notice.
Current wording
We rely on both domestic and international suppliers for medical equipment and supplies, including pharmaceuticals used in our business. Recent U.S. tariffs, retaliatory measures by other countries, significant uncertainty surrounding trade tensions and military conflicts, in particular the conflict in the Middle East, may result in higher prices for medical and other supplies and lead to supply chain disruptions and additional costs. Factors arising from supply chain challenges such as raw material shortages, longer lead times, and increased transportation expenses may affect our ability to grow our business effectively and may pose risks to our ability to acquire essential medical supplies in a timely and efficient manner. The degree to which tariffs and the conflict in the Middle East may affect the global supply chain and our business will depend on the timing, duration and magnitude of these events, which may change at any time and with little or no prior notice.
Previous wording
Additionally, the healthcare industry is subject to shifting political priorities and initiatives. As our stakeholders have evolving, varied, and sometimes conflicting expectations regarding political positions, we may experience adverse reactions from some of our stakeholders for positions we take on, and advocacy for, Medicare and Medicaid in the future.
Current wording
Additionally, the healthcare industry is subject to shifting political priorities and initiatives. As our stakeholders have evolving, varied, and sometimes conflicting expectations regarding political positions, we may experience adverse reactions from some of our stakeholders for positions we take on, and advocacy for, Medicare and Medicaid funding and program design in the future.
Previous wording
During periods of high unemployment, governmental entities often experience budget deficits as a result of increased costs and lower than expected tax collections. These budget deficits at federal, state and local government entities have decreased, and may continue to decrease, spending for health and human service programs, including Medicare, Medicaid, PACE and similar programs, which represent nearly all of the payor sources for our centers and which may have a material effect on our results of operations and financial condition. To date, we believe that macroeconomic and industry conditions, including labor shortages and inflation, have not had a material effect on our operating results. However, there can be no assurance that continued challenges will not have an adverse impact on our operating results and financial condition.
Current wording
Governmental payors at the federal, state and local levels continue to face structural budget deficits and fiscal pressures driven by rising operational outlays, healthcare program expansions, and shifting revenue collections. These ongoing budget constraints have decreased, and may continue to decrease, spending or reimbursement rates for health and human service programs, including Medicare, Medicaid, PACE and similar programs. Because these programs represent nearly all of the payor sources for our centers, any prolonged funding reductions may have a material effect on our results of operations and financial condition. While macroeconomic and industry conditions, including labor shortages and inflation, have increased our cost of care to date, we believe that these conditions have not had a material effect on our overall operating results to date; however, there can be no assurance that continued challenges will not have an adverse impact on our operating results and financial condition in the future.
Previous wording
Approximately 99.8% of our revenue for each of the years ended June 30, 2025 and 2024, was derived from capitation agreements with government payors in which we receive fixed PMPM fees. While there are variations specific to each agreement, we generally contract with government payors to receive a fixed PMPM fee to provide or manage all healthcare services a participant may require while assuming financial responsibility for the totality of our participants’ healthcare expenses. This type of contract is often referred to as an “at-risk” or a “capitation” contract.
Current wording
Nearly all of our revenue for the years ended June 30, 2026 and 2025, was derived from capitation agreements with government payors in which we receive fixed PMPM fees. While there are variations specific to each agreement, we generally contract with government payors to receive a fixed PMPM fee to provide or manage all healthcare services a participant may require while assuming financial responsibility for the totality of our participants’ healthcare expenses. This type of contract is often referred to as an “at-risk” or a “capitation” contract.
Previous wording
Historically, our medical costs and expenses as a percentage of revenue have fluctuated. Factors that may cause medical expenses to exceed estimates include:
Current wording
Historically, our medical costs and expenses as a percentage of revenue have fluctuated. Factors that have caused and may continue to cause medical expenses to exceed estimates include:
Previous wording
•an increase in the cost of healthcare services and supplies, whether as a result of inflation, wage increases, purchases of vaccines and personal protective equipment as a result of a pandemic or epidemic, other health emergencies, or otherwise;
Current wording
•an increase in the cost of healthcare services and supplies, whether as a result of inflation, wage increases, pandemics or epidemics, other health emergencies, or otherwise;
Previous wording
Our operating expenses have increased, and we expect them to continue to increase, over the next several years as we continue to hire additional personnel, expand our operations and infrastructure, reimagine key operational areas through technology, and continue to provide services to an increasing number of participants in furtherance of our clinical and operational initiatives. If we are not able to execute or realize the benefits of our clinical and operational value initiatives, our operating loss could continue to decline and we may not gain anticipated integration and efficiencies. In addition to the expected costs to grow our business, we also expect to continue to incur compliance costs, as a result of audits and maintaining high quality of care across our centers, as well as additional legal, accounting and other expenses as we continue to operate as a public company. These investments may be more costly than we expect, and if we do not achieve the benefits anticipated from these investments, or if the realization of these benefits is delayed, our profitability could continue to decline. If our growth rate were to decline significantly or become negative, it could adversely affect our financial condition and results of operations. If we are not able to maintain positive cash flow in the long term, we may require additional financing, which may not be available on favorable terms or at all and/or which would be dilutive to our shareholders. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Accordingly, we may not be able to be profitable or improve our income in the future, which could negatively impact the value of our common stock.
Current wording
In addition to the expected costs to grow our business, we also expect to continue to incur compliance costs, as a result of audits and maintaining high quality of care across our centers, as well as additional legal, accounting and other expenses as we continue to operate as a public company. These investments may be more costly than we expect, and if we do not achieve the benefits anticipated from these investments, or if the realization of these benefits is delayed, our profitability could decline. If our growth rate were to decline significantly or become negative, it could adversely affect our financial condition and results of operations.
Previous wording
In fiscal year 2025, while we continued several initiatives intended to lower certain of our costs, we also made, and expect to continue making, significant investments in growing and transforming our business, including through the implementation of Company-wide transformation initiatives (focused on managing cost trends, operational excellence and high quality care for participants) increasing our participant base, building capabilities to increase our sophistication as a payor to drive clinical value, expanding our operations through acquisitions, hiring additional employees for growing or new centers, and introducing or improving technology. As a result of these increased expenditures, we may not succeed in increasing our revenue sufficiently to improve our profit margins. We finance our operations principally from revenue from our participant services and the incurrence of indebtedness. We may not continue to generate positive cash flow from operations or have access to sufficient capital, and our variable results may make it difficult for you to rely on our historical results as indicative of future performance. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing and highly regulated industries, including increasing expenses as we continue to grow our business.
Current wording
We finance our operations principally from revenue from our participant services and the incurrence of indebtedness. We may not continue to generate positive cash flow from operations or have access to sufficient capital, and our variable results may make it difficult for you to rely on our historical results as indicative of future performance. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing and highly regulated industries, including increasing expenses as we continue to grow our business. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Accordingly, we may not be able to be profitable or improve our income in the future, which could negatively impact the value of our common stock.
Previous wording
Our operations are dependent on a limited number of government payors, particularly Medicare and Medicaid, with whom we directly contract to provide services to participants. We generally manage our contracts on a state-by-state basis, entering into a separate contract in each state. When aggregating the revenue associated with Medicare and Medicaid by state, Colorado, California and Virginia accounted for a total of approximately 86.4% and 84.3% of our capitation revenue for the years ended June 30, 2025 and 2024, respectively.
Current wording
Our operations are dependent on a limited number of government payors, particularly Medicare and Medicaid, with whom we directly contract to provide services to participants. We generally manage our contracts on a state-by-state basis, entering into a separate contract in each state. When aggregating the revenue associated with Medicare and Medicaid by state, Colorado and California accounted for a total of 70.2% and 70.1% of our capitation revenue for the fiscal years ended June 30, 2026 and 2025, respectively.
Previous wording
Based on our current business structure and market conditions, we expect that the majority of our revenues will continue to be derived from a limited number of key government payors. As a result, we depend on federal funding, the financial condition of the states in which we operate, and each state’s commitment to its PACE program. Government-funded healthcare programs in the states in which we operate face a number of risks, including higher than expected healthcare costs and lack of predictability of tax basis and budget needs. As the states respond to market dynamics and financial pressures, and as government payors make strategic budgetary decisions in respect of the programs in which they participate, certain government payors, including CMS and state Medicaid agencies, may seek to renegotiate or terminate their agreements with us. Any reduction in the budgetary appropriations for our services, whether due to fiscal constraints from a recession or economic downturn, emergency situations such as pandemics, changes in policy or otherwise, could result in a reduction in our capitated fee payments, changes to the scope of services, or even the loss of contracts, any of which could negatively impact our revenues, business and prospects.
Current wording
Based on our current business structure and market conditions, we expect that the majority of our revenues will continue to be derived from a limited number of key government payors. As a result, we depend on federal funding, the financial condition of the states in which we operate, and each state’s commitment to its PACE program. Government-funded healthcare programs in the states in which we operate face a number of risks, including higher than expected healthcare costs and lack of predictability of tax basis and budget needs. As the states respond to regulatory changes, market dynamics and financial pressures, and as government payors make strategic budgetary decisions in respect of the programs in which they participate, certain government payors, including CMS and state Medicaid agencies, may seek to renegotiate or terminate their agreements with us. Any reduction in the budgetary appropriations for our services, whether due to fiscal constraints from changes in policy, a recession or economic downturn, emergency situations such as pandemics, or otherwise, could result in a reduction in our capitated fee payments, changes to the scope of services, or even the loss of contracts, any of which could negatively impact our revenues, business and prospects.
Previous wording
Further, the OBBBA, makes several changes that impact Medicare, Medicaid and PACE providers. OBBBA mandates significant reductions in federal Medicaid spending, with the Congressional Budget Office estimating a decrease of $1 trillion over the next decade. The OBBBA also introduces new work requirements for Medicaid recipients aged 19 to 64, necessitating at least 80 hours per month of work, education, or volunteer activities, unless they qualify for certain exemptions. The OBBBA also narrows Medicaid eligibility for qualified immigrants. States will be required to conduct eligibility verifications of Medicaid enrollees in the expansion population every six months (unless otherwise exempt), increasing from the previous annual requirement. These changes may lead to decreased Medicaid enrollment among existing and prospective PACE participants, potentially reducing our funding and decreasing margins. OBBBA also introduces cost-sharing measures, requiring Medicaid beneficiaries with incomes between 100% and 138% of the federal poverty level to pay up to $35 per service for certain healthcare services. As a result, eligible participants could be deterred from enrolling in or continuing enrollment with PACE programs, possibly impacting our ability to retain or increase our participant base. With the federal funding cuts, and states being prohibited from increasing provider taxes to finance their share of Medicaid spending, states may also face budgetary pressures. These budgetary pressures may potentially lead to reductions in certain optional Medicaid benefits, reductions in the workforce for the government entities that oversee and administer Medicaid and PACE, causing delays, and downward pressure on rates, including our capitated fee payments. State-level decisions on benefit coverage could adversely affect or limit the comprehensiveness and quality of care we provide. Finally, the new requirements will necessitate adjustments in our administrative processes to ensure compliance with more frequent eligibility verifications and other reporting standards mandated by federal and state regulatory agencies. Failure to adapt promptly could result in regulatory penalties, sanctions, or loss of funding. Until we know the full scope of the impact of the OBBBA and other policy changes made by the Trump Administration, whether those policy changes are challenged and subsequently upheld by the court system and how those changes impact our business and the business of our competitors over the long term, we will not know the extent of any direct or indirect impact on us.
Current wording
As a result of these Reconciliation Act mandates, eligible participants could be deterred from enrolling in or continuing enrollment with PACE programs, possibly impacting our ability to retain or increase our participant base. With the federal funding cuts, and states being prohibited from increasing provider taxes to finance their share of Medicaid spending, states are also facing budgetary pressures. These budgetary pressures may potentially lead to reductions in certain optional Medicaid benefits, reductions in the workforce for the government entities that oversee and administer Medicaid and PACE, causing delays, and downward pressure on rates, including our capitated fee payments. State-level decisions on benefit coverage could adversely affect or limit the comprehensiveness and quality of care we provide. Finally, the new requirements will necessitate adjustments in our administrative processes to ensure compliance with more frequent eligibility verifications and other reporting standards mandated by federal and state regulatory agencies. Failure to adapt promptly could result in regulatory penalties, sanctions, or loss of funding. Until we know the full operational reality of these multi-phase Reconciliation Act rollouts, continuous litigation appeals, and down-stream state budgetary adjustments are finalized, we will not know the extent of any direct or indirect impact on us.
Previous wording
See also Item 1A. Risk Factors, “Risks Related to Our Business-We conduct a significant percentage of our operations in the State of Colorado and, as a result, we are particularly susceptible to any reduction in budget appropriations for our services or any other adverse developments in that state.”
Current wording
See also Item 1A. Risk Factors, “Risks Related to Our Business-We conduct a significant percentage of our operations in the States of California and Colorado and, as a result, we are particularly susceptible to any reduction in budget appropriations for our services or any other adverse developments in that state.”
Previous wording
Reductions in PACE reimbursement rates or changes in the rules governing PACE programs could have a material adverse effect on our financial condition and results of operations.
Current wording
Reductions in PACE reimbursement rates, changes in risk adjustment methodologies, or changes in the rules governing PACE programs could have a material adverse effect on our financial condition and results of operations.
Previous wording
We receive nearly all of our revenue through the PACE program, which accounted for 99.8% of our revenue for each of the years ended June 30, 2025 and 2024. As a result, our operations are dependent on government funding levels for PACE programs. Any changes that limit or reduce general PACE funding, such as reductions in or limitations of reimbursement amounts or rates under programs, reductions in funding of programs, expansion of benefits, services or treatments under programs without adequate funding, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Current wording
Nearly all of our revenue is derived through the PACE program. As a result, our operations are highly dependent on federal and state government funding levels and reimbursement methodologies applicable to PACE organizations. Any changes that limit or reduce general PACE funding, such as reductions in or limitations of reimbursement amounts or rates under programs, changes in payment methodologies, reductions in funding of programs or expansion of benefits, services or treatments under programs without adequate funding, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Previous wording
The PACE programs and their respective reimbursement rates, payment structures and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the PACE rates at which we are compensated for our services. Budget pressures can lead federal and state governments to reduce or place limits on reimbursement rates and payment structures under PACE. For example, the budget constraints caused by recent federal funding cuts and impact of the OBBBA may lead federal and state governments to reduce or limit reimbursement amounts or rates under the PACE program. Implementation of these and other types of measures has in the past and could in the future result in reductions in our revenue and operating margins, the extent of which would depend on the specific measures implemented. Legislation enacted in 2011 requires CMS to sequester or reduce all Medicare payments, including payments to PACE organizations, by two percent per year beginning on April 1, 2013, and this sequestration has been extended through fiscal year 2032 for Medicare benefit payments. We cannot predict what other deficit reduction, other payment reduction or budget enforcement initiatives may be proposed by Congress, which could impact our business, including whether Congress will attempt to increase, restructure or suspend sequestration.
Current wording
The PACE programs and their respective reimbursement methodologies are subject to frequent statutory, regulatory and administrative changes. These changes may include modifications to payment rates, benchmark calculations, risk adjustment methodologies, risk score reconciliations, data submission requirements, administrative guidance, executive orders and government funding restrictions, all of which may materially adversely affect the PACE rates at which we are compensated for our services. Budget pressures can lead federal and state governments to reduce or place limits on reimbursement rates and payment structures under PACE. For example, the budget constraints caused by recent federal funding cuts and impact of the Reconciliation Act may lead federal and state governments to reduce or limit reimbursement amounts or rates under the PACE program. Implementation of these and other types of measures has in the past and could in the future result in reductions in our revenue and operating margins, the extent of which would depend on the specific measures implemented.
Previous wording
Each year, CMS establishes the Medicare PACE benchmark payment rates by county for the following calendar year. Because nearly all of our revenue is through the PACE program, any negative changes to the PACE benchmark payment rates could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, our PACE revenues may become volatile in the future, which could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Current wording
Each year, CMS establishes the Medicare PACE benchmark payment rates by county for the following calendar year. Because nearly all of our revenue is through the PACE program, any negative changes to the PACE benchmark payment rates could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Previous wording
Reductions in reimbursement rates could have a material, adverse effect on our financial condition and results of operations or even result in rates that are insufficient to cover our operating expenses. For example, our external provider costs are driven by rates set by Medicare and Medicaid, which are outside of our control and may be negotiated in a manner unfavorable to us. Additionally, any delay or default by state governments in funding our capitated payments could materially and adversely affect our business, financial condition and results of operations.
Current wording
Reductions in reimbursement rates or adverse changes in payment methodologies could have a material, adverse effect on our financial condition and results of operations or even result in rates that are insufficient to cover our operating expenses. For example, our external provider costs are driven by rates set by Medicare and Medicaid, which are outside of our control and may be negotiated in a manner unfavorable to us. Additionally, any delay or default by state governments in funding our capitated payments could materially and adversely affect our business, financial condition and results of operations.
Previous wording
Starting in 2021, we underwent federal and state audits in our centers in California, Colorado and New Mexico. Based on deficiencies detected in the audits, CMS and regulatory authorities in the states of California and Colorado suspended new enrollments at our Sacramento center and our centers in Colorado. We were released from the enrollment sanctions in 2023. As previously disclosed, in October 2023, CMS and the DHCS conducted a joint routine audit of our Sacramento center and DHCS is currently conducting a medical review of our San Bernardino center, which commenced in March 2024. In response to both of these matters, DHCS suspended its state-required attestations for our planned de novo centers in California. There is no guarantee that such attestations will be reinstated or that similar situations will not occur in the future. Audits have and will continue to increase our regulatory compliance costs and have required and may require further change to our business practices, which could negatively impact our participant and revenue growth. Managing audits, even if we achieve favorable outcomes, is costly, time-consuming and diverts management’s attention from our business.
Current wording
Audits have increased and will continue to increase our regulatory compliance costs and have required and may require further change to our business practices, which could negatively impact our participant and revenue growth. Managing audits, even if we achieve favorable outcomes, is costly, time-consuming and diverts management’s attention from our business.
Previous wording
Our centers will continue to be subject to federal and state audits, and there is no guarantee that future audits will not find deficiencies similar to, or different from, the ones found in connection with prior audits.
Current wording
Our centers will continue to be subject to federal and state audits, and there is no guarantee that future audits will not find deficiencies similar to, or different from, the ones found in connection with prior audits. As previously disclosed, we currently continue to fulfill our obligations under a formal corrective action plan issued by DHCS with respect to findings resulting from the medical review of our San Bernardino, California center.
Previous wording
In general, inspections, reviews, audits, requests for information or investigations with adverse findings, and in particular the audits described above, have resulted in and may further result in:
Current wording
In general, inspections, reviews, audits, requests for information or investigations with adverse findings have resulted in and may further result in:
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Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
These notices and approvals typically require a substantial amount of information, including supporting documentation. While certain of these proposed bills and codified restrictions target physician and dental practice management, they reflect a broader trend of increased regulatory scrutiny of healthcare transactions, which could negatively affect our ability to grow our business and our ability to successfully complete future transactions.
Current report — wording carried from elsewhere
These proposed transactions may also have material impacts on our operating results if we significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition or investment, dilute our current shareholders’ percentage ownership by issuing common stock to a transaction counterparty, or incur asset write-offs, restructuring costs and other expenses associated with such transactions. Acquisitions, joint ventures and strategic investments also involve numerous other risks, including potential exposure to assumed liabilities, as well as undetected internal control, regulatory or other issues, or unanticipated additional costs.
Current report — wording carried from elsewhere
In fiscal year 2026, while we continued several initiatives intended to lower certain of our costs, we also continued to make significant investments in growing and transforming our business, including through the implementation of Company-wide transformation initiatives (focused on managing cost trends, operational excellence and high quality care for participants) increasing our participant base, building capabilities to increase our sophistication as a payor to drive clinical value, expanding our operations through acquisitions, hiring additional employees for growing or new centers, and introducing or improving technology. As a result of these increased expenditures, our profit margins may decrease.
Current report — wording carried from elsewhere
Further, the Reconciliation Act, made several changes that impact Medicare, Medicaid and PACE providers. The Reconciliation Act mandated significant reductions in federal Medicaid spending, with the Congressional Budget Office estimating a decrease of $1 trillion over the next decade. The Reconciliation Act also introduced new work requirements for Medicaid recipients aged 19 to 64, which are slated for nationwide implementation on January 1, 2027, necessitating at least 80 hours per month of work, education, or volunteer activities, unless they qualify for certain exemptions. The Reconciliation Act also narrowed Medicaid eligibility for qualified immigrants. States will be required to conduct eligibility verifications of Medicaid enrollees in the expansion population every six months (unless otherwise exempt), increasing from the previous annual requirement. These changes may lead to decreased Medicaid enrollment among existing and prospective PACE participants, potentially reducing our funding and decreasing margins. The Reconciliation Act also introduced cost-sharing measures, requiring Medicaid beneficiaries with incomes between 100% and 138% of the federal poverty level to pay up to $35 per service for certain healthcare services. Though the statutory implementation date for these co-pays is deferred until October 1, 2028, states are already structuring their multi-year budgets around these anticipated savings.
Current report — wording carried from elsewhere
Legislation enacted in 2011 requires CMS to sequester or reduce all Medicare payments, including payments to PACE organizations, by two percent per year beginning on April 1, 2013, and this sequestration has been extended through 2032 for Medicare benefit payments. We cannot predict what other deficit reduction, other payment reduction or budget enforcement initiatives may be proposed by Congress, which could impact our business, including whether Congress will attempt to increase, restructure or suspend sequestration.
Current report — wording carried from elsewhere
•federal and state laws regarding the collection, use disclosure and protection of personal identifiable information, or PII, and protected health information, or PHI (e.g., HIPAA and the CCPA);