UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number 000-50194

HMS HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

(214) 453-3000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x☒ No o☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ oNo x☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ xNo o☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ xNo o☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ oNo x☒

The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2015,2016, the last business day of the registrant’s most recently completed second quarter was $1.5 billion based on the last reported sale price of the registrant’s Common Stockcommon stock on the NASDAQ Global Select Market on that date. Solely for purposes of this disclosure, shares of common stock held by executiveofficers, directors and directorspersons who hold 10% or more of the outstanding shares of common stock of the registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers anddirectors as affiliates is not necessarily a conclusive determination for any other purposes.

There were 84,005,98683,909,845 shares of common stock outstanding as of February 25, 2016.May 31, 2017.

Documents Incorporated by Reference

Unless provided in an amendment to this Annual Report on Form 10-K, the information required by Part III is incorporated by reference to the registrant’s 2016 proxy statement, to the extent stated herein. Such proxy statement or amendment will be filed with the SEC within 120 days of the registrant’s fiscal year ended December 31, 2015.None.

HMS HOLDINGS CORP. AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Glossary of Terms and Abbreviations

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K of HMS Holdings Corp. (together with its subsidiaries, “HMS,” the “Company,” “we,” “our” or “us”) contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. From time to time, we also provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements. Such statements givereflect our current expectations, projections and assumptions about our business, the economy and future events or forecasts of future events; theyconditions. They do not relate strictly to historical or current facts.

We have tried wherever possible, to identify suchforward-looking statements by using words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “project,” “seek,” “target,” “will,” “would,” “could,” “should,” and similar expressions and references to guidance. In particular, theseguidance, although some forward-looking statements may be expressed differently. These statements include, statements relating toamong other things, information concerning our possible future actions, business plans, objectives and prospects, our future operating or financial performance, orsales efforts and results of current and anticipated services, the benefits and synergies to be obtained from completed and future acquisitions, and the future performance of companies we have acquired, sales efforts,sufficiency of our appeals reserves, the future effect of different accounting determinations or remediation activities, our ability to successfully remediate material weaknesses in our internal control over financial reporting, our future expenses, interest rates and financial results, the outcome of contingencies, such as litigation, and the impact of current, pending and futurechanges to U.S. healthcare legislation or changes to healthcare spending affecting Medicare, Medicaid or other publicly funded or subsidized health programs.

We cannot guarantee that any forward-looking statement will be realized. Forward-looking statements are based on our current expectationsnot guarantees and involve risks, uncertainties and assumptions regarding our business, the economythat are difficult to predict. Actual results may differ materially from past results and other future conditions. Shouldforward-looking statements if known or unknown risks or uncertainties materialize, or shouldif underlying assumptions prove inaccurate, actual results could differ materially from past resultsinaccurate. These risks and those anticipated, estimated or projected. We caution you, therefore, against relying on anyuncertainties include, among other things,

These and other risks are discussed under the headings “Part I. Item 1. Business,” “Part I. Item 1A, Risk Factors,” “Part II, Item 7. Management’s Discussion and Analysis of these forward-looking statements. They are neither statementsFinancial Condition and Results of historical fact nor guarantees or assurancesOperations,” and “Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk” of future performance. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on2016 Form 10-K and in particular, the risks discussed under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and those discussed in other documents we file with the Securities and Exchange Commission.SEC.

Any forward-looking statements made by us in this Annual Report on2016 Form 10-K speak only as of the date on which they are made. Factors or events that could cause actual results to differ may emerge from time to time and it is not possible for us to predict all of them. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. We caution readers not to place undue reliance upon any of these forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q and Form 8-K reports and our other filings with the Securities and Exchange Commission.SEC.

Market and Industry Data

This 2016 Form 10-K contains market, industry and government data and forecasts that have been obtained from publicly available information, various industry publications and other published industry sources. We have not independently verified the information and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third party sources referred to in this 2016 Form 10-K were prepared for use in, or in connection with, this report.

PART I

Item 1. Business.Business

Founded in 1974, HMS Holdings Corp. is a holding company whose principal business is conducted through its operating subsidiaries. Unless the context otherwise indicates, references in this Annual Report to the terms “we,” “our” and “us” refer to HMS Holdings Corp., and its subsidiaries and its affiliates.

General Overview

We operateleading provider of cost containment solutions in the U.S. healthcare insurance benefit cost containment marketplace. We use innovative technology, extensive data services and powerful analytics, to deliver coordination of benefits, payment integrity and health management and engagement solutions to help healthcare payers improve performance and outcomes. We provide coordination of benefits services to government and privatecommercial healthcare payers and sponsors to ensure that the responsible party pays healthcare claims. Our payment integrity services ensure that healthcare claims billed are accurate and appropriate.appropriate; and our care management technology helps risk-bearing organizations manage the care delivered to their members. Together these various services help customers recover improper payments, including thoseamounts from liable third parties; prevent future improper payments; reduce fraud, waste and abuse; better manage the care that members receive; and ensure regulatory compliance.

Demand for

HMS began its operations as Health Management Systems, Inc., which became our services arises,wholly owned subsidiary in part, from healthcare funds spentMarch 2003 when we assumed its business in error, where another payer was actually responsible forconnection with the costadoption of the healthcare claim, or a mistake was made in applying complex claim processing rules. According to the Centers for Medicare & Medicaid Services (“CMS”) National Health Expenditures 2014-2024 projections (the “CMS NHE Projections”) and error rates published on paymentaccuracy.gov, the government estimates that improper payments in the Medicaid and Medicare programs totaled $117 billion in 2015. Our services focus on containing costs by detecting and reducing the errors that result in improper payment, and our revenues are based, in part, on the amounts we recover for our customers.

Our customers are state Medicaid agencies, government health agencies and health plans, including Medicaid managed care, Medicare Advantage and group and individual health lines of business; government and private employers; and other healthcare payers and sponsors, including child support agencies. As of December 31, 2015, we served 45 state Medicaid programs and the District of Columbia, and government health agencies, including CMS and the Veterans Health Administration (“VHA”). We also provided services to approximately 250 health plans and supported their multiple lines of business. We additionally served as a subcontractor for certain business outsourcing and technology firms.

Our revenue for the year ended December 31, 2015 was $474.2 million, an increase of $31.0 million, or 7.0%, from 2014 revenue of $443.2 million, primarily as a result of the expansion of services to our existing customers and growth through serving private health plan customers which exceeded the decline in Medicare RAC revenue.

Over the years, we haveholding company structure. Since then HMS has grown both organically and through targeted acquisitions. Initially, we provided coordinationacquisitions of benefits services to state Medicaid agencies. When Medicaid began to delegate members to managed care organizations, we began providing similar coordination of benefits services to those health plans. We launched our payment integrity services in 2007 and subsequently acquired several businesses tothat helped expand our service offerings. In 2009, we began providing cost containment services for Medicare with our acquisition ofproduct suite, including IntegriGuard, LLC (“IntegriGuard”)(2009), which does business as our wholly owned subsidiary HMS Federal, providing fraud, waste and abuse analytical services to the Medicare program, the Veterans Health Administration (“VHA”) and the Department of Defense. In 2009 and 2010, we began providing cost containment services to large self-funded employers through our acquisitions of Verify Solutions, Inc. and Chapman Kelly, Inc. In 2011, we expanded our cost containment services among federal, state and health plan payers with our acquisition of HealthDataInsights, Inc.(“HDI”). HDI provides improper payment identification services for government (2011), Essette, Inc. (2016), Eliza Holding Corp. (2017) and private health plans, and is the Medicare Recovery Audit Contractor (“RAC”) in CMS Region D, covering 17 states and three U.S. territories. In December 2012, we extended our workers’ compensation recovery services to health plans through our asset purchase of MedRecovery Management, LLC.

The Healthcare Environment

The largest government healthcare programs are Medicare, the healthcare program for aged and disabled citizens that is administered individually by CMS and Medicaid, the program that provides medical assistance to eligible low income individuals, which is also regulated by CMS, but administered by states. For 2016, Medicare and Medicaid are projected to pay approximately 44.9% of the nation’s healthcare expenditures and serve over 128 million beneficiaries. Many of these beneficiaries are enrolled in managed care plans, which have the responsibility for both patient care and claim adjudication, though many states also continue to manage the care for certain populations on a fee for service basis.

By law, the Medicaid program is required to be the payer of last resort; that is, all other available third party resources must meet their legal obligation to pay claims before the Medicaid program pays for the care of an individual enrolled in Medicaid. Under Title XIX of the Social Security Act, states are required to take all reasonable measures to ascertain the legal liability of “third parties” for healthcare services provided to Medicaid recipients. Since 1985, we have provided state Medicaid agencies with services to identify third parties with primary liability for Medicaid claims, and since 2005, we have provided similar services to Medicaid managed care plans.

In accordance with the Medicare Prescription Drug Improvement and Modernization Act of 2003, CMS began a demonstration project utilizing recovery audit contractors to assist Medicare in identifying improper payments made to healthcare providers and suppliers. The demonstration project began in 2005 with six pilot states and was viewed as a success with Medicare RACs identifying over $900 million in overpayments and underpayments on claims of healthcare services provided to Medicare beneficiaries. The success of the demonstration project led Congress to pass the Tax Relief and Health Care Act of 2006, which made the Medicare RAC Program permanent and authorized its expansion to all 50 states by January 1, 2010.

Signed into law in February 2006, the Deficit Reduction Act of 2005 (the “DRA”) established a Medicaid Integrity Program to increase the government’s capacity to prevent, detect and address fraud, waste and abuse in the Medicaid program. The DRA also added new entities, such as self-insured plans, Pharmacy Benefit Managers (“PBMs”) and other “legally responsible” parties to the list of entities subject to the third party liability (“TPL”) provisions of the Medicaid statute. These measures, at both the federal and state level, have strengthened our ability to identify and recover erroneous payments made by our customers.

The Patient Protection and Affordable Care Act (the “ACA”) was signed into law in 2010. This legislation touched almost every sector of the healthcare system, and affords us a range of growth opportunities across a number of services. We are focused on three critical areas related to this legislation:

Medicaid Expansion:States that expand their Medicaid programs in accordance with the ACA receive federal funding for the total cost of the expansion for a period of three years, and reduced funding thereafter. As of early 2016, approximately two-thirds of the states opted to expand their Medicaid programs as provided under the ACA. According to the CMS NHE Projections, the number of individuals enrolled in Medicaid and the Children’s Health Insurance Program (“CHIP”) is expected to increase from 77.9 million in 2016 to 84.6 million in 2024, with expenditures over the same period expected to increase from $585 billion to $915 billion. As a result, we anticipate continued demand for our cost containment services by states and the managed care organizations they contract with. We believe that our strong history of successful contracting with Medicaid agencies and Medicaid managed care organizations will enable us to continue providing value-added services to help control the escalating costs for this expanded population.

Payment Integrity:The ACA contained a number of provisions for combating fraud, waste and abuse throughout the healthcare system, including in Medicaid and Medicare. These initiatives include: (i) requiring state Medicaid agencies to contract with state Medicaid RACs and deploy programs modeled on the Medicare RAC Program administered by CMS, (ii) expanding the Medicare RAC Program to include Medicare Part C and D, (iii) establishing a national healthcare fraud, waste and abuse data collection program and (iv) increasing scrutiny of providers and suppliers who want to participate in Medicare, Medicaid and other federally-funded programs. The ACA further required that each state establish a Medicaid RAC program by January 1, 2012. In addition, the ACA allowed for significant increases in funding for these and other fraud, waste and abuse efforts. We continue to seek opportunities to expand our current partnerships with CMS, states and health plans and to provide innovative ideas to support their payment integrity initiatives.

Employer-Sponsored Health Coverage: The ACA largely preserves and builds upon the existing employer-sponsored health coverage model. Though not all employers will be required to provide healthcare coverage, large employers (i.e. those with 50 or more full time equivalents) will be penalized starting in 2016 if (i) they do not offer coverage (or if they offer coverage that does not meet certain requirements) and (ii) one or more of their full time employees receives a federal tax credit or cost sharing subsidy through a health insurance exchange. Employers will also be prohibited from imposing waiting periods for enrollment of more than 90 days. We expect that we will be able to offer a range of audit services to employers of all sizes, which will be valuable as these employers extend coverage to their employees.

The healthcare environment continues to change as new programs are established, such as the Medicare prescription drug program and the Marketplace Exchanges, and new opportunities for oversight and improved program integrity are created. Our expertise in helping healthcare payers control costs and recover improper payments through various cost saving measures add value to the sustainability of large government healthcare programs. Although these changes in the healthcare environment create opportunities for us, they sometimes cause us to reevaluate our current business. One primary example of this is the current Medicare RAC Program. As a result of increased Medicare RAC activity and other payer pressures, which include reducing overall costs and improving quality of services provided, healthcare systems have experienced an accelerated shift in patients moving from inpatient to outpatient care. In response to concerns over this growing trend, in August 2013, CMS issued CMS Rule 1599-F,Hospital Inpatient Admission Order and Certification and Two Midnight Benchmark for Inpatient Hospital Admissions for the Fiscal Year 2014 Inpatient Prospective Payment System/Long-Term Care Hospital (the “Two Midnight Rule”) in order to clarify Medicare’s inpatient policy around when it is appropriate to admit a patient to the hospital for an inpatient stay versus when they should receive outpatient services. The Two Midnight Rule redefined the requirements for an inpatient stay with a new formal time-based standard, which initially stated that surgical procedures, diagnostic tests and other treatments (in addition to services designated as inpatient-only),are generally appropriate for inpatient hospital admission and payment under Medicare Part A when a physician (i) expects the beneficiary to require a stay that crosses at least two midnights and (ii) admits the beneficiary to the hospital based upon that expectation.

As part of theRule’simplementation, CMS suspended the Medicare RACs’ review of inpatient hospital claims paidbetween October 2013 and September 2014 to determine whether the inpatient hospital admission and patient status wasappropriate. CMS subsequently extended the delay of the enforcement of Two Midnight Rule claims by Medicare RACs through January 2016 in accordance with the passage of certain legislative and regulatory actions. In October 2015, CMS released updates to the Two Midnight Rule as part of CMS’ final outpatient payment rule, Calendar Year (CY) 2016 Hospital Outpatient Prospective Payment System. The final rule provided, among other things, that inpatient admissions where a physician expects the patient to need less than two midnights would be payable under Medicare Part A on a case-by-case basis. CMS also announced that Quality Improvement Organizations (“QIOs”) would assume the responsibility for conducting initial reviews of short inpatient stays and refer claim denials to Medicare Administrative Contractors. Medicare RACs would resume patient status reviews for claims with admission dates of January 1, 2016 or later that were based on providers with high denial rates upon referral by QIOs.

In August 2014,in response to litigation by the American Hospital Association that cited (i) ambiguities around Medicare’s hospital inpatient payment policy, (ii) flaws with CMS’ policy to fully deny payments to hospitals for these claims and (iii) that hospitals were denied timely due process because the Office of Medicare Hearings and Appeals (OMHA) had a serious backlog and was not hearing hospital appeals, CMS announced it would settle with hospitals willing to withdraw inpatient status claims currently pending in the appeals process by offering to pay hospitals 68% for all eligible claims that they have billed to Medicare. On February 9, 2016, the D.C. Circuit Court of Appeals decided to remand the case to the U.S. District Court for the District of Columbia regarding mandamus relief for three hospitals whose appeals were significantly delayed due to OMHA’s appeals backlog. While the Circuit Court’s decision agrees with plaintiffs’ expectations of an appeals process that meets statutory timeframes and their argument that Medicare RAC denials have greatly contributed to the backlog, the decision also recognized that Congress’s recent introduction of Senate Bill 2368, theAudit & Appeals Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015, could be viewed as significant progress towards reducing the appeals backlog and solving many of the appeals issues cited in the AHA litigation. Even if the AFIRM Act is passed, however, it will take time to reduce the backlog and improve the appeals process. As such, we believe it is likely that the current ADR limits and other review restraints will continue until substantial changes to the appeals process are implemented. We will continue to closely follow developments related to this legislation in order to further evaluate the potential impact it may have on our business.others.

We believe thatwere originally incorporated in the needState of New York in October 2002 and desire to have a Medicare Recovery Audit program remains a goal for CMS, howeverreincorporated in the current constraints within the program regarding theState of Delaware in July 2013. Our principal executive offices are located 5615 High Point Drive, Irving, Texas 75038 and our telephone number of claims that can be reviewed, the lack of an adequate structure for establishing contingent revenue and the general uncertainty around the program raises concerns about its viability. We remain confident that we have a robust business model that has demonstrated an ability to recover hundreds of millions of dollars for the customers we serve. Our commitment to reduce fraud, waste and abuse in these government healthcare systems remains strong and we will continue to review our business model while we work with our customers to improve the program.is (214) 453-3000.

Principal Products and ServicesWe operate as one business segment with a single management team that reports to the Chief Executive Officer.

Our Solutions

Our coordination of benefits offering to customers consists of services that draw principally upon proprietary information management and data mining techniques designed to ensure that the rightcorrect party pays a healthcare claim. Our payment integrity offering to customers also consists of a variety of services are designed to ensure that the billinghealthcare billings and/or payment ispayments are accurate and appropriate. As a result of ourthese services, customers received billions of dollars in cash recoveries in 2015,2016, and saved billions more through the prevention of erroneous payments. In addition, our care management solutions help risk-bearing organizations manage the care delivered to their members with a focus on improving outcomes and patient engagement.

Our services are applicable to federal, state and privatecommercial health plans and prevent and address errors across the payment continuum, from an individual’s enrollment in a program before any medical service is rendered, to pre-payment review of a claim by a payer, through recovery audit where discovery of an improper payment is made.made via audit. Our services also address thea wide spectrum of payment errors, from eligibility and coordination of benefits errors, to the identification and investigation of potential fraud, and extend to most claim types. Our services also assist customers in managing quality, risk, cost and compliance across all lines of business.

In general, our range of services includes the following:

We provide cost avoidance services, which include providing validated insurance coverage information that is used by government-sponsored payers to coordinate benefits properly for future claims. With validated insurance information, Medicaid payers can avoid unnecessary costs by ensuring that they pay only after all other benefits available have been exhausted, thereby complying with federal regulations that require Medicaid to be the payer of last resort. Nevertheless, due to a variety of factors, some Medicaid claims are paid even when there is a known responsible third party. Our government-sponsored program customers rely on us to identify those claims that were paid in error and recover these payments from the liable third party. Further, we also provide services to assist customers in identifying other third-party insurance and recovering medical expenses where a member is involved in a casualty or tort incident. Lastly, for Medicaid agencies exclusively, we provide estate recovery services to identify and recover Medicaid expenditures from the estates of deceased Medicaid members in accordance with state policies. For the years ended December 31, 2016, 2015 and 2014, our coordination of benefits services represented 72.3%, 71.2% and 70.5% of our total revenue, respectively.

Our payment integrity services are applicable to all markets that HMS serves, including the federal and state governments, commercial health plans and other at-risk entities. Our solutions are designed to verify that medical services are utilized, billed and paid appropriately. Our services combine data analytics, clinical expertise and proprietary technology to identify improper payments on both a pre-payment and post-payment basis; identify and recover overpayments/underpayments; detect and prevent fraud, waste and abuse; and identify process improvements. For the years ended December 31, 2016, 2015 and 2014, our payment integrity services represented 24.3%, 24.5% and 24.5% of our total revenue, respectively.

We offer a web-based care management platform which helps risk-bearing healthcare organizations identify, engage, and manage at-risk patient populations to improve outcomes while managing costs.

Customers

For each of the years ended December 31, 2016, 2015 and 2014 respectively, none of our customersno one individual Company customer accounted for more than 10% of our total revenue. For the year ended December 31, 2013, one customer accounted for 22.3%

The composition of our total revenue.

The list of our ten10 largest customers changes periodically. For the years ended December 31, 2016, 2015 and 2014, and 2013, our ten10 largest customers represented 44.0%40.6%, 40.1%44.0% and 47.2%40.1% of our total revenue, respectively. The current terms of our agreements with these customers have expiration dates ranging between 20162017 and 2020. Several of our contracts, including those with some of our largest customers, may be terminated for convenience. The failure to reprocureearly termination of a contract with one of theseour significant customers may have a materialan adverse effect on our financial condition, results of operations and cash flows.

We provide products and services under contracts (or sub-contracts) that contain various revenue structures, including contingent revenue and fixed feefixed-fee arrangements. Most of our contracts have terms ofranging from three to five years, including optional renewal terms.terms at the option of the customer. In many instances, we provide our services pursuant to agreements that are subject to periodic reprocurements. Several of our contracts, including those with some of our largest customers, may be terminated for convenience. Because we provide our services pursuant to agreements that are open to competition from various businesses in the U.S. healthcare insurance benefit cost containment marketplace, we cannot provide assurance that our contracts, including those with our largest customers, will not be terminated for convenience, awarded to other parties, or renewed, and,renewed. Additionally, we cannot provide assurance that our contracts, if renewed, thatwill have the same fee structures willor otherwise be equal to those currently in effect.on satisfactory terms.

Industry Trends/Trends and Opportunities

AsU.S. healthcare expenditures continue to escalate and consume a large proportion of our GDP, presenting challenges for payers who wish to contain and reduce costs while also promoting quality healthcare outcomes. These aims are the same across all at-risk entities, including commercial health plans and government healthcare programs, continuesuch as Medicaid and Medicare.

Within the commercial market, health plans sell policies directly to grow,individuals (on the open market or via health insurance exchanges), contract with employers to underwrite their abilityemployees’ care, or contract with self-insured employers to oversee benefit administration to their employees. This market also includes a growing number of risk bearing provider-sponsored plans that operate and market health plan benefits. According to CMS NHE projections, private health insurance covered 195 million individuals in 2016 at a cost of $1.09 trillion.

Several commercial health plans also offer government-sponsored lines of business, including partnering with Medicare, Medicaid and CHIP to oversee care delivery for beneficiaries enrolled in those programs. Government managed care grew out of pressures to contain the growth of state and federal program spending and to address general concerns about healthcare expenditures presents challenges dueaccess. Commercial health plan-related partnerships with government programs include the following:

HMS also continues to the number and variety ofserve government-sponsored agencies’ legacy fee-for-service programs at the state and federal level,level. These plans are generally reliant on and susceptible to the government appropriations process that determines their budget and governs the rise in the cost of care and number of beneficiaries. CMS has projected that Medicaid, CHIP and Medicare expenditures will increase to nearly $2.1 trillion by 2024. The ACA further added increased pressure on states to cover more individuals, making cost containment a high priority.beneficiaries they serve.

According to the CMS HNENHE projections, Medicare programs in 20152016 covered approximately 54.556 million people and spentat a cost of approximately $646$681 billion and Medicaid/CHIP programs covered approximately 7677 million people, and spentcosting approximately $560$593 billion. Altogether, it is projected that the government programs we serve covered approximately 131130 million people and spent $1.2at a total cost of approximately $1.3 trillion in 2015. We believe that enrollment in these programs will continue to increase as a result of2016. Based on the ACA.

According to theCMS NHE Projections,,Medicaid enrollment Medicare spending is projected to grow 5.8% in 2017 over 2016, and CMS projects Medicaid enrollment will grow by 2.1% in 2016 over 2015, and 2.5%1.7% in 2017 over 2016. Total Medicaid spending is projected to increase at a rate of 4.5% in 2016 over 2015, and at a rate of 5.3%4.8% in 2017 over 2016. In addition, Medicare spending is projected to grow 6.1% in 2016 over 2015 and up to 20% in 2018 over 2015. There are a number of factors that could impact these projections, including medical utilization by the new enrollees under the ACA and any legislative action taken to reduce spending.

In response to pressures to contain the growth of state and federal Medicaid spending and to concerns about access to healthcare for low-income individuals, the use of managed care arrangements in Medicaid continues to grow. In 2015, 38 states and the District of Columbia contracted with managed care organizations to provide care to some or all of their Medicaid beneficiaries. In addition, many states have expanded the use of managed care organizations to new regions or to serve beneficiaries with more complex conditions. Of the 31 states and the District of Columbia that opted to expand Medicaid eligibility levels by early 2016 pursuant to the ACA, all except for four use Medicaid managed care organizations. The majority of new lives that have entered the Medicaid program as a result of the ACA are enrolled in managed care organizations.

Similarly, health plans also continue to assume risk for Medicare lives, with the Kaiser Family Foundation estimating that in 2015, nearly one-third of all Medicare recipients had enrolled in a Medicare Advantage plan. As commercial and government health plans continue to focus on strategies to contain costs across their different lines of business, we’llwe will continue to focus on serving these health plansthem and meetmeeting their evolving needs. Regardless of the program, coordinating benefits among a growing number of healthcare payers and ensuring that claims are paid appropriately represents an enormous challenge for our customers and an ongoing opportunity for us.

Regulatory Environment

The market for cost containment solutions is large and growing, driven by increasing healthcare costs and payment complexities. For 2017, Medicare and Medicaid are projected to pay approximately 45.9% of the nation’s healthcare expenditures and serve over 130 million beneficiaries. Many of these beneficiaries are enrolled in managed care plans, which have the responsibility for both patient care and claim adjudications. Since 1985, we have provided state Medicaid agencies with services to identify third parties with primary liability for Medicaid claims, and since 2005, we have provided similar services to Medicaid managed care plans.

In 2006, Congress enacted the DRA and created the Medicaid Integrity Program under the Social Security Act to increase the government’s capacity to prevent, detect and address fraud, waste and abuse in the Medicaid program. Later that year, Congress passed the Tax Relief and Health Care Act of 2006, which established the Medicare RAC program. HDI was awarded one of the first contracts under the program. In October 2016, CMS made a new round of awards and we again were awarded a region.

These measures, at both the federal and state level, have strengthened our ability to identify and recover erroneous payments on behalf of our customers.

The ACA was signed into law in 2010. It included many provisions impacting healthcare delivery and payment programs, including employer-sponsored health coverage, expansion of the Medicaid program, health insurance exchanges with premium subsidies, and payment integrity efforts. Following the 2016 Presidential and Congressional elections, some or all of the ACA provisions may be revised or repealed, although the scope and timing of such Congressional efforts are yet to be defined. Options that have been discussed include issuing block grants or establishing per capita caps for state Medicaid populations, and looking at program design alternatives for future enrollment criteria. We will monitor ACA-related changes as they develop and assess their potential impact, as well as any opportunities they may present for our customers and for us.

Competition

The U.S. healthcare insurance benefit cost containment marketplace is a dynamic industry with a range of businesses currently able to offer cost containment services, both directly or indirectly (through subcontracting)sub-contracting), to some or all of the various healthcare payers. In addition, with improvements in technology and the growth in healthcare spending, new businesses are incentivized to enter this marketplace. Competition is therefore robust as customers have many alternatives available to them in their effort to containMany healthcare costs. In addition, many healthcare payers also have the ability to perform some or all of these cost containment services themselves and choose to exercise that option. Competition is therefore robust as customers have many alternatives available to them in their effort to contain healthcare costs.

We compete based on a variety of factors, including our ability to perform a wide range of coordination of benefits and payment integrity related functions; proven results to maximize recoveries and cost avoidance; our in-depth government healthcare program experience; clinical staff expertise; extensive insurance eligibility database; proprietary systems and processes; existing relationships with various customer and other industry shareholders; and our ability to provide customers with actionable intelligence to improve outcomes and patient engagement.

Within our core coordination of benefits services, we compete primarily with large business outsourcing and technology firms, claims processors (including PBMs),and PBMs, clearinghouses, healthcare consulting firms, smaller regional vendors and other TPL service providers; these companies include Optum, Inc., Public Consulting Group, Inc., Emdeon Inc., HP and Xerox.providers. In addition, as noted, we frequently work with customers who may elect to perform some or all of their recovery and cost avoidance functions in-house.

The competitive environment for payment integrity services includes some of the same companies that provide coordination of benefits services, as well asservices. Within the care management and risk analytics sector, we compete primarily with vendors who provide these and other Medicare RACs (CGI Federal, Inc., Cotiviti and Performant Financial Corp.); other claim audit vendors (including Cognosante and Myers & Stauffer LC); fraud, waste and abuse claim edit and predictive analysis companies (such as Emdeon, Inc., Verisk Health, Inc. and LexisNexis Risk Solutions); and numerous regional utilizationpopulation health management companies.technology services. Companies with whom we compete across our product offerings include:

We compete based on a variety of factors, including our ability to perform a wide range of coordination of benefits-and payment integrity related functions; maximize recoveries and cost avoidance; apply our in-depth government healthcare program experience, clinical staff expertise, extensive insurance eligibility database, proprietary systems and processes; leverage our existing relationships; and sustain operations under contingency fee structures.

Business Strategy

OverWe believe that the coursesteadily increasing enrollment and rising expenditures for Medicare and Medicaid, with most new enrollees entering managed care plans; an aging U.S. population with an increasing concentration of 2016,individuals with high cost chronic conditions; and the overall complexity of the healthcare claims payment system in the U.S. all combine to create substantial growth opportunities for the suite of cost containment solutions which we offer. We also believe that these factors similarly present growth opportunities for our care management solutions. We expect to grow our business throughover the course of 2017 and beyond, both organically and inorganically, by leveraging existing key assets (e.g., our data, analytics and in-house expertise, and distribution channel) and pursuing a number of strategic objectives or initiatives, that may include:including:

Employees

As of December 31, 2015,2016, we had 2,3162,315 employees, of which 2,2512,287 were full time.full-time. Of our total employees, 208253 support selling, general and administrativeSG&A activities.

Financial Information About Industry SegmentsIntellectual Property

SinceOur ability to develop and maintain the beginningproprietary aspects of 2007,our technology and operate without infringing the proprietary rights of others are important to our business and competitive position. We establish and protect our proprietary technology and intellectual property through a combination of patents, patent applications, trademarks, copyrights, domain names, trade secrets, including know-how, confidentiality and invention assignment agreements, security measures, non-disclosure agreements with third parties, and other contractual rights. As a result of acquiring Eliza Holding Corp. on April 17, 2017, we have been managednow own a patent portfolio comprised of approximately 55 domestic and operated as one business, with a single management team that reports to the chief executive officer.international patents and patent applications. We do not operate separate lines of business with respectbelieve that any one individual technology is essential to any of our product lines. Accordingly, we do not prepare discrete financial information with respect to separate product lines or by location and do not have separately reportable segments as defined by the guidance provided by the Financial Accounting Standards Board (the “FASB”).business.

Available Information

We maintain a website (www.hms.com) that contains variousAdditional information about our company and our services. ThroughHMS is available on our website we make available, free of charge, access to all reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and our Proxy Statements, as well as amendments to these reports or statements, as filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may also read and copy this information, including any materials we file with the SEC, for a copying fee, at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.www.hms.com. The content on our website, or any website referred to in this Annual Report on Form 10-K, is not incorporated by reference into this Annual Report, on Form 10-K unless expressly noted.

We also make current copiesCopies of the following documentsour recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements, as well as amendments to these reports or statements, are available free of charge on our website underthrough the Investor Relations/Corporate Governance tabs (http://investor.hms.com/corporate-governance.cfm)Relations page, as soon as reasonably practicable after we electronically file them with, or furnish them to, the Audit Committee Charter,SEC. These materials, as well as similar materials for SEC registrants, may be obtained directly from the Compensation Committee Charter, the Nominating & Governance Committee Charter, the Compliance Committee Charter, our Code of Conduct and our Corporate Governance Guidelines.SEC through their website at www.sec.gov. You may also obtain aread and copy of any of the foregoing documents, free of charge, if you submit a written request to Attention: Investor Relations, 5615 High Point Drive, Irving, Texas, 75038. We intend to disclose any future amendments or waivers to the provisions of our Code of Conduct that relate to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions by filing such information on a Current Report on Form 8-Kmaterials we file with the SEC within four business days, toat the extent such filing is requiredSEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the NASDAQ Marketplace Rules; otherwise, we will disclose such amendments or waivers by posting such information on our website.SEC at 1-800-SEC-0330.

Corporate Information

We are incorporated in the State of Delaware. We were originally incorporated on October 2, 2002 in the State of New York. On March 3, 2003, we adopted a holding company structure and assumed the business of our predecessor, Health Management Systems, Inc. In connection with the adoption of this structure, Health Management Systems, Inc., which began doing business in 1974, became our wholly owned subsidiary.

Item 1A. Risk Factors.Factors

We provide

Our business is subject to significant risks, including the following cautionary discussion of risks and uncertainties and possibly inaccurate assumptions relevant to our business that, individually or in the aggregate, may cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.described below. You should carefully consider these factors, but understand that it is not possible to predict or identify all such factors. Consequently, you should not considerrisks, as well as the following to be a complete discussion of all potential risks or uncertainties involved with investing in our stock. These risk factors should be read in connection with other information set forth in this Annual Report,2016 Form 10-K, including our Consolidated Financial Statements and the related Notes.

Risks Relating to Our Business

Changes in the United States healthcare environment, or in laws relating to healthcare programs and policies, and steps we take in anticipation The occurrence of such changes, particularly as they relate to the ACA and the Medicare and Medicaid programs, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The healthcare industry in the United States is subject to changing political, economic and regulatory influences that may affect the procurement practices and operations of federal, state and private healthcare organizations and agencies. In general, the ACA sought to improve access to healthcare by making health insurance available to more legal U.S. residents. The legislation’s strong emphasis on program integrity and cost containment, along with its expansion of Medicaid, created new opportunities to grow our business and our service offerings. However, it will be difficult to predict its full impact and influence on future changes to Medicare policy, due not only to its complexity, but also to the wide range of other factors contributing to uncertainty of the healthcare landscape. Chief among these are the 2016 elections, where several candidates on the federal level have expressed their opposition to the ACA, and some on the state level oppose Medicaid expansion.  In addition, certain provisions of the legislation may be repealed or modified.  The Medicare RAC Program also faces increased opposition and ongoing legal challenges.

We have made and will continue to make investments in personnel, infrastructure and product development, as well as in the overall expansion of the services that we offer in order to support existing and new customers as they implement the requirements of the ACA. As states seek to contain costs with an expanding Medicaid population, we expect to continue to see an increase in the migration of Medicaid lives from fee-for-service to managed care plans. However, future changes to the ACA and to the Medicare and Medicaid programs may also lower reimbursement rates, establish new payment models, increase or decrease government involvement in healthcare, decrease the Medicare RAC Program, and/or otherwise change the operating environment for our customers. Healthcare organizations may react to such changed circumstances and financial pressures, including those surrounding the implementation of the ACA, by taking actions such as curtailing or deferring their retention of service providers like us, which could reduce the demand for our services. Our business, financial condition, results of operations and cash flows could be adversely affected if efforts to waive, modify or otherwise change the ACA, in whole or in part, are successful, if we are unable to adapt our products and services to meet changing requirements or expand service delivery into new areas, or the demand for our services is reduced as a result of healthcare organizations’ reactions to changed circumstances and financial pressures.

Healthcare spending fluctuations, simplification of the healthcare payment process or other aspects of the healthcare financing system, budgetary pressures and/or programmatic changes diminishing the scope of program benefits, or limiting payment integrity initiatives, could reduce the need for and the price of our services, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our projections and expectations are premised upon consistent growth rates in spending in the Medicare and Medicaid programs, the current healthcare financing system and the need for our services within that existing framework. As enrollment in government healthcare programs continue to grow, particularly under the ACA, we expect the complexities of the healthcare benefit and payment system to continue to grow (due to factors such as the expansion of pay-for-performance programs). Our success as a company is based on offering services that improve the ability of our customers to recover revenue that would otherwise be lost often as a result of procedural inefficiencies and complexities in that system. However, the need for our services, the price customers are willing to pay for them and/or the scope and profitability of our contracts could be negatively affected by a number of factors, including a lower than projected growth in Medicare and Medicaid programs due to developments such as lower medical utilization by new enrollees under the ACA and any legislative action taken to reduce spending. Compounding this are budgetary pressures that may drive changes at the state level, including shifting lives from traditional fee-for-service plans into Medicaid managed care plans to achieve cost savings.

The demand for our services could also be impacted by other changes in government healthcare programs or in the level of government spending, such as: the simplification of the healthcare benefit and payment system through legislative or regulatory changes at the federal or state level (for example, legislative changes impacting the scope of mandatory audits; limiting or reducing the amount of reviewable claims and/or the look-back period for review in areas where we conduct audits); unanticipated reductions in the scope of program benefits (such as, for example, state decisions to eliminate coverage of optional Medicaid services or shifting lives into managed care plans); and/or limits placed on ongoing program integrity initiatives. Modifications in provider billing behavior and habits, often in response to the success of our services or to legislative changes to reduce healthcare spending, could also reduce the profitability of our contracts and reduce the need for our services. For example, during 2014 and 2015, HDI’s recovery audit services under its existing Medicare RAC contract were limited because of delays in the award of the new contracts resulting from pre-award protests and ongoing litigation regarding certain payment terms proposed by CMS as part of the new Medicare RAC proposals. In addition, due to CMS’ implementation of the Two-Midnight Rule, HDI’s review of inpatient hospital claims lasting less than two midnights was suspended beginning in October 2013 and Medicare RACs are no longer permitted to conduct initial medical reviews of such short inpatient stays. Instead, Medicare RACs are now restricted to reviewing hospitals that have consistently high denial rates based on QIO patient status reviews or fail to improve their performance after QIO educational intervention and are subsequently referred to a Medicare RAC by QIOs. Moreover, in connection with the rule’s restrictions, CMS proposed a reimbursement cut in Medicare payments to hospitals in order to offset an anticipated increase in the number of inpatient admissions that would likely result from hospitals no longer having the ability to bill CMS for outpatient services on hospital stays lasting less than two midnights. Federal lawsuits have been filed by hospitals challenging the Two-Midnight Rule on the grounds that the proposed payment reduction violates the Administrative Procedure Act. Revenue associated with Two-Midnight Rule recoveries initiated by Medicare RACs historically were a significant finding for the Medicare RAC program prior to implementation of the moratorium; as a result, the continued suspension or termination of this type of review activity under the Two-Midnight Rule may have a material impact on our future revenue if HDI is awarded a new Medicare RAC contract, depending upon, among other factors, how the Two Midnight Rule is applied by providers, the review strategies ultimately approved by CMS, the scope of improper claims that CMS allows HDI, and the outcome of the federal court challenges to the Two-Midnight Rule. Any of these factorsrisks could cause our financial projections to differ from our actual results, and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Further, in August 2014, CMS announced it would settle with hospitals willing to withdraw inpatient status claims currently pending in the RAC appeals process by offering to pay hospitals 68% for all eligible claims they had billed to Medicare. In June 2015, CMS notified HDI that based on the initial lists of finalized settlements, HDI owed CMS approximately $28.6 million due to adjustments in contingency fees pursuant to HDI’s contract with CMS. HDI had previously advised CMS that it disagreed with CMS’ interpretation of the contract and has requested additional support and accurate backup data for specific audits from CMS to further evaluate the potential impact of the hospital settlement on fees that it has been, or is due to be paid, and its respective position with respect to the resolution of the matter, which continues to remain uncertain at this time. While there are uncertainties in any dispute resolution and results cannot be guaranteed, HDI accrues an estimated liability for appeals based on the amount of fees that are subject to appeals, closures or other adjustments, which we estimate are probable of being returned to providers following a successful appeal. A portion of our reserve for estimated liability for appeals recorded as of December 31, 2015 may apply to this population, and there could be a material negative impact on our future revenue in future periods to the extent that (i) any final determination of amounts owed by HDI to CMS under the current Medicare RAC contract materially exceeds our accrued reserves for such appeals, (ii) HDI is required to return certain fees which have been paid or (iii) HDI’s ability to collect fees for audits already performed is affected.

Our business could be adversely affected if we fail to maintain a high level of customer retention, lose a major customer or fail to renew or reprocure a contract, or if customers elect to reduce the scope of our contracts or terminate them before their scheduled expiration dates.

Although each of our customers accounted for less than 10% of revenue from continuing operations in 2015, we generate a significant portion of our revenue from a limited number of large customers at the federal and state level. Ourcontracts with these customers are subject to periodic renewal and/or re-bidding processes and permit them to terminate their contracts on short notice, with or without cause.Since several of our contracts, including those with many of our largest customers, may be terminated upon short notice for convenience, dissatisfied customers might seek to exit existing contracts prior to their scheduled expiration date and could direct future business to our competitors. Government customers are also subject to financial pressures or pressure from stakeholders that may cause them to redefine or reduce the scope of our contracts (by, for example, significantly reducing the volume of data that we are permitted to audit) or terminate contracts for our services that may be regarded as non-essential. Despite our right to prompt and full payment under the terms of our contracts, we could face challenges in obtaining timely or full payments for our properly provided services from customers and parties who we provide services to. The unexpected termination, substantial reduction or failure to reprocure or renew a contract with a major customer could reduce our revenue and adversely affect our business.

Our success also depends on relationships we develop with our customers that enable us to understand our customers’ needs and deliver solutions and services that are tailored to meet those needs. If a customer is dissatisfied with the quality of our work or we fail to meet performance standards under our contracts, or if our products, technical infrastructure or services do not comply with the provisions of our contractual agreements or applicable regulatory requirements, we could incur additional costs that may impair the profitability of a contract and damage our ability to obtain additional work from that customer, or other current or prospective customers. For example, some of our contracts contain liquidated damages provisions and financial penalties related to performance failures, which if triggered, could adversely affect our reputation, business, financial condition, results of operations and cash flows. Although we have liability insurance, the policy coverage and limits may not be adequate to provide protection against all potential liabilities, and we may encounter, and have to litigate, disputes with our insurers over the existence and scope of coverage under those policies. We also may be required to disclose liquidated damages or other financial penalties assessed against us in connection with future bids for services with other customers, which may reduce our chances of winning such procurements. Further, under the terms of one of our contracts, we issued an irrevocable letter of credit for $3.0million to secure our performance, which we established against our existing revolving credit facility. If a claim is made against this letter of credit or any similar instrument that we obtain in the future, we would be required to reimburse the issuer of the letter of credit for the amount of the claim.

If we lose a major customer; if we fail to maintain a high level of customer retention; if we fail to reprocure a contract; if our customers reduce the scope of our contracts or limit future contracting opportunities; or if we are exposed to significant costs, liabilities or negative publicity, our ability to compete for new contracts with current or prospective customers could be damaged and our business, financial condition, reputation, results of operations and cash flows could be materially adversely affected.

We face significant competition for our services and we expect competition to increase.

Competition among U.S. healthcare insurance benefit cost containment service providers is intense and we expect to encounter additional competition due primarily to advances in technology. Many of the cost containment services we provide are being targeted by formidable competitors with national reputations, and their success in attracting business or winning contract bids could significantly and/or adversely affect our business. Our current competitors include large business outsourcing and technology firms; the other Medicare RACs; Medicaid Management Information Systems (“MMIS”) vendors; other claim audit vendors; fraud, waste and abuse claim edit and predictive analysis companies; primary claims processors; numerous regional utilization management companies; analytics and software vendors; as well as clearinghouses, healthcare consulting firms and other TPL service providers.

In addition, current and prospective customers could compete by electing to perform some or all of their recovery and cost avoidance functions in-house, or they could develop in-house capacities for some of the services that we provide or hope to provide, therefore deciding not to engage us or reducing the quality of service they purchase from us. Certain state customers may decide to combine or “bundle” TPL services under large-scale IT procurements, allowing MMIS vendors to partner with less experienced TPL identification vendors based on preferred relationships or favorable pricing. Some of our competitors have also merged or formed business alliances with other competitors, which may affect our ability to work with potential customers. In some areas of our business, we could face potential competition from our current or former subcontractors or teaming partners, who may use their position to establish their own relationships with our customers and seek to become prime contractors on similar work in the future. As certain vendors and healthcare providers consolidate to create integrated systems with greater market recognition and financial resources, these entities may be able to offer lower prices or negotiate fee reductions on our current products and services. Although we attempt to protect ourselves against such conduct through the terms of our subcontracts and teaming agreements, a subcontractor or teaming partner may determine that the benefits of violating its contract with us outweigh the costs and risks.

We must remain competitive with our existing business and service capabilities and develop new products and services, which will require not only that we make substantial financial and resource investments, but that we quickly respond to new or emerging technologies and to changes in customer requirements and the healthcare industry. As industry standards continue to rapidly evolve, companies that have invested in proprietary technology different from our own product and service offerings, such as front-end analytics, have emerged as new competitors. There is also increasing sophistication in certain services and our competitors are constantly developing products and services that may become more efficient or appealing to our customers. Although the quality and value of new products introduced by competitors may be unknown, our current and future customers may decide to try these untested solutions because of the lower pricing models offered by our competitors. In certain cases, our competitors and potential competitors have significantly greater resources and market recognition than we have and may be able to devote greater resources to the sale of their services, the development and implementation of new and improved systems and solutions for the customers that we serve, or the pursuit of various acquisitions that allows them to quickly amass a wide array of capabilities. We cannot provide assurance that our new or modified product and service innovations will be responsive to customer preferences or industry changes, or that the product development initiatives that we prioritize will yield the gains that we anticipate, if any.

We cannot provide assurance that we will be able to compete successfully against existing or new competitors. In addition, we may be forced to lower our pricing, unexpectedly increase or enhance our technological or data capabilities, or modify our service offerings, or the demand for our services may decrease as a result of increased competition. Further, a failure to be responsive to our existing and potential customers’ needs or to the changing industry landscape could hinder our ability to maintain or expand our customer base, hire and retain new employees, pursue new business opportunities, complete future acquisitions and operate our business effectively. Any inability to compete effectively could materially adversely affect our business, financial condition, results of operations, and cash flows.flows in a material way.

If we are unableRisks Relating to protect our intellectual property rights the value of our products and services may be diminished and our business may be adversely affected.Our Company

Our success as a company depends in part upon our ability to protect our core technology and intellectual property. Our expanding operations and efforts to develop new products and services also make protection of our intellectual property more critical. However, the steps we have taken to deter misappropriation of intellectual property may be insufficient to protect our proprietary information. From time to time, competitors have attempted to use state open records and/or federal Freedom of Information Act laws to obtain our proposal responses and other documents we provide to our government customers. We cannot be certain that our efforts to protect the confidential and proprietary trade secret information or intellectual property in these proposals or other documents will always be successful, due to the many factors that go into the various state and federal decisions to release information in response to open records requests (even in spite of our objections and responses). In addition, misappropriation of our intellectual property by third parties, or any disclosure or dissemination of our confidential and proprietary business intelligence, queries, algorithms and other similar information by any means, could undermine any competitive advantage we currently derive or may derive from that intellectual property. For example, our current or former employees, consultants or other third parties may unintentionally or willfully disclose our trade secrets, know-how or other confidential and proprietary information to competitors. In order to enforce our rights, we may be required to engage in costly and time-consuming litigation or legal proceedings in which we may not ultimately prevail. On the other hand, third parties may claim that we are infringing upon or misappropriating their intellectual property. Our exposure to risks related to the use of intellectual property may also increase as a result of acquisitions since third parties may make infringement and similar or related claims after we have acquired technology. Any of these situations could cause us to expend significant time and resources and to incur substantial costs associated with litigation that may be necessary to defend ourselves or to enforce our intellectual property rights and could result in our being prevented from furnishing certain products and services. Although we have taken measures to protect our proprietary rights, we cannot provide assurance that others will not compete with our business by offering products or concepts that are substantially similar to ours. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties or our employees, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our products and services, which could have an adverse effect on our business, financial condition, results of operations and cash flows.

A federal or state government agency’s determination to award a contract may be challenged by an interested party. As a result, even if we win a bid, the contract may be delayed or may never be implemented if such a challenge is successful.

In order to market our services to customers, we are often required to respond to government-issued requests for proposals (“RFPs”) to compete for a contract. The state and federal laws and regulations governing procurements of goods and services provide procedures by which other bidders and other interested parties may challenge the award of a government contract. Challenges or protests to government awards may be filed even if there are no valid legal grounds on which to base the protest. If any such protests are filed, the government agency may decide to withhold a contract award or suspend performance under the contract while the protest is being considered, or may choose to take corrective action on its own, in each case, potentially delaying the start of the contract. If we are the original awardee of a protested contract, we could be forced to expend considerable funds to defend a potential award, while also incurring expenses to maintain our ability to timely start implementation in case the protest is resolved in our favor. It can take many months to resolve these protests, and even if it is resolved in our favor, the resulting delay in the start-up and funding of our work under the contracts may cause our actual results to differ materially and adversely from those anticipated. In the event of irregularities we perceive or learn of in the award or bidding process, we also may be forced to file protests in response to RFP awards to other bidders, at significant cost to us. In addition, a contract award may be terminated or the government agency may opt to solicit new bids and award a new contract if a protest is successful or the government agency chooses not to uphold its original award. We cannot provide assurance that we will prevail if a contract we are awarded is protested or that if we protest an award our challenge will be successful. Extended implementation delays or successful protests of our contract awards could have a material adverse effect on our financial condition or results of operations.

For example, our wholly owned subsidiary HDI has served as the Medicare RAC for Region D since October 2008. After multiple contract modifications due to the delay in procurement of the new Medicare RAC contract awards, HDI’s Medicare RAC contract now provides for a term that expires on July 31, 2016. The most recent extension further requires HDI to continue to support the appeal process from August 1, 2016 through January 31, 2018. CMS has also implemented new ADR limits for inpatient providers that set the ADR requirement to 0.5%, from the standards through 2015 of 2.0%. This change significantly impacts the volumes of claims Medicare RACs will review for inpatient providers and reduces their ability to identify overpayments and underpayments. On November 6, 2015, CMS released a new RFP for recovery audit services, including those currently performed by HDI, for each of the CMS Recovery Audit regions. This reprocurement replaces the procurement activities begun in February 2013 for the new Medicare RAC contracts, which were significantly delayed, in part, by the cancellation of the original and second procurements following the Government Accountability Office’s denial of pre-award protests and the ongoing litigation in regards to certain procurements terms. The current procurement has paused, pending the results of a second Request for Information (“RFI”) released by CMS on December 31, 2015 that sought to gather requirements for recovery auditing work for health plans. Changes to the procurement based on the RFI have not yet been made known. Currently, CMS’ answers to questions submitted regarding the Medicare RAC procurement are pending and a proposal due date has not been published. The timing and outcome of the new Medicare RAC contract awards continue to remain uncertain and the prolonged delay of the new contract awards may further impact our business. In addition, in the event HDI is awarded one or more regions, the new Medicare RAC contract may contain substantially different terms from HDI’s current contract and such terms may change or delay the timing of HDI’s revenue recognition under the current contract.

We obtain a significant portion of our business through competitive bidding in response to government requests for proposals and future contracts may not be awarded through this process on the same level and we may not reprocure certain contracts.

To effectively respond to government RFPs, we are often required to accurately estimate our cost structure for servicing a proposed contract, the time required to establish operations and the likely terms of any proposals submitted by our competitors. We must also assemble and submit a large volume of information within a RFP’s rigid timetable, and our ability to provide timely and complete responses to RFPs will greatly impact our business. Should any part of our business suffer a negative event, such as customer dispute, a government inquiry or an adverse judgment or settlement in a litigation proceeding, we may be required to disclose the occurrence of that event in a RFP, which could impact our ability to win the contract at issue. Even if we win these contracts, we are not always able to secure the most favorable contract terms and conditions with our government customers, which may impact our ability to protect our rights relating to payment, our intellectual property, our employees, and other contractual rights. We also cannot provide assurance that we will continue to obtain contracts in response to government RFPs, that we will be successful in re-winning contracts after they expire, or that our proposals will result in profitable contracts. In addition, if we are unable to win reprocurements on particular contracts, we may be precluded from entering certain customer markets for the term of the contract awarded to another party. If we are unable to consistently win new contract awards over any extended period, our business and prospects will be adversely affected.

Our ability to expand our business will be adversely affected if we fail to implement our growth strategy.

The size and the scope of our business operations have expanded over the past several years, and we expect that we willcurrently intend to continue to grow and expand into new areas within the government and privatecommercial healthcare space; however, such growth and expansion carries costs and risks that, if not properly managed, could adversely affect our business. Our future growth will depend, among other things, on our ability to successfully execute our business plans and continued efforts to improve our operations, all while remaining competitive. We must also be flexible and responsive to our customers’ needs and to changes in the political, economic and regulatory environment in which we operate.The greater size and complexity of our expanding business puts additional strain on our administrative, operational and financial resources and makes the determination ofcan make optimal resource allocation more difficult.difficult to determine. We cannot provide assurance that we willmay not be able to maintain or accelerate our growth. A failure to anticipate or properly address the demands and challenges that our growth strategy and potential diversification may have on our resources and existing infrastructure may result in unanticipated costs and inefficiencies and could negatively impact our ability to execute on our business plans and growth goals, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we fail to innovate and develop new or enhanced solutions and services, or if these solutions and services are not adopted by our customers, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Part of our growth strategy depends on our ability to respond to the evolving healthcare landscape with new and enhanced solutions and services that our existing and potential customers are willing to adopt. The development, marketing and implementation of these solutions and services may require that we make substantial financial and resource investments. We face risks that our new or modified solutions and services may not be responsive to customer preferences or industry changes, and that the solution and service development initiatives that we prioritize may not yield the gains that we anticipate, if any. If we are unable to predict market preferences or healthcare industry changes, or if we are unable to develop or adapt solutions and services that are responsive to existing and potential customers’ needs, we may fail to expand our business, which could constrain our future revenue growth and materially adversely affect our business, financial condition, results of operations and cash flows.

Our operating resultsacquisition strategy may subject us to considerable business and financial risk.

Historically, to achieve our strategic goals, we have made a significant number of acquisitions that have expanded the solutions and services we offer, provided a presence in complementary business lines, or expanded our geographic presence and/or customer base. For example, we acquired IntegriGuard, LLC in September 2009; Verify Solutions, Inc. in December 2009; Allied Management Group-Special Investigation Unit in June 2010; Chapman Kelly, Inc. in August 2010; HDI in December 2011; MedRecovery Management, LLC in December 2012; Essette, Inc. in September 2016; and Eliza Holding Corp. in April 2017.

We intend to pursue future acquisitions that will continue to expand and diversify our business and to periodically engage in discussions regarding such possible acquisitions. We are subject to significant fluctuations duerisks and uncertainties relating to our ability to identify suitable potential acquisition candidates, to consummate additional acquisitions that will be advantageous to us, and to successfully integrate future acquisitions. Future and potential business acquisitions involve a number of risk factors that could affect our operations, including, variabilitybut not limited to:

If we fail to adequately address these risks, or to successfully integrate the timingbusinesses that we acquire, we may not realize cost efficiencies, synergies or other benefits that we anticipated when selecting our acquisition candidates, and our reputation, business, financial condition, results of when we recognize contingency fee revenueoperations and the challenges associated with forecasting revenue for new products and services. As a result, youcash flows could be materially adversely affected.

You will not be able to rely on our operating results in any particular period as an indication of our future performance.performance because they are subject to significant fluctuation which may cause the market price of our common stock to decrease significantly.

Our operating results may fail to match our past or projected performance. We have experienced significant variations in our revenue between reporting periods due to the timing of periodic revenue recovery projects, the timing and delays in third party payers’ claim adjudication and ultimate payment to our customers where our revenue is contingent upon such collections and delays in receiving payment for our services. Our revenue and operating results have also been impacted from period to period as a result of a number of factors, including:some of which are outside of our control, including, but not limited to:

Occasionally our state and federal customers are requested by third party payers to refund payments that we previously recovered for our customers. If our state and federal customers choose to refund money in response to these requests, regardless of whether an error actually occurred in connection with the payments, we may also be required to return contingent revenue which we were previously paid associated with such refunded payments. We also typically face a long implementation period with a new customer ofor a new contract with an existing customer and may not be able to estimate with certainty the period in which implementation may be completed.

We cannot predict the extent to which future variations could occur due to these or other factors. Although we have experienced some seasonal trends in our operational volume, we do not consider our operations to be seasonal to any material degree, we have experienced some seasonal trends in our operational volume that have causeddegree. Consequently, our operating results are subject to fluctuate.significant fluctuation for any particular quarter, fiscal year, or other period, and may not be indicative of future periods. Significant fluctuations in our operating results may cause the market price of our common stock to decrease significantly.

We face challenges associated with forecasting the revenue under our contracts and solutions, and any failure to accurately forecast such revenue could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, weWe may not be able to accurately estimate the factors upon which we base our contract pricing, or the costs and timing for implementing and completing contracts when we introduce new products and services into the marketplace, making it difficult to reliably forecast revenue under those contracts. For a majority of our customer contracts, the payment of our fee is contingent upon the recoveries received by our customers. We also have cost-plus or time-and-material based contracts with the federal government where our revenue is recognized based on costs incurred plus an estimate of the negotiated fee earned. Our ability to earn a profit on these contracts requires that we accurately estimate the costs involved with these contracts and assess the probability of achieving certain outcomes or milestones within the contracted time period. In addition, we cannot predict with certainty the costs or the period in which implementation or contracts may be completed when we introduce new solutions or services into the marketplace. We may also face a long implementation period with a new customer or a new contract, making it difficult to reliably forecast revenue under those contracts. If we do not accurately estimate the costs and timing for completing projects, or if we encounter increased or unexpected costs, delays, failures, liabilities or risks, including those outside of our control, our contracts could prove unprofitable for us or yield lower profit margins than anticipated. Although we believe that we have recorded adequate provisions in our financial statements for losses on our fixed-price and cost-plus contracts where applicable, as required under United States generally accepted accounting principles (“U.S. GAAP”), we cannot provide assurance thatGAAP, our contract loss provisions willmay not be adequate to cover all actual future losses. We cannot predict the extent to which future revenue variations could occur due to these or other factors. Consequently, our results of operations are subject to significant fluctuation and our results of operations for any particular quarter or fiscal year may not be indicative of results of operations for future periods.

We must comply with laws and regulations regarding individual privacy and information security, including taking steps to ensure that our workforce, vendors, subcontractors and other business associates who obtain access to sensitive information about individuals maintain its confidentiality. Our failure, or a failure by our business associates, to comply with those laws and regulations, whether or not inadvertent, could subject us to legal actions, fines and penalties and negatively impact our reputation and operations.

As a service provider, we often receive, process, transmit and store protected health information (“PHI”) of individuals, as well as other financial, confidential and proprietary information belonging to our customers, our subsidiaries and third parties (e.g., private insurance companies, financial institutions) from which we obtain information. The use and disclosure of that information is regulated through federal and state laws and rules, which are changed frequently by legislation, regulatory issuances and/or administrative interpretation. Various state laws address the use and disclosure of individually identifiable financial and health data. Some are derived from the privacy and security provisions such as in the federal Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and the regulations implementing these laws. HIPAA also imposes standards and requirements on our business associates (as this term is defined in the HIPAA regulations), including our subcontractors and many of our vendors.

In January 2013, the U.S. Department of Health and Human Services issued Final Omnibus Privacy, Security, Breach Notification, and Enforcement Rules that modified and supplemented many of the standards and regulations under HIPAA and HITECH. These rules significantly increased the risk of liability to us and our business associates and subcontractors and made more incidents of inadvertent disclosure reportable and subject to penalties. Even though we take measures to comply with all applicable regulations and to ensure our business associates and subcontractors comply with these laws, regulations and rules, we have less than complete control over our business associates’ and subcontractors’ actions and practices. In addition, we could also be exposed to data breach risk if there is unauthorized access to one of our or our subcontractors’ secure facilities or from lost or stolen laptops, other portable media from current or former employee theft of data containing PHI, from misdirected mailings containing PHI, or other forms of administrative or operational error. If we or our subcontractors fail to comply with applicable laws; if unauthorized parties gain physical access to one of our facilities and steals or misuses confidential information; if we erroneously use or disclose data in a way that is inconsistent with our granted rights; or if such information is misdirected, lost or stolen during transmission or transport, we may suffer damage to our reputation, potential loss of existing customers and difficulty attracting new customers. We could also be exposed to, among other things, unfavorable publicity, governmental inquiry and oversight, allegations by our customers that we have not performed our contractual obligations, costs to provide notifications to affected individuals, or litigation by affected parties and possible financial obligations for damages or indemnification obligations related to the theft or misuse of such information, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Further, as regulatory focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify. Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personally identifiable information, along with increased customer demands for enhanced data security infrastructure, could greatly increase our cost of providing our services. See Risk Factor - “Our systems and networks may be subject to cyber security breaches and other disruptions that could compromise our information and harm our business" for additional information.

System interruptions or failures could expose us to liability and harm our business.

Our data and operation centers are essential to our business and our operations depend on our ability to maintain and protect our information systems. We attempt to mitigate the potential adverse effects of a disruption, relocation or change in operating environment; however, we cannot provide assurance that the situations we plan for and the amount of insurance coverage that we maintain willmay not be adequate in any particularevery case. In addition, despiteDespite systems redundancy and security measures, our systems and operations are vulnerable to damage or interruption from, among other sources:

In addition, while there are backup systems in many of our operating facilities, an extended outage of utility or network services supplied by third party IT vendors or providers may delay or disrupt the delivery or performance of the solutions and services we provide for our customers. If we encounter a business interruption, or fail to effectively maintain our information systems, if it takes longer than we anticipate to complete required upgrades, enhancements or integrations, or in the event our business continuity plans and business interruption insurance docoverage are not effectivelyadequate or fail to compensate us on a timely basis, we could suffer operational disruptions, disputes with customers, civil or criminal penalties, regulatory problems, increases in administrative expenses, loss of our ability to produce timely and accurate financial and other reports or other adverse consequences, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our systems and networks and those of third parties on which we rely may be subject to cyber security breaches and other disruptions that could compromise our information and harm our business.

We intendIn the ordinary course of our business, we rely heavily upon our technology systems and networks to continueinput, maintain and communicate the confidential and proprietary data we receive on behalf of our customers, as well as third-party products and services. In addition, sub-contractors, teaming partners or other third-party vendors may receive or utilize this information on our behalf. The secure processing and maintenance of this information is critical to pursue acquisition opportunities,our operations and business strategy. Our security measures or those of third parties on which may subjectwe rely could be compromised or breached as a result of computer hacking, acts of vandalism or theft, malware, computer viruses, employee error or malfeasance, catastrophes or other unforeseen events. As a result, our data, customers’ data, information technology or infrastructure could be accessed improperly, made unavailable, improperly modified, or corrupted or we could suffer system disruptions, shutdowns and denials of service. The occurrence of any of these events could cause our solutions and services to be perceived as vulnerable, cause our customers to lose confidence in our solutions and services, negatively affect our ability to attract new customers, cause existing customers to terminate or not renew our solutions and services and damage our reputation, all of which could reduce our revenue, increase our expenses and expose us to considerable businesslegal claims and regulatory actions. Similarly, we could be materially adversely affected by the loss of proprietary, trade secret or confidential technical and financial risk,data if our internal networks are compromised. We may be unable to implement adequate preventive measures to protect against such compromises. We could also be forced to expend significant resources in response to a cyber-security breach, including repairing system damage, increasing cyber security protection costs by deploying additional personnel and ifprotection technologies, paying regulatory fines and litigating and resolving legal claims and regulatory actions, all of which could increase our expenses, divert the attention of our management and key personnel away from our business operations and materially adversely affect our results of operations.

If we are unable to successfully integrateprotect our proprietary technology, information, processes, know-how, and other intellectual property and intellectual property rights, or become subject to claims of infringing or misappropriating the businesses that we acquire, weintellectual property of third parties, the value of our solutions and services may not realize the anticipated benefits of acquisitionsbe diminished and our results of operations couldbusiness may be materially adversely affected.

Historically,Our success as a company depends in part upon our ability to achieveprotect our strategic goals,core technology and intellectual property. Our expanding operations and efforts to develop new solutions and services also make protection of our intellectual property more critical. We seek to protect trade secrets and other proprietary information through confidentiality agreements and invention assignment agreements with employees, consultants and other third parties, as well as through the terms of our agreements with customers and vendors, and other security measures. However, the steps we have madetaken to deter misappropriation of intellectual property may be insufficient to protect our proprietary information. Misappropriation of our intellectual property by third parties, or any disclosure or dissemination of our confidential and proprietary business intelligence, queries, algorithms and other similar information by any means, could undermine any competitive advantage we currently derive or may derive from that intellectual property. For example, our current or former employees, consultants or other third parties may unintentionally or willfully disclose our trade secrets, know-how or other confidential and proprietary information to competitors. Competitors have also attempted to use state open records and/or federal Freedom of Information Act laws to obtain our proposal responses and other documents we provide to our government customers. We cannot be certain that our efforts to protect the confidential and proprietary trade secret information or intellectual property in these proposals or other documents will always be successful, due to the many factors underlying the various state and federal decisions to release information in response to open records requests (even in spite of our objections and efforts to protection information). On the other hand, third parties may claim that we are infringing upon or misappropriating their intellectual property. Our exposure to risks related to the use of intellectual property may also increase as a significant numberresult of acquisitions that have expanded the productsbecause third parties may make infringement and services we offer, provided a presence in complementary business lines,similar or expanded our geographic presence and/or customer base. Business acquisitions and combinations involve a number of risk factors that could affect our operations, including:

We intend to continue our acquisition strategy to expand and diversify our business. We cannot, however, provide assurance that we will be able to identify any potential acquisition candidates or consummate additional acquisitions or that future acquisitions will be successfully integrated or will be advantageous to us. Entities we acquire may not achieve the revenue and earnings we anticipate or their liabilities may exceed our expectations. We could face integration issues pertaining to the internal controls and operational functions of the acquired companies and we also could fail to realize cost efficiencies or synergies that we anticipated when selecting our acquisition candidates. Customer dissatisfaction or performance problems with a particular acquired entity could materially and adversely affect our reputation as a whole. We may be unable to profitably manage entities thatrelated claims after we have acquired technology. Any of these situations could cause us to expend significant time and resources and to incur substantial costs associated with litigation or legal proceedings that we may acquire,be necessary to defend ourselves or we may fail to integrate them successfully without incurring substantial expenses, delays or other problems. If we fail to successfully integrate the businesses that we acquire,enforce our intellectual property rights, in which we may not realize anyultimately prevail, and could result in our being prevented from furnishing certain solutions and services. If the protection of the benefits that we anticipate in connection with the acquisitions and that could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.

We may not be ableproprietary rights is inadequate to realizeprevent unauthorized use or appropriation by third parties or our employees, the entire book value of goodwillour brand and other intangible assets from acquisitions.

As of December 31, 2015, we have $361.5 million of goodwillmay be diminished and $54.3 million of net intangible assets. We assess goodwill and other intangible assets at least annually for impairment in the second quarter of each year, orothers may be able to more frequently if certain events or circumstances warrant. In the event that the book value of goodwill is impaired, any such impairment would be charged to earnings in the period of impairment. We cannot provide assurance that future impairment of goodwill will not have a material adverse effect oneffectively compete with our business financial condition, results of operations and cash flows.

Weby offering solutions or concepts that are subjectsubstantially similar to extensive government regulation and our government contracts are subject to audit and investigation rights. Any violation of the laws and regulations applicable to us or a negative audit or investigation finding could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.

Much of our business is regulated by the federal government and the states in which we operate. The laws and regulations governing our operations are generally intended to benefit and protect individual citizens, including government program beneficiaries, health plan members and providers, rather than shareholders. The government agencies administering these laws and regulations have broad latitude to enforce them. These laws and regulations, along with the terms of our government contracts, regulate how we do business, what services we offer and how we interact with our customers, providers, other healthcare payers and the public. We are subject, on an ongoing basis, to various governmental reviews, audits and investigations to verify our compliance with our contracts and applicable laws and regulations.

In addition, because we receive payments from federal and state governmental agencies, we are subject to various laws, including the Federal Acquisition Regulations, the Foreign Corrupt Practices Act, federal and state employment, equal opportunity and affirmative action laws, federal and state prompt pay statutes, as well as the Federal False Claims Act and similar state statutes, which permit government law enforcement agencies to institute suits against us for violations and, in some cases, to seek double or treble damages, penalties and assessments. In addition, private citizens, acting as whistleblowers, can sue on behalf of the government under the “qui tam” provisions of the Federal False Claims Act and similar statutory provisions in many states.

The expansion of our operations into new products and services may further expose us to requirements and potential liabilities under additional statutes and legislative schemes that have previously not been relevant to our business, such as banking and credit reporting statutes, that may both increase demands on our resources for compliance activities and subject us to potential penalties for noncompliance with statutory and regulatory standards. Increased involvement in analytic or audit work that can have an impact on the eligibility of individuals for medical coverage or specific benefits, or payments made by our customers to providers, could increase the likelihood and incidence of our being subjected to scrutiny or legal actions by parties other than our customers, based on alleged mistakes or deficiencies in our work, with significant resulting costs and strain on our resources.

If the government discovers improper or illegal activities in the course of audits or investigations, we may be subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions and debarment from doing business with the government. The risks to which we are subject, particularly under the Federal False Claims Act and similar state fraud statutes, have increased in recent years due to legislative changes that have (among other amendments) expanded the definition of a false claim to include, potentially, any unreimbursed overpayment received from, or other monetary debt owed to, a government agency. This subjects us to potential liability for a false claim, for example, where we may be overcharged for services by a subcontractor and may pass that charge on to a government customer, or where we may have a good faith disagreement with a government agency’s view of whether an overpayment has occurred. If we are found to be in violation of any applicable law or regulation, or if we receive an adverse review, audit or investigation, any resulting negative publicity, penalties or sanctions could have an adverse effect on our reputation in the industry, impair our ability to compete for new contracts and have a material adverse effect on our business, financial condition, results of operations and cash flows.

The federal government or a state may limit or prohibit the outsourcing of certain programs or functions, or may refuse to grant consents and/or waivers necessary to permit private entities, such as us, to perform certain elements of government programs or functions, or there may be other state or federal limitations on our outsourcing of work or our vendor use that obstruct cost-effective performance of our contracts.

The federal government or a state could limit or prohibit private contractors like us from operating or performing elements of certain government functions or programs. State or local governments could be required to operate such programs with government employees as a condition of receiving federal funding. Moreover, under current law, in order to privatize certain functions of government programs, the federal government must grant a consent and/or waiver to the petitioning state or local agency. If the federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a private entity. Such a situation could eliminate a contracting opportunity or reduce the value of an existing contract.

Similarly, other state or federal limitations on outsourcing certain types of work to vendors that supplement our own workforce could make it more difficult for us to fulfill our contracts in a cost-effective manner. Certain segments of our operations use or involve vendor or subcontractor personnel located outside of the United States, who may (under carefully controlled circumstances) access certain PHI in the course of assisting us with various elements of the services we provide to our customers. There is, however, increasing pressure from an expanding number of sources to prohibit the use of off-shore labor, particularly on government contracts. The federal government and a number of states have considered laws and/or issued rules and orders that would limit, restrict or wholly prohibit the use of off-shore labor in performance of government contracts, or impose sanctions for the use of such resources. Some of our customers have already chosen to contractually limit or restrict our ability to use off-shore resources. Intensified restrictions of this type or associated penalties could raise our costs of doing business, expose us to unexpected fines or penalties, increase the prices we must charge to customers to realize a profit and eliminate or significantly reduce the value of existing contracts or potential contract opportunities, any ofours, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may rely on subcontractorsface significant competition for our solutions and partnersservices and we expect competition to provide customers with a single-source solution or we may serve as a subcontractor to a third party prime contractor.

From time to time, we may engage subcontractors, teaming partners or other third parties to provide our customers with a single-source solution for a broader range of service needs. Similarly, we are and may in the future be engaged as a subcontractor to a third party prime contractor.Subcontracting arrangements where we are not the prime contractor pose unique risks to us because we do not have control over the customer relationship, and our ability to generate revenue under such subcontracts is dependent on the prime contractor, its performance and relationship with the customer, and its relationship with us.While we believe that we perform appropriate due diligence on our prime contractors, subcontractors and teaming partners, and that we take adequate measures to ensure that they comply with the appropriate laws and regulations, we cannot guarantee that those parties will comply with the terms set forth in their agreements with us (or in the case of a prime contractor, their agreement with the customer), or that they will be reasonable in construing their contractual rights and obligations, always act appropriately in dealing with us or customers, provide adequate service, or remain in compliance with the relevant laws, rules or regulations. We may have disputes with our prime contractors, subcontractors, teaming partners or other third parties arising from the quality and timeliness of work being performed, customer concerns, contractual interpretations or other matters. Performance deficiencies or misconduct by our prime contractors or subcontractors or perceived performance deficiencies by us could result in a contract termination and/or could adversely affect our customer relationships and reputation. We may be exposed to liability if we lose or terminate a subcontractor or teaming partner due to a dispute, and subsequently have difficulty engaging an appropriate replacement or otherwise performing their functions in-house, such that we fail to fulfill our contractual obligations to our customer. For example, our ability to service our customers and deliver and implement solutions require that we work with certain third party IT providers, including software vendors, utility and network providers, and depends on such third parties meeting our expectations in both timeliness and quality. If the services provided by these third party providers do not meet our expectations, or if they terminate or refuse to renew their relationships with us or were to offer their products to us in the future on less advantageous terms, we may not be able to deliver or perform our services for existing customers as expected,increase, which could result in a customer terminating our contract and expose us to additional liabilities, and harm our current and future customer relationships. Likewise, we could face contractual liability in the event a prime contract, under which we serve as a subcontractor, is terminated, whether for non-performance by the prime contractor or otherwise, then our subcontract will similarly terminate and the resulting contract loss couldmaterially adversely affect our business, financial condition, results of operations and cash flows.

The market for healthcare cost containment solutions and services is intensely competitive, driven by rapidly changing technologies, evolving industry standards and customer demands to become more efficient. Our competitors range in size from large, diversified national companies to small, specialized firms, and could include current or former sub-contractors or teaming partners seeking to establish direct relationships with our customers in order to perform similar services as the prime contractor, as well as current and prospective customers that elect to perform recovery and cost avoidance functions in-house or to develop in-house capacities for solutions and services that we provide or hope to provide. Consolidation among vendors and healthcare providers, as well as the merging of some of our competitors or formation of business alliances with other competitors, have contributed to the increasingly competitive environment. For example, certain state customers have combined or “bundled” TPL services under large-scale IT procurements, allowing MMIS vendors to partner with less experienced TPL identification vendors based on preferred relationships or favorable pricing. In addition, companies that have invested in proprietary technology different from our own solution and service offerings, such as front-end analytics, have emerged as new competitors due to the rapidly evolving healthcare landscape. There is also increasing sophistication in the solutions and services that our competitors are developing that may become more efficient or appealing to our customers. In order to remain competitive, we may need to quickly develop and market new and enhanced solutions and services responsive to emerging technologies and changes in the healthcare industry, which may require that we make substantial financial and resource investments.

We may not be able to compete successfully against our existing or future competitors. Some of these competitors have significantly greater financial and technical resources and market recognition than we do. They may be able to (i) offer lower prices or negotiate fee reductions on our current solutions and services, (ii) respond more quickly than we can to new and emerging technologies and changing customer requirements, (iii) devote greater resources to the sale of their solutions and services and the development and implementation of new and improved systems, solutions and services for customers that we serve, and (iv) pursue various acquisitions that allow them to rapidly amass a wide array of capabilities. We may be forced to lower our pricing, unexpectedly increase or enhance our technological or data capabilities, or modify our solution or service offerings. Notwithstanding any changes we make in response to increased competition, the demand for our solutions and services may decrease as a result of increased competition. A failure to be responsive to our existing and potential customers’ needs or the changing industry landscape could hinder our ability to maintain or expand our customer base, hire and retain new employees, pursue new business opportunities, complete future acquisitions and operate our business effectively. Any inability to compete effectively could materially adversely affect our business, financial condition, results of operations and cash flows.

Our business dependscould be materially adversely affected if we fail to maintain a high level of customer retention, if our customers elect to reduce the scope of our contracts or terminate them before their scheduled expiration dates or if we fail to meet performance standards under our customer contracts.

We historically have derived and expect to continue to generate a significant portion of our revenue from a limited number of large customers at the federal and state level. Our contracts with these customers are subject to periodic renewal and some permit them to terminate their contracts on short notice, with or without cause. If a customer is dissatisfied with the quality of our work or if we fail to meet performance standards under our contracts, or if our solutions, technical infrastructure or services do not comply with the provisions of our contractual agreements or applicable regulatory requirements, customers might seek to reduce the scope of the services we perform or prematurely terminate their agreements with us, or we could incur additional costs that may impair the profitability of a contract and damage our ability to obtain additional work from that customer, or other current or prospective customers. For example, some of our contracts contain liquidated damages provisions and financial penalties related to performance failures, which if triggered, could materially adversely affect our reputation, business, financial condition, results of operations and cash flows. We also may be required to disclose such liquidated damages or other financial penalties assessed against us in connection with future bids for services with other customers.

In addition, government customers are subject to financial pressures or pressure from stakeholders that may cause them to terminate contracts for our services that may be regarded as non-essential or to redefine or reduce the scope of our contracts by, for example, significantly reducing the volume of data that we are permitted to audit. Despite our right to prompt and full payment under the terms of our contracts, we could face challenges in obtaining timely or full payments for our properly provided services from our customers. If there is a substantial reduction in the scope of our services under, or a termination of, any of our key contracts with our major customers, or if we are exposed to significant costs, liabilities or negative publicity, our ability to compete for new contracts with current or prospective customers could be damaged and our business, financial condition, reputation, results of operations and cash flows could be materially adversely affected.

Any failure to maintain effective information processing systems that are compliant with current HIPAA transaction and code set standards and the integrity of the data in, and operations of, those systems could materially adversely affect our information systems, as well as thosebusiness, financial condition, results of other entities that provide us with data or receive data from us.operations and cash flows.

Our ability to conduct our operations and accurately report our financial results depends on the integrity of the data in our information systems and the integrity of the processes performed by those systems. These information systems and applications require continual maintenance, upgrading and enhancement to meet our operational needs, satisfy customer requests and handle our expansion and growth. Despite our testing and quality control measures, we cannot be certain that errors or system deficiencies will not be found and that remediation can be done in a timeframe that is acceptable to our customers, or that customer relationships will not be impaired by the occurrence of errors or the need for remediation. In addition, implementation of upgrades and enhancements may cost more, take longer or require more testing than originally expected. Given the large amount of data we collect and manage, it is possible that hardware failures or errors or technical deficiencies in our systems could result in data loss or corruption or cause the information that we collect, utilize or disseminate to be incomplete or contain inaccuracies that our customers regard as significant.

Through several of the services we provide, situations Situations may also arise in which the accuracy of our data analysis or the content and quality of our work product is central to the disposition of claims, controversies or litigation between our customers and third parties. When such situations arise, we may be requiredparties that would require us to allocate significant resources to fulfilling our contractual obligations to provide our customers with full and complete access to records, analysis and back-up documentation of our work. Assuring our capacity to fulfill these obligations as well as actually fulfilling such obligations, canthem could impose significant burdens on our infrastructure for data storage, maintenance and processing, requiringand require us to prioritize maintenance of and access to these resources, or incur additionalincreased costs to supplement them in order to satisfy our obligations. Should the frequency or scope of situations in which customers invoke these obligations increase to a substantial degree, the resulting strain on our personnel, data storage and computing resources, which could materially and negatively impact other business operations.

Moreover, because many of the services we furnish to customers involve submitting high volumes of monetary claims to third parties (such as health insurance carriers) and processing payments from them, the efficiency and effectiveness of our own operations are to some degree dependent on the claims processing systems of these third parties and their compliance with any new transaction and code set standards. On October 1, 2015, health plans, private payers and healthcare providers were required to transition to the new ICD-10 coding system, which greatly expanded the number and detail of diagnosis codes used for inpatient, outpatient and physician claims. The transition to the new transaction and code set standard initially caused disruptions and delays as we and other stakeholders made the necessary system adjustments to be fully compliant and capable of exchanging data. Although we have successfully updated our systems to allow for processing of ICD-10 values on claims, there could be delays if the third parties with whom we work with failed to timely or effectively implement the new transaction and code set standards within the required timeframe or if they continue to be out of compliance with the new standards. Claims processing systems failures, incapacities or deficiencies internal to these third-parties may continue to significantly delay or obstruct our ability to recover money for our customers, and thereby interfere with our performance under our contracts and our ability to generate revenue from those contracts in the timeframe we anticipate, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We depend on many different entities to supply information and an inability to successfully manage our relationships with a number of these suppliers may harm the quality and availability of our servicessolutions and services.

We obtain the data used in our solutions and services from many sources, including privatecommercial health insurance plans, financial institutions, managed care organizations, government entities and non-government entities. In addition, our ability to normalize and fully utilize, within our contractual rights, the data we have obtained from these sources to enhance and improve our current product offerings is an important component of our growth strategy. From time to time, challenges arise in managing and maintaining our relationships with entitiesdata sources that are not our customers and that furnish information to us pursuant to a combination of voluntary cooperation and legal obligationobligations under laws and regulations that are often subject to differing interpretation. OurFor example, data suppliers maycould seek to limit or end our access to and use of their data if they determine that somecertain uses of data for our customers are not permitted by our agreements, and seek to limit or end our access and use of certain data for particular purposes or customers. Theysuch suppliers may also make errors in compiling, transmitting or accurately characterizing data or may have technological limitations that interfere with our receipt or use of the data we are relying uponrely on them to provide. If a number of our information sources or suppliers become unable or unwilling to provide us with certain data under terms of use that are acceptable to us and our customers, or if the applicable regulatorylaws and law enforcement regimeregulations for use and protection of this data changes in a way that disincentivizes our suppliers, or imposes unacceptable or unreasonable conditions or risks on us, or disincentivizes our suppliers to continue to provide us with data, we cannot provide assurance that we willmay not be able to obtain new or favorable agreements with alternative data suppliers on terms favorablesuppliers. In addition, our ability to us, or at all. Further, althoughnormalize and fully utilize the information we have received from various data sources in order to enhance and improve current solutions for our customers is an important component of our growth strategy. Although we believe that we have the legal and contractual rights necessary to normalize and use the data we have obtained from these sources to normalizefor potential or contemplated solution and use information for our customer solutions,service offerings, we cannot assure youprovide assurance that these entities will allow us topermit the use of their data for all potential or contemplated product or service offerings.these purposes. If we lose a number of our data sources or access to certain data;data and are unable to identify and reach the requisite agreements with suitable alternative suppliers andor fail to successfully integrate these data sourcesthem into our solution and service offerings;offerings, or if there is a lack of integrity ofin the data that ourcurrent or future suppliers provide, we could experience service disruptions, increased costs, reduced quality of our solutions and services, and/or performance penalties under our customer contracts, which could have ana material adverse effect on our business, financial condition, results of operations orand cash flows.

We may rely on sub-contractors and other third party providers to provide customers with a single-source solution or service or we may serve as a sub-contractor to a third party prime contractor. If these parties fail to satisfy their obligations to us or if we are unable to maintain these relationships, our business, financial condition, results of operations and cash flows could be materially adversely affected.

In some areas of our business we may engage sub-contractors, teaming partners, vendors or other third party providers to provide our customers with a single-source solution or service for a broader range of service needs. These third parties include software vendors, utility and network providers and other information technology service providers. Our systemsability to deliver and networksimplement solutions and serve our customers effectively depends on our ability to obtain permissions from our customers, when necessary, to use these third party sub-contractors, or on these third parties meeting our service standards in both timeliness and quality. Similarly, we are and may in the future be engaged as a sub-contractor to a third party prime contractor. Sub-contracting arrangements where we are not the prime contractor pose unique risks to us because we do not have control over the customer relationship, and our ability to generate revenue under such sub-contracts is dependent on the prime contractor, its performance and relationship with the customer, and its relationship with us. While we believe that we perform appropriate due diligence on these parties and take adequate measures to ensure that they comply with the appropriate laws and regulations, we cannot guarantee that they will comply with the terms set forth in their agreements with us or in the case of a prime contractor, their agreement with the customer or that they will provide adequate and timely services, construe their contractual rights and obligations in a reasonable way, act appropriately in dealing with us or customers, and remain in compliance with the relevant laws, rules or regulations. As a result, we may have disputes with these parties arising from these or other matters. Performance deficiencies or misconduct by our prime contractors or sub-contractors may be perceived as inadequacies in our solutions or services or cause us to fail to fulfill our contractual obligations to our customers, which could materially adversely affect our customer relationships and reputation, result in termination of a customer contract or the sub-contractor or partner, and subject us to cyber security breachesa dispute with our customer or such third party. In addition, if our third party service providers terminate or refuse to renew their relationships with us or offer their products to us in the future on less advantageous terms, we may not be able to perform or deliver solutions or services for existing customers as expected. Likewise, we could suffer losses in the event a prime contract, under which we serve as a sub-contractor, is terminated, whether for non-performance by the prime contractor or otherwise. Upon any such termination of the prime contract, our sub-contract will similarly terminate, and the resulting contract loss could materially adversely affect our business, financial condition, results of operations and cash flows.

We obtain a significant portion of our business through competitive bidding in response to government requests for proposals. Reprocurements and future contracts may not be awarded through this process on the same level or our contract awards may be challenged by interested parties which could materially adversely affect our business, financial condition, results of operations and cash flows.

In order to market our solutions and services and compete for contracts with existing and potential state and federal customers, we are often required to respond to government-issued RFPs. These RFP responses typically require us to assemble and submit a large volume of information within a rigid timetable, and to accurately estimate our cost structure for servicing the proposed contract, the time required to establish operations and the likely terms of any proposals submitted by our competitors. We may also be required to disclose the occurrence of any negative events suffered by our business, such as customer disputes, a government inquiry or an adverse judgment or settlement in litigation or a legal proceeding, which could impair our ability to win the contract at issue or have a material adverse effect on our reputation in the industry.

Even if we win these contracts, we may fail to secure favorable contract terms and conditions, or a government’s determination to award us the contract may be challenged by an interested party. Under the state and federal laws and regulations governing procurements of goods and services, challenges and award protests may be filed even if there are no valid legal grounds on which to base the protest. The filing of such challenges could potentially delay the start or implementation of the contract if the government agency determines to withhold a contract award or suspend contract performance while the protest is being considered, or to take corrective action on its own, such as soliciting new bids or terminating the contract award or current procurement. In the event of irregularities, we perceive or learn of in the award or bidding process, we also may be forced to file protests in response to RFP awards to other disruptionsbidders. Resolution of a protest, even in our favor, could force us to expend considerable funds in disputing the potential award or to incur additional expenses to maintain our ability to timely start implementation, which may cause our actual results to differ materially and adversely from those anticipated. In addition, if we are unable to win reprocurements or protests of particular contracts, we may be precluded from entering certain customer markets for the term of the contract awarded to another party. Any failure to continue to obtain contracts in response to government RFPs, to design proposals that result in profitable contracts, to win new contracts or re-procure current contracts after they expire or to prevail in protests or challenges of contract awards could compromisehave a material adverse effect on our informationbusiness, financial condition, results of operations and harm our business.cash flows.

In the ordinary course of our business, we rely heavily upon our technology systems and networks to input, maintain and communicate the confidential and proprietary data we receive on behalf of our customers. The secure processing and maintenance of this information is critical to our operations and business strategy. Our security measures could be compromised and, as a result, our data, customers’ data, information technology or infrastructure could be accessed improperly, made unavailable, improperly modified, corrupted by computer hackers, nefarious actors, computer viruses or other malicious software programs that could attack our services, or breached due to employee error or malfeasance, all of which could create system disruptions and cause shutdowns or denials of service. This is also true for third-party products or services that we use. In addition, subcontractors, teaming partners or other third party vendors that receive or utilize confidential information on our behalf may become subject to a security breach, which may result in unauthorized access to such third party’s information systems and/or our customers’ protected information. The occurrence of any of these events could cause our services to be perceived as vulnerable, cause our customers to lose confidence in our services, negatively affect our ability to attract new customers, cause existing customers to terminate or not renew our services and damage our reputation, all of which could reduce our revenue, increase our expenses and expose us to legal claims and regulatory actions. Similarly, if our internal networks are compromised, we could be adversely affected by the loss of proprietary, trade secret or confidential technical and financial data. Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. We could be forced to expend significant resources in response to a cyber-security breach, including repairing system damage, increasing cyber security protection costs by deploying additional personnel and protection technologies, paying regulatory fines and litigating and resolving legal claims and regulatory actions, all of which could increase our expenses, divert the attention of our management and key personnel away from our business operations and adversely affect our results of operations.

We may be a party to litigation, regulatory, or other dispute resolution proceedings, and adverseAdverse judgments or settlements in any of theselegal proceedings could materially harm our business, financial condition, operating results and operating results.cash flows.

We are subject and may be a party to lawsuits and other claims that arise from time to time in the ordinary course of our business. Thesebusiness, which may include lawsuits and claimsthose related to, for example, contracts, subcontracts,sub-contracts, teaming agreements, protection of confidential information or trade secrets, adversary proceedings arising from customer bankruptcies, employment of our workforce and immigration requirements or compliance with any of a wide array of state and federal statutes, rules and regulations that pertain to different aspects of our business. We may also be required to initiate expensive litigation or other proceedings to protect our business interests. In addition, because of the payments we receive from government customers, we may be subject to unexpected inquiries, investigations, legal actions or enforcement proceedings pursuant to the False Claims Act, healthcare fraud, waste and abuse laws or similar legislation. Any investigations, settlements or adverse judgments stemming from such legal disputes or other claims may result in significant monetary damages or injunctive relief against us, as well as reputational injury that could adversely affect us or our ability to bid in response to RFPs in one or more jurisdictions. There is a risk that we will not be successful or otherwise be able to satisfactorily resolve any pending or future litigation. In addition, litigation and other legal claims are subject to inherent uncertainties and management’s view of currently pending legal matters may change in the future. Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate. Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings (possibly resulting in changes in established reserves), could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be precluded from bidding on and/or performing certain work due to other work we currently perform.

Various laws, regulations and administrative policies prohibit companies from performing work for government agencies in capacities that might be viewed to create an actual or perceived conflict of interest. In particular, CMS has stringent conflict of interest rules, which can limit our bidding for specific work for CMS, or for other contracts that might conflict, or be perceived by CMS to conflict, with contractual work for CMS. State governments and managed care organizations also have conflict of interest restrictions that could limit our ability to bid for certain work and impede our overall sales strategy. As we continue to expand and diversify our business operations, the likelihood that customers or potential customers will perceive conflicts of interest between our various subsidiaries, products, services, activities and customer relationships may increase. Such conflicts, whether real or perceived, could result in a loss of contracts or additional internal structural barriers that delay operational efficiency, or may require that we divest ourselves of certain existing businesses or reorganize our current management and personnel structure, as well as our corporate organization and entity structure, in order to qualify for new contract awards or to appropriately mitigate conflicts and otherwise accommodate the needs as a company that is expanding in complexity. Our failure to devote sufficient care, attention and resources to managing these adjustments may result in technical or administrative errors that could expose us to potential liability or adverse regulatory action. In addition, conflict of interest rules and standards change frequently, and are subject to varying interpretations and varying degrees and consistency of enforcement at the federal, state and municipal levels, and we cannot provide assurance that we will be successful in navigating these restrictions. If we are prevented from expanding our business or are unable to effectively implement our strategic initiatives due to real or perceived conflicts of interest, our business and results of operations could be adversely affected.

We may not be able to managedeliver our business effectivelysolutions and services efficiently if we are unable to attract and retain qualified employees.

Our successful delivery of services has a continuing needand solutions is dependent upon our ability to attractrecruit, employ, train and retain skilled personnel. For example, when we are awarded a contract, we may need to quickly hire project leaders, case management staff and other personnel with the specific qualifications required by our contracts. The additional staff could then create a concurrent demand for increased administrative personnel. Our ability to maintain our productivity and profitability is limited by our ability to recruit, employ, trainattract and retain the skilled personnel necessary to fulfill our contractual requirements and otherwise sustain our business and operations. The success of recruitment and retention strategies depend on a number of factors, including the competitive demands for employees having the skills we need and the level of compensation required to hire and retain such employees. As our business expands and undergoes change, we may also find it difficult to preserve our corporate culture, which could reduce our ability to innovate and operate effectively or result in a loss of experienced personnel. In addition, our customers or competitors may hire away our qualified employees. Despite our best efforts to protect our interests in our agreements with employees or customers, weWe may not in all instances be able to secure protective contractual rights or retain our employees. Some competitors may also decide that the benefits of hiring our employees who are limited by contractual terms outweighs the costs and risks. We cannot provide assurance that we will be able to recruit the appropriate personnel in the timeframe required to fulfill our contractual obligations, we will be successful in maintainingor maintain the personnel necessary to efficiently operate and support our business, orand even if our recruitment and retention strategies are successful, our labor costs will notmay increase significantly. Our inability to hire sufficient personnel on a timely basis and without significantly increasing our labor costs could materially adversely affect our business, financial condition, results of operations and cash flows.

Our future success depends, in part, on the continued service and availability of key personnel andmembers of our ability to manage leadership transitions successfully.management team.

Our ability to execute on our business plans may be impacted if our management team cannot work together effectively, or if members of our senior management team resign. In addition, ourand future success requires that we attract, develop, motivate and retain experienced and innovative executive officers and senior managers who have successfully managed, designed or designedimplemented government services programs or information technology projects, or have relevant experience in other sectors of the data management or the healthcare industry, and information technology professionals who have designed or implemented complex information technology projects. Innovative, experienced and technologically- proficientindustry. These individuals are in great demand and are likely to remain a limited resource. Dueresource in our industry. The loss of services of one or more members of our management team could materially adversely affect our business, financial condition, results of operations and cash flows. In addition, to the intense competition for these individuals, we cannot provide assurance that we will be able to continue to attract and retain the most capable and desirable executive officers and senior managers. To the extent we lose experienced personnel,an executive officer or senior manager, we must put processes in place for management transition, including leadership development and succession planning throughout our business, and successfully manage the transfer of critical knowledge from those individuals. We may incur increased expenses in connection with the hiring, promotion or replacement of anythese individuals and the transition of these key individuals. The loss of the services of one or more of our executive officers, or the loss of significant numbers of senior managers or information technology professionals, could adversely affect our business, financial condition, results of operationsleadership and cash flows.critical knowledge.

Our outstanding indebtedness could materially adversely affect our financial condition and our ability to operate our business, and we may not be able to generate sufficient cash flows to meet our debt service obligations.

In December 2011, we entered into a five-year, revolving and term secured credit agreement with certain financial institutions and Citibank, N.A. as Administrative Agent in connection with our acquisition of HDI. In May 2013, we amended and restated the credit agreement and entered into a $500 million five-year revolving credit agreement (the “Credit Agreement”). Under specified circumstances, the revolving credit facility under the Credit Agreement can be increased or one or more incremental term loan facilities can be added. Our obligations and any amounts due under the Credit Agreement are guaranteed by our material subsidiaries and secured by a security interest in all, or substantially all, of our and our subsidiaries’ physical assets. As of December 31, 2015,2016, the outstanding principal balance due on the revolving credit facilityunder our Credit Agreement was $197.8 million.

Our outstanding indebtedness and any additional indebtedness we incur may have important consequences for us, including, without limitation, that: (i) we may be required to use a substantial portion of our cash flow to pay the principal of and interest on our indebtedness; (ii) our indebtedness and leverage may increase our vulnerability to adverse changes in general economic and industry conditions, as well as to competitive pressures; (iii) our ability to obtain additional financing for working capital, capital expenditures, acquisitions and for general corporate and other purposes may be limited; and (iv) our flexibility in planning for, or reacting to, changes in our business and our industry may be limited.

In addition, our ability to make payments of principal and interest on our outstanding revolving credit facility depends upon our future performance and our ability to generate cash flows. Under the terms of the Credit Agreement, we are required to comply with specified financial and operating covenants, which may limit our ability to operate our business as we otherwise might operate it. For example, our obligations may be accelerated upon the occurrence of an event of default, which includes customary events of default, including, without limitation, payment defaults, failure to perform affirmative covenants, failure to refrain from actions or omissions prohibited by negative covenants, the inaccuracy of representations or warranties, cross-defaults, bankruptcy and insolvency related defaults, defaults relating to judgments, defaults due to certain ERISA related events and a change of control default. If not cured, an event of default would result in any amounts outstanding, including any accrued interest and unpaid fees, becoming immediately due and payable, which would require us to, among other things: seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets, and/or reduce or delay planned capital or operating expenditures. Such measures might not be sufficient to enable us to service our debt, and any such financing or refinancing might not be available on economically favorable terms or at all. If we are not able to generate sufficient cash flows to meet our debt service obligations or are forced to take additional measures to be able to service our indebtedness, our business, financial condition and results of operations could be materially and adversely affected.

Changes in, or interpretations of, tax rules and regulations may materially adversely affect our effective tax rates.

We are a United States-based company subject to various federal, state and local tax laws and regulations in multiple U.S. jurisdictions that govern numerous aspects of our business. As we expand our business, we may perform services for new customers located outside of the United States or in a U.S. Territory, which may subject us to foreign tax laws and regulations that could increase our exposure to additional tax liabilities. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned and taxed, by changes in, or our interpretation of, tax rules and regulations in the jurisdictions in which we do business, by providing services in new geographies,jurisdictions, by increases in expenses not deductible for tax purposes including impairments of goodwill, by changes in U.S. GAAP or by changes in the valuation of our deferred tax assets and liabilities. Furthermore, the results of the 2016 elections create uncertainty regarding future potential tax law reform.

In addition, we are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”)IRS and other domestic tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result. There can be no assurance that theThe final determination of any of these examinations will notcould have ana material adverse effect on our business, financial condition, results of operations and cash flows.

Our health insurance coverage and self-insurance reserves may not cover future claims.claims, which could materially adversely affect our business, financial condition, results of operations and cash flows.

We maintain various insurance policies for company employee health, workers’ compensation, general liability and property damage. We are self-insured for our health plans, and have purchased a fully-insured stop loss policy to help offset our liability for both individual and aggregate claim costs. We are also responsible for losses up to a certain limit for workers’ compensation, general liability and property damage insurance.

For policies under which we are responsible for losses, we record a liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Our estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions, and is closely monitored and adjusted when warranted by changing circumstances. Our prior growth could affect the accuracy of estimates based on historical experience. Should a greater amount of claims occur compared to what was estimated or medical costs increase beyond what was expected, our accrued liabilities might not be sufficient and we may be required to record additional expense. Unanticipated changes may also produce materially different amounts of expense than reported under these programs, which could materially adversely affect our business, financial condition, results of operations and cash flows.

We identified material weaknesses in our internal control over financial reporting, and if we fail to remedy them or other material weaknesses that we may identify in the future, our financial statements could be materially misstated.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. As described in Part II, Item 9A of this Annual Report on Form 10-K, management identified material weaknesses in our internal control over financial reporting as of December 31, 2016 related to the calculation of the estimated liability for appeals balance in connection with our CMS reserve and the valuation of our accounts receivable allowance. These material weaknesses resulted in an immaterial reclassification error in revenue and selling, general and administrative expenses that was corrected prior to issuance of the consolidated financial statements. Until remediated, these material weaknesses could result in misstatements of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that will not be prevented or detected on a timely basis.

We are actively revising and supplementing our control environment and our risk assessment process and the design of our process level controls in order to remediate these material weaknesses, including a set of compensating controls in the near term. We are enhancing and revising the design of controls and procedures to ensure the calculations of the CMS reserve and the accounts receivable allowance properly utilize historical information to derive the period-end balances. Additionally, management will be supplementing the review controls over the CMS reserve and the accounts receivable allowance, and controls over the completeness and accuracy of the data used to calculate the balances, with additional levels of review involving senior members of our accounting department and will assess the need for additional remediation steps.

We cannot predict the outcome of our assessment and that of our independent registered public accounting firm in future periods. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future, we may fail to meet our future reporting obligations on a timely basis, our financial statements may contain material misstatements, our operating results or financial condition may be negatively impacted, and we may be subject to litigation and regulatory actions, causing investor perceptions to be adversely affected and potentially resulting in a decline in the market price of our common stock.

Risks Relating to Our Industry

Our business could be materially adversely affected by changes in the U.S. healthcare environment or in laws relating to healthcare programs and policies, particularly as they relate to the ACA and the Medicare and Medicaid programs.

The healthcare industry in the United States is subject to changing political, economic and regulatory influences that may affect the procurement practices and operations of federal, state and commercial healthcare organizations and agencies. The ACA’s emphasis on program integrity and cost containment, along with its expansion of Medicaid, created new opportunities to grow our business and our service offerings. However, due to a wide range of factors contributing to uncertainty of the healthcare landscape, including, among other factors, the results of the 2016 elections, Congressional activity to repeal the ACA, and the numerous, varying ACA replace measures that may encompass Medicaid, Medicare and commercial insurance, it is difficult to predict its full impact and influence on future changes to healthcare policy. Policies that fundamentally change the financial structure of the Medicaid program, currently funded jointly by the states and the U.S. Federal Government, could result in early termination or non-renewal of our contracts with certain state government customers. Federal changes may also reduce reimbursement rates to states, establish new payment models, increase or decrease government involvement in healthcare, decrease the Medicare RAC Program, or otherwise change the operating environment for our customers. Healthcare organizations may react to such changed circumstances and financial pressures by taking actions to ramp up, curtail or defer their retention of cost containment providers like us, which could impact the demand for our solutions and services. While certain changes may present new opportunities to us, our business, financial condition, results of operations and cash flows could be materially adversely affected if efforts to waive, modify or otherwise change the ACA, in whole or in part, are successful, if we are unable to adapt our solutions and services to meet changing requirements or expand service delivery into new areas, or if the demand for our solutions and services is reduced.

Healthcare spending fluctuations, simplification of the healthcare payment process or other aspects of the healthcare financing system, budgetary pressures and/or programmatic changes diminishing the scope of program benefits, or limiting payment integrity initiatives, could reduce the need for and the price of our solutions and services, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our projections and expectations are premised, in part, upon consistent growth rates in spending in the Medicare and Medicaid programs, the current healthcare financing system and the need for our solutions and services within that existing framework. Our success as a company is based on offering solutions and services that improve the ability of our customers to identify and recover revenue that would otherwise be lost often as a result of procedural inefficiencies and complexities in that system. However, the need for our solutions and services, the price customers are willing to pay for them or the scope and profitability of our contracts could be negatively affected by a number of factors, including a lower than projected growth in Medicare and Medicaid programs due to developments such as the possible repeal of or modification to the ACA, and any action taken to reduce eligibility or services, or reform Medicaid spending. The absence of near-term compliance deadlines effected by the ACA and other legislation could additionally cause our revenue to decline. There can be no certainty that additional incentives will be created in regard to our solutions and services, or that any legislation or regulations that may be adopted would favorably impact our business.

Modifications in provider billing behavior and habits, often in response to the success of our solutions and services or to changes that reduce healthcare spending, could also reduce the profitability of our contracts and reduce the need for our solutions and services. Compounding this are budgetary pressures that may drive changes at the state level. The demand for our solutions and services could also be impacted by other changes in government healthcare programs or in the level of government spending, such as:

For example, during 2014 and 2015, our recovery audit services under HDI’s existing Medicare RAC contract were limited because of significant delays in procurement activities for the new Medicare RAC contract awards, resulting from, in part, the cancellation of the original and second procurements following the denial of pre-award protests and ongoing litigation regarding certain payment terms proposed by CMS as part of the new Medicare RAC proposals. In October 2016, CMS announced the new awards, including the award of RAC Region 4 to our wholly owned subsidiary. These new Medicare RAC contracts are currently being implemented and we currently expect that audits will begin in Q2 2017. Our existing Medicare RAC contract ends on January 31, 2018, and we are required to maintain certain reserves related to pending appeals for this contract through at least this date. In addition, CMS has shifted the responsibility for initial medical reviews of short inpatient stays from the Medicare RACs to Quality Improvement Organizations, further restricting the Medicare RACs review to a small subset of claims for potential payment inaccuracies. CMS has also implemented new ADR limits for inpatient providers that reduces the ADR requirement to 0.5% under the new contract, down from the 2.0% ADR requirement under the prior contract. This change significantly impacts the volumes of claims Medicare RACs are permitted to review for inpatient providers and reduces their ability to identify overpayments and underpayments under their Medicare RAC contracts. For the new contract, CMS has continued to maintain the previously established ADR limits for institutional providers, originally established in January 2016, which reduced the ADR requirement to 0.5%. In April 2016, CMS instituted a new policy adjusting ADR limits based on provider denial rate after three (3) 45-day ADR cycles. This change significantly impacts the volumes of claims Medicare RACs are permitted to review for inpatient providers, and reduces their ability to identify overpayments and underpayments under their Medicare RAC contracts in the near term, pending the adjustment of ADR limits based on provider denial rates established following the first three (3) cycles of RAC reviews.

Further, in August 2014, CMS announced it would settle with hospitals willing to withdraw inpatient status claims currently pending in the RAC appeals process by offering to pay hospitals 68% for all eligible claims they had billed to Medicare. In June 2015, CMS notified HDI that based on the initial lists of finalized settlements, HDI owed CMS approximately $28.6 million due to adjustments in contingency fees under our existing Medicare RAC contract. HDI previously advised CMS that it disagrees with CMS’ interpretation of the contract and that CMS does not have the contractual right, among other things, to require repayment of fees already paid. The amount ultimately payable to CMS by HDI remains uncertain. In addition, in September 2016, CMS announced that it would extend an opportunity for another round of settlements for hospitals that were eligible for but did not choose to participate in the 2014 settlement, with CMS offering to pay 66% for all eligible claims they had billed to Medicare. We believe this settlement will be processed and evaluated by CMS over the course of 2017, and the number and amount of claims that will be subject to the 2016 settlement remains uncertain. There could be a material negative impact on our future revenue to the extent that (i) any final determination of amounts owed by us to CMS under the current Medicare RAC contract materially exceeds our accrued reserves for such appeals, (ii) we are required to increase or decrease our contractually required reserves with respect to pending appeals due to changes in appeal performance, changes in data provided to us from other entities in the RAC process, or other related factors, (iii) we are required to repay a portion of prior fees associated with the hospital settlement program, (iv) we are unable to obtain full payments for properly provided services, or (v) future fees payable to us by CMS are reduced. Although we do not anticipate our Medicare RAC contract will represent a significant portion of our business going forward, our Medicare RAC contract still represents a future business opportunity for us and any of these factors or other changes to the Medicare RAC program that materially reduce our revenue or profitability with such program could have a material adverse effect on our business, financial condition, results of operations and cash flows.

A failure to comply with the laws and regulations that apply to companies in our industry regarding individual privacy and information security could subject us to legal actions, fines and penalties and negatively impact our reputation and operations.

As a service provider, we often receive, process, transmit and store sensitive data, including PHI and personally identifiable information of individuals, as well as other financial, confidential and proprietary information belonging to our customers, subsidiaries, data supplies and other third parties from which we obtain information. The use and disclosure of that information is regulated at the federal, state, international and industry levels and we are also obligated by our contractual requirements with customers. For example, we are subject to federal regulation under HIPAA, as amended by the HITECH Act, the Final Omnibus Privacy, Security, Breach Notification, and Enforcement Rule, which modified and supplemented many of the standards and regulations under HIPAA and the HITECH Act, and various state laws. HIPAA also imposes standards and requirements on our business associates as defined under HIPAA.

Even though we take measures to comply with all applicable regulations and to ensure our business associates and sub-contractors comply with these laws, regulations and rules, we have less than complete control over our business associates’ and sub-contractors’ actions and practices. We may be exposed to data breach risk if there is unauthorized access to one of our or our sub-contractors’ secure facilities or from lost or stolen laptops, other portable media from current or former employee theft of data containing PHI, from misdirected mailings containing PHI, or other forms of administrative or operational error. If we or our sub-contractors fail to comply with applicable laws; if unauthorized parties gain physical access to one of our facilities and steals or misuses confidential information; if we erroneously use or disclose data in a way that is inconsistent with our granted rights; or if such information is misdirected, lost or stolen during transmission or transport, we may suffer damage to our reputation, potential loss of existing customers and difficulty attracting new customers. We could also be exposed to, among other things, unfavorable publicity, governmental inquiry and oversight, allegations by our customers that we have not performed our contractual obligations, costs to provide notifications to affected individuals, or litigation by affected parties and possible financial obligations for damages or indemnification obligations related to the theft or misuse of such information, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, laws, rules and regulations concerning the protection of personal information are subject to frequent change by legislation, regulatory issuances or administrative interpretation. As regulatory focus on privacy issues continues to increase and these laws and regulations continue to expand and become more complex, these potential risks to our business could intensify. Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personally identifiable information, along with increased customer demands for enhanced data security infrastructure, could greatly increase our cost of providing our solutions and services.

We are subject to extensive government regulation, including government audits and investigations relating to our compliance with the laws and regulations applicable to companies in our industry, and a negative finding or other adverse determination could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.

Much of our business is regulated by the federal government and the states in which we operate. The laws and regulations governing our operations are generally intended to benefit and protect individual citizens, including government program beneficiaries, health plan members and providers, rather than shareholders, and the government agencies administering these laws and regulations have broad latitude to enforce them. As such, we are subject, on an ongoing basis, to various governmental reviews, audits and investigations to verify our compliance with our contracts and applicable laws and regulations, as well as legal actions and enforcement proceedings. For example, because we receive payments from federal and state governmental agencies, we are subject to various laws, including the Federal Acquisition Regulations, the Foreign Corrupt Practices Act, federal and state employment, equal opportunity and affirmative action laws, federal and state prompt pay statutes. We are also subject to Federal False Claims Act and similar state statutes, which permit government law enforcement agencies to institute suits against us for violations and, in some cases, to seek double or treble damages, penalties and assessments. In addition, private citizens, acting as whistleblowers, can sue on behalf of the government under the “qui tam” provisions of the Federal False Claims Act and similar statutory provisions in many states.

The expansion of our operations into new solutions and services may further expose us to requirements and potential liabilities under additional statutes and legislative schemes that have previously not been relevant to our business, such as banking and credit reporting statutes, that may both increase demands on our resources for compliance activities and subject us to potential penalties for noncompliance with statutory and regulatory standards. Increased involvement in analytic or audit work that can have an impact on the eligibility of individuals for medical coverage or specific benefits, or payments made by our customers to providers, could increase the likelihood and incidence of our being subjected to scrutiny or legal actions by parties other than our customers, based on alleged mistakes or deficiencies in our work, with significant resulting costs and strain on our resources.

These laws and regulations, along with the terms of our government contracts, regulate how we do business, what solutions and services we offer and how we interact with our customers, providers, other healthcare payers and the public. If the government discovers improper or illegal activities in the course of audits or investigations, we may be subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions and debarment from doing business with the government. Similarly, if our customers assert that we have failed to properly perform or comply with our contractual obligations, or if the carriers to which we send billings assert that we have failed to properly comply with applicable federal or state billing rules and regulations, we may be required to provide refunds or make payments to resolve such issues. The risks to which we are subject, particularly under the Federal False Claims Act and similar state fraud statutes, have also increased in recent years due to legislative changes that have (among other amendments) expanded the definition of a false claim to include, potentially, any unreimbursed overpayment received from, or other monetary debt owed to, a government agency. This subjects us to potential liability for a false claim, for example, where we may be overcharged for services by a sub-contractor and may pass that charge on to a government customer, or where we may have a good faith disagreement with a government agency’s view of whether an overpayment has occurred. If we are found to be in violation of any applicable law or regulation, or if we receive an adverse review, audit or investigation, any resulting negative publicity, penalties or sanctions could have an adverse effect on our reputation in the industry, impair our ability to compete for new contracts or bid in response to RFPs in one or more jurisdictions and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Federal and state governments may limit or prohibit outsourcing of certain programs or functions, refuse to grant consents or waivers necessary to permit private entities to perform such work, or impose other limitations on outsourcing or certain vendors that may obstruct cost-effective performance of our contracts.

The federal government or a state could limit or prohibit private contractors like us from operating or performing elements of certain government functions or programs. State or local governments could be required to operate such programs with government employees as a condition of receiving federal funding. Moreover, under current law, in order to privatize certain functions of government programs, the federal government must grant a consent and/or waiver to the petitioning state or local agency. If the federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a commercial entity. Such a situation could eliminate a contracting opportunity or reduce the value of an existing contract.

Similarly, other state or federal limitations on outsourcing certain types of work to vendors that supplement our own workforce could make it more difficult for us to fulfill our contracts in a cost-effective manner. Certain segments of our operations use or involve vendor or sub-contractor personnel located outside of the United States, who may (under carefully controlled circumstances) access certain PHI in the course of assisting us with various elements of the services we provide to our customers. There is, however, increasing pressure from an expanding number of sources to prohibit the use of off-shore labor, particularly on government contracts. The federal government and a number of states have considered laws or issued rules, regulations, and orders that would limit, restrict or wholly prohibit the use of off-shore labor in performance of government contracts, or impose sanctions for the use of such resources. Some of our customers have already chosen to contractually limit or restrict our ability to use off-shore resources. Intensified restrictions of this type or associated penalties could raise our costs of doing business, expose us to unexpected fines or penalties, increase the prices we must charge to customers to realize a profit and eliminate or significantly reduce the value of existing contracts or potential contract opportunities, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be precluded from bidding on or performing certain work due to work we currently perform, which could materially adversely affect our business, financial condition, results of operations and cash flows.

Various laws, regulations and administrative policies prohibit companies from performing work for government agencies in capacities that might be viewed to create an actual or perceived conflict of interest. In particular, CMS has stringent conflict of interest rules, which can limit our bidding for specific work for CMS, or for other contracts that might conflict, or be perceived by CMS to conflict, with contractual work for CMS. State governments and managed care organizations also have conflict of interest restrictions that could limit our ability to bid for certain work and impede our overall sales strategy. As we continue to expand and diversify our business operations, the likelihood that customers or potential customers will perceive conflicts of interest between our various subsidiaries, solutions, services, activities and customer relationships may increase. Such conflicts, whether real or perceived, could result in a loss of contracts or additional internal structural barriers that delay operational efficiency, or may require that we divest ourselves of certain existing businesses or reorganize our current management and personnel structure, as well as our corporate organization and entity structure, in order to qualify for new contract awards or to appropriately mitigate conflicts and otherwise accommodate the needs as a company that is expanding in complexity. Our failure to devote sufficient care, attention and resources to managing these adjustments may result in technical or administrative errors that could expose us to potential liability or adverse regulatory action. In addition, conflict of interest rules and standards change frequently, and are subject to varying interpretations and varying degrees and consistency of enforcement at the federal, state and municipal levels, and we may not be successful in navigating these restrictions. If we are prevented from expanding our business or are unable to effectively implement our strategic initiatives due to real or perceived conflicts of interest, our business, financial condition, results of operations and cash flows could be materially adversely affected.

Risks Related to Our Common Stock

The market price of our common stock may be volatile.volatile, and fluctuations in the price of our common stock may materially adversely affect our business, financial condition, results of operations and cash flows and materially adversely affect our shareholders.

The market price of our common stock has fluctuated widely and may continue to do so. During the 52-week period ended February 19, 2016,May 31, 2017, the closing price of our common stock on the NASDAQ Global Select market ranged from a high of $19.10$23.46 per share, to a low of $8.24$16.18 per share.

We expect our Our stock price to beis subject to fluctuationsfluctuation as a result of a variety of factors, including factors beyond our control. Some of thesecontrol including the risk factors are:described above and those which are related to:

In addition, the stock market often experiences significant price and volume fluctuations. These fluctuations are often unrelated to the operating performance of particular companies. These broad market fluctuations may materially adversely affect the market price of our common stock. When the market price of a company’s stock drops significantly, shareholders may institute securities class action litigation against that company. Any litigation against us could cause us to incur substantial costs, divert the time and attention of our management and other resources or otherwise harm our business.

Failure to maintain adequate internal controls may affect our ability to timely or accurately report our financial results.

As a public company, we are subject to the reporting requirements of the Exchange Act and other rules and regulations of the SEC, the Sarbanes-Oxley Act of 2002 and the listing requirements of the NASDAQ Global Select Market. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Although we consistently assess the adequacy of our internal controls over financial reporting, these controls have inherent limitations, including human error, the possibility that controls could become inadequate because of changed conditions, the circumvention or overriding of controls and fraud. If we are unable to identify or to remediate material weaknesses or significant deficiencies in our internal controls, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and NASDAQ, we could face severe consequences from those authorities. Either case may cause investors to lose confidence in our reported financial information, which could result in a material adverse effect on our business or have a negative effect on the trading price of our stock.

Because we do not intend to pay dividends, you will benefit from an investment in our common stock only if it appreciates in value.

We have paid no cash dividends on any of our capital stock to date and currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. The success of your investment in our common stock will likely depend entirely upon any future appreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased your shares.

Certain provisions of our certificate of incorporation and bylaws could discourage unsolicited takeover attempts, which could depress the market price of our common stock.

Our certificate of incorporation authorizes the issuance of up to 5,000,000 shares of “blank check” preferred stock with such designations, rights and preferences as may be determined by our Board of Directors. Accordingly, our Board of Directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights, that could adversely affect the voting power or other rights of holders of our common stock. In the event of issuance, preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying, or preventing a change in control. Although we have no present intention to issue any shares of preferred stock, we cannot provide assuranceit is possible that we will not do so in the future. In addition, our bylaws provide for a classified Board of Directors, and require advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for nominations of candidates for election to our Board of Directors and provide for Delaware as an exclusive forum for certain disputes with our shareholders, all of which could also have the effect of discouraging a change of control.

Item 1B. Unresolved Staff Comments.Comments

None.

Item 2. Properties.Properties

In June 2010,

As of December 31, 2016, we purchased the 223,000 square foot office building in Irving, Texas that serves as our corporate headquarters and as the primary center for our operational activities. In addition, in February 2014, we entered into a lease agreement for 63,922leased approximately 78,000 square feet of office space in Las Vegas, Nevada. As of December 31, 2015, we leased approximately 168,000 square feet of office space in 2721 other locations throughout the United States, the leases for which have expiration dates later in 2016 andstarting late 2017 through 2024. See Note 1312 - “Commitments and Contingencies” in our Notes to the Consolidated Financial Statements in Item 8. Consolidated Financial Statements and Supplementary Data for additional information aboutregarding our lease commitments. In general, we believe our facilities are suitable to meet our current and reasonably anticipated future needs.

Item 3. Legal Proceedings.Proceedings

The information set forth under the caption “Litigation” in Note 1312 of the Notes to the Consolidated Financial Statements included in Part II, Item 8. Consolidated Financial Statements and Supplementary Data is incorporated herein by reference.

Item 4. Mine Safety Disclosures.Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related StockholderShareholder Matters and Issuer Purchases of Equity Securities.Securities

Repurchases of Shares of Treasury Stock

On July 30, 2015, our Board of Directors approved a share repurchase program authorizing the repurchase of up to $75 million of our common stock from time to time on the open market or in privately negotiated transactions. The repurchase program is authorized through July 30, 2017, and may be suspended or discontinued at any time. Repurchased shares will be available for use in connection with issuance under our stock plans and for other corporate purposes. Repurchases may be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under insider trading laws. The timing and amount of any shares repurchased under the program will be determined by our management based on its evaluation of market conditions and other factors. During the year ended December 31, 2015, we repurchased $50 million of our common stock pursuant to this authorization and 10b5-1 plans.

The summary of our repurchases of our common stock through the date hereof is as follows: