As of December 31, 2017,2022, we had 7482 equity joint ventures including 6675 with hospital and health systems, which are comprised of 165over 350 hospitals, four with physicians, and fourthree with other parties.

The following describes the payment models in effect during the year ended December 31, 2022. Such payment models have been subject to temporary adjustments made by CMS in response COVID-19 pandemic as described elsewhere in this Annual Report on client-server technology and is highly scalable. We believe our software and systems are flexible, easy-to-use and allow us to accommodate further growth. We believe that our ability to build and enhance our information and software systems provides us with a competitive advantage that allows us to grow our business in a cost-efficient manner and provide better patient care.

The federal government’s Medicare program, governed by the Social Security Act of 1965 (the “Social Security Act”), reimburses health care providers for services furnished to Medicare beneficiaries. These beneficiaries generally include persons age 65 and older and those who are chronically disabled. The program is primarily administered by the Department of Health and Human Services (“HHS”) and the Centers forCMS. Medicare & Medicaid Services (“CMS”). Medicare paymentsservices accounted for 71.0%59.6%, 74.5%59.8% and 74.5%62.1%, of our net service revenue for the years ended December 31, 2017, 20162022, 2021, and 2015,2020, respectively. Medicare reimburses us based upon the setting in which we provide our services or the Medicare category in which those services fall.

In 2011, sequestration was implemented in the Budget Control Act of 2011(BCA, P.L. 112-25) as a tool in federal budget control. The sequestration cut to Medicare payments began on April 1, 2013, and reduced Medicare payments for patients whose service dates ended on or after April 1, 2013 by 2%. Absent any additional Congressional action,In response to COVID-19, the U.S. Government enacted the Coronavirus Aid, Relief, and Economic Security ("CARES Act") on March 27, 2020. The CARES Act suspended the 2% sequestration cuts are plannedpayment adjustments on Medicare patient claims with periods that ended on May 1, 2020 through December 31, 2020. On April 14, 2021, Congress passed legislation to continue the suspension of the 2% sequestration payment adjustments on Medicare patient claims with dates of service through 2023.December 31, 2021. On December 10, 2021, the Protecting Medicare and American Farmers from Sequester Cuts Act legislation passed, which will continue the suspension of the sequestration payment adjustments for Medicare patient claims with dates of service through March 31, 2022. Medicare patient claims with dates of services between April 1 through June 30, 2022 had a 1% sequestration adjustment and Medicare patient claims with dates of services beginning July 1, 2022 returned to a 2% sequestration adjustment.

The Medicare home nursing benefit is available to patients who need care following discharge from a hospital, as well as patients who suffer from chronic conditions that require skilled intermittent care. While the services received need not be rehabilitative or of a finite duration, patients who require full-time skilled nursing for an extended period of time generally do not qualify for Medicare home nursing benefits. As a condition of coverage under Medicare, beneficiaries must: (1) be homebound, meaning they are unable to leave their home without a considerable and taxing effort; (2) require intermittent skilled nursing, physical therapy, or speech therapy services that are covered by Medicare; and (3) receive treatment under a plan of care that is established and periodically reviewed by a physician. Qualifying patients also may receive reimbursement for occupational therapy, medical social services, and home health aide services if these additional services are part of a plan of care prescribed by a physician.

We receive a standard prospective Medicare payment for delivering care over a 60-day episode of care. Thererecord revenue as services are provided under PDGM. For each 30-day period, the patient is no limit to the number of episodes a beneficiary may receive as long as he or she remains eligible. The base episode payment is a flat rate that is adjusted upward or downward based upon differences in the expected resource needs of individual patients as indicated by clinical severity, functional severity and service utilization. The magnitude of the adjustment is determined by each patient’s categorizationclassified into one of 153432 home health resource groups prior to receiving services. Each 30-day period is placed into a subgroup falling under the following categories: (i) timing being early or late, (ii) admission source being community or institutional, (iii) one of 12 clinical groupings based on the patient's principal diagnosis, (iv) functional impairment level of low, medium, or high, and (v) a co-morbidity adjustment of none, low, or high based on the patient's secondary diagnoses.

Each 30-day period payment groups, known as Home Health Resource Groups and the costliness of care for patients in each group relative to the average patient. Payment is further adjusted for differences in local labor costs using the hospital wage index. We bill and are reimbursed for services in two stages: an initial request for advance payment when the episode commences and a final claim when the episode is completed. We submit allfrom Medicare claims through the Medicare Administrative Contractors for the federal government. We receive 60% of the estimated payment for a patient’s initial episode up-front (after the initial assessment is completed and upon initial billing) and the remaining 40% upon completion of the episode and after all final treatment orders are signed by the physician. In the event of

Under PDGM, the initial certification of the Patient ProtectionMedicare patient eligibility, plan of care, and Affordable Care Act (“the PPACA”) that substantially impact our business. First, as a conditioncomprehensive assessment remains valid for 60-day episodes of care but payments for Medicare payment, the PPACA mandates that prior to certifying a patient’s eligibility for home health services are made based upon 30-day payment periods. The national, standardized 30-day Medicare payment amount was $2,031.64, resulting in a 3.2% increase in payments over fiscal year 2021. The rule reflected the certifying physician must document that he or she, or allowed non-physician practitioner, had2.6% payment update, 0.7% increase due to the reduction of the fixed-dollar loss ratio for outliers, and a face-to-face encounter0.1% reduction due to the rural add-on percentages mandated by the Bipartisan Budget Act of 2018. The final rule expanded the Home Health Value-Based Purchasing ("HHVBP") model nationally, with the patientfirst performance year of January 1, 2023. Starting in 2025, fee-for-service payments to home health agencies will be adjusted based on the quality of care provided to beneficiaries during the calendar year 2023 performance year.

On October 31, 2022, CMS released the final rule for fiscal year 2023. The final rule states the Medicare base payments will increase by 0.7%. The increase reflects the effects of the 4.0% home health payment update, a 3.5% decrease from the effects of the prospective permanent behavioral assumption adjustment of -3.925% that relatesis being phased-in, and 0.2% increase from the effects of an update to the condition for whichfixed-dollar ratio used in determining outlier payments. The impact of the patient receives home health services. The face-to-face encounter must occur within 90 days prior-3.925% permanent behavioral assumption adjustment is -3.5%, as the permanent adjustment is only made to the start of care or 30 days after30-day payment rate and not the start of care. Documentation regarding these encounters must be present in the patient's home health medical record. In 2015, documentation supporting these encounters must be in the certifying physician's or hospital medical record.

We verify a patient’s eligibility for home health benefits at the time of admission. Through the verification process we are able to determine the payor source and eligibility for reimbursement of each patient. Accordingly, we do not have material amounts of reimbursements pending approval based on the eligibility of a patient to receive reimbursement from the applicable payor program. Further, we provide only limited services to patients who are ineligible for reimbursement from a third party payor. Therefore, we do not have any material amounts of reimbursements due from patients who are self-pay.

Home health payment rates are updated annually by the home health market basket percentage as adjusted by Congress. CMS establishes the home health market basket index, which measures inflation in the prices of an appropriate mix of goods and services included in home health services.

In order for a Medicare beneficiary to qualify for the Medicare hospice benefit, two physicians must certify that, in their clinical judgment, the beneficiary has less than six months to live, assuming the beneficiary’s disease runs its normal course. In addition, the Medicare beneficiary must affirmatively elect hospice care and waive any rights to other Medicare curative benefits related to his or her terminal illness. At the end of each benefit period (described below), a physician must recertify that the Medicare beneficiary’s life expectancy is six months or less in order for the beneficiary to continue to qualify for and to receive the Medicare hospice benefit. The first two benefit periods are 90 days and subsequent benefit periods are 60 days. A Medicare beneficiary may revoke his or her election at any time and resume receiving traditional Medicare benefits. There is no limit on how long a Medicare beneficiary can receive hospice benefits and services, provided that the beneficiary continues to meet Medicare hospice eligibility criteria.

Medicare reimburses for hospice care using one of four predetermined daily rates based upon the level of care we furnish to a beneficiary. These rates are subject to annual adjustments based on inflation and geographic wage considerations. The base Medicare rate for services that we provide to a beneficiary depends upon which of the following four levels of care we provide to that beneficiary:

All Medicare payments to our LTACHs are made in accordance with a PPS specifically applicable to LTACHs, referred to as “LTACH-PPS.” The LTACH-PPS was established by CMS final regulations published in 2002, that require each patient discharged from an LTACH to be assigned a distinct long-term care diagnosis-related group (“MS-LTC-DRG”), which take into account (among other things) the severity of a patient's condition. Our LTACHs are paid a predetermined fixed amount based upon the assigned MS-LTC-DRG (adjusted for area wage differences), which includes adjustments for short stay and high cost outlier patients (described in further detail below). The payment amount for each MS-LTC-DRG classification is intended to reflect the average cost of treating a Medicare patient assigned to that MS-LTC-DRG in an LTACH.

Adjustments to MS-LTC-DRG payments might include:

An LTACH must have an average inpatient length-of-stay for Medicare patients (including both Medicare covered and non-covered days) of greater than 25 days during each annual cost reporting period. LTACHs that fail to exceed an average length-of-stay of 25 days during any cost reporting period may be paid under the general acute care hospital IPPS. CMS clarified its policy on the calculation of the average length-of-stay by specifying that all data on all Medicare inpatient days, including Medicare Advantage days, must be included in the average length-of-stay calculation effective for cost reporting periods beginning on or after January 1, 2012.

On August 2, 2017,2021, CMS postedissued a display copy of its final rule for the fiscal year 2022. LTACH-PPS payments increased by 1.1% for fiscal year 2022. LTACH-PPS payments for fiscal year 2022 for discharges paid using the standard LTACH payment rate increased by 0.9% due primarily to the annual standard Federal rate update to Medicarefor fiscal year 2022 of 1.9% and 0.8% decrease in high cost outlier payments. LTACH-PPS payments for fiscal year 2022 for discharges paid using the site neutral payment rates and policiesrate increased by 3%.

On August 1, 2022, CMS issued the final rule for the Fiscal Year 2018 inpatient hospitals prospective payment system andfiscal year 2023 stating LTACH-PPS payments will increase 2.3% due primarily to the LTACH PPS. CMS estimates the impact of the proposed rule will result in a 2.4% overall reduction in LTACH spending. The LTACHannual standard federal rate is reduced to $41,430.56 from $42,476.41. CMS is also proposingupdate (the productivity-adjusted market basket increase) of 3.8% and a 12 month administrative moratorium on application of the 25 Percent Rule beginning with the expiration of the statutory moratorium after September 30, 2017. The 25 Percent Rule will not be applied to LTACHs for discharges occurring on or

In response to be paid at standard Federal LTACH rates insteadCOVID-19, the CARES Act suspended the application of site neutralsite-neutral payments for grandfathered LTACHs. CMS changedLTACH admissions that were admitted during the separatenessPublic Health Emergency ("PHE"). On February 9, 2023, the U.S. Department of Health and control restrictions for certain co-located IPPS-exempt hospitals. The Final Rule also adds three new quality measures and discontinues two quality measures. CMS also finalized its proposal to implement collection of standardized patient assessment data underHuman Services extended the IMPACT Act on functional status, cognitive function, cancer treatments, respiratory treatments, transfusions and other special services effective for admissions on/after April 1, 2019.

Medicaid is a joint federal and state funded health insurance program for certain low-income individuals administered by the states. Medicaid reimburses health care providers using a number of different systems, including cost-based, prospective payment and negotiated rate systems. Rates are also subject to adjustment based on statutory and regulatory changes, administrative rulings, government funding limitations and interpretations of policy by individual state agencies.

As of December 31, 2017,2022, we had 14,554approximately 30,000 employees, of which 9,31516,000 were full-time. None of our employees are subject to a collective bargaining agreement. We consider our relationships with our employees and independent contractors to be good.

We are subject to claims and legal actions in the ordinary course of our business. To cover claims that may arise, we maintain commercial insurance for healthcare professional liability, general liability, automobile liability, employed lawyers liability, fiduciary liability, crime liability, information security and privacy liabilities, and workers’ compensation/employer’s liability in amounts that we believe are appropriate and sufficient for our operations. We maintain claims-made healthcare professional liability and occurrence based general liability insurance that provides primary limits of $1.0 million per incident/ occurrence and $3.0 million in annual aggregate amounts. We maintain workers’ compensation insurance that meets state statutory requirements and provides a primary employer liability limit of $1.0 million to cover claims that may arise in the states in which we operate, excluding Ohio and Washington. Coverage for workers' compensation matters within Ohio andthe State of Washington is procured from each state'sthe State's respective mandated programs and not through third party insurance payors.program. Under our workers’ compensation insurance policies, the Company maintains a deductible of the first $0.5$1.0 million in workers' compensation liability. We maintain automobile liability insurance for all owned, hired and non-owned autos with a primary limit of $1.0 million. In addition, we currently maintain multiple layers of umbrella coverage in the aggregate amount of $40.0 million that provides excess coverage for healthcare professional liability, general liability, automobile liability and employer’s liability. We also maintain directors' and officers' liability insurance in the aggregate amount of $65.0$80.0 million. The cost and availability of insurance coverage has varied widely in recent years. While we believe that our insurance policies and coverage are adequate for a business enterprise of our type, we cannot guarantee that our insurance coverage is sufficient to cover all future claims or that it will continue to be available in adequate amounts or at a reasonable cost.

In addition, the UHG Agreement generally requires us to operate our business in the ordinary course of business consistent with past practice pending consummation of the merger and also restricts us from taking certain actions with respect to our business and financial affairs without UnitedHealth Group’s consent. Such restrictions will be in place until either the merger is consummated or the UHG Agreement is terminated. For these and other reasons, the pendency of the merger could adversely affect our business and results of operations.

Certain costs associated with the transaction have already been incurred or may be payable even if the transaction is not consummated. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruptions to our business resulting from the recent U.S. presidential election could have a material effect on our business.

matters before an annual meeting of stockholders.

On November 15, 2017, we announced our entry intoIn response to COVID-19, the Merger Agreement with Almost Family, providing for a “merger of equals” business combinationU.S. Government enacted the CARES Act on March 27, 2020. The following portions of the CompanyCARES Act impacted us during the twelve months ended December 31, 2022:

On December 26, 2013, President Obama signed into lawAugust 1, 2022, CMS issued the Bipartisan Budget Act of 2013 (Public Law 113-67). This law prevents a scheduled payment reduction for physicians and other practitioners who treat Medicare patients from taking effect on January 1, 2014. Included in the legislation are the following changes to LTACH reimbursement: 

The Affordable Care Act established ACOs as a tool to improve quality and short stay outlier policies. lower costs through increased care coordination in the Medicare fee-for-service ("FFS") program, also known as "Original Medicare." The Medicare FFS program covers approximately 70% of the Medicare recipients or approximately 36 million eligible Medicare beneficiaries. ACOs are typically formed as legal entities by groups of doctors and other healthcare providers who endeavor to work together to provide high quality services and care for their patients through three-year contracts with CMS. Provider and beneficiary participation in an ACO is purely voluntary and Medicare beneficiaries retain their current ability to seek treatment from any provider they wish. Beneficiaries are assigned to ACOs using an "attribution" model based on a plurality of services provided by the primary care physician. Beneficiaries retain the right to use any doctor or hospital who accepts Medicare, at any time.

CMS finalized its proposalestablished the MSSP to facilitate coordination and cooperation among providers to improve the quality of care for Medicare FFS beneficiaries and to reduce costs. Eligible providers, hospitals, and suppliers may participate in the MSSP by creating, participating in or contracting with an ACO. The MSSP is designed to improve beneficiary outcomes and increase

value of care by (1) promoting accountability for the care of Medicare FFS beneficiaries, (2) requiring coordinated care for all services provided under Medicare FFS, and (3) encouraging investment in infrastructure and redesigned care processes. The MSSP will reward ACOs that provide healthcare services at a new severe wound exceptioncost for the ACO's patients during a relevant measurement year that is below the ACO's benchmark costs established by CMS, while also meeting performance standards on quality of care. Under the final MSSP rules, Medicare is to reimburse individual providers and suppliers for specific items and services as Medicare currently does under the FFS payment methodologies. MSSP rules require CMS to develop a benchmark for savings to be paid at standard Federal LTACH rates instead of site neutral paymentsachieved by each ACO, if the ACO is to receive shared savings or for grandfathered LTACHs. CMS changedACOs that have elected to accept responsibility for losses. An ACO that meets the separateness and control restrictions for certain co-located IPPS-exempt hospitals. The Final Rule also adds three newprogram's quality measures and discontinues two quality measures. CMS also finalized its proposalperformance standards will be eligible to implement collection of standardized patient assessment data under the IMPACT Act on functional status, cognitive function, cancer treatments, respiratory treatments, transfusions and other special services effective for admissions on/after April 1, 2019.