The VITAS segment of the Company’s business operates in a heavily-regulated industry. As a result, the Company is subjected to inquiries and investigations by various government agencies, which can result in penalties including repayment obligations, funding withholding, or debarment, as well as to lawsuits, including qui tam actions. The following sections describe the various ongoing material lawsuits and investigations of which the Company is currently aware. Other than as described below, it is not possible at this time for us to estimate either the timing or outcome of any of those matters, or whether any potential loss, or range of potential losses, is probable or reasonably estimable.

Regulatory Matters and Litigation

VITAS was one of a group of hospice providers selected by the Office of the Inspector General’s (“OIG”) Office of Audit Services (“OAS”) for inclusion in an audit of the provision of elevated level-of-care hospice services. As a result of this audit, which reviewed 100 out of a total population of 50,850 inpatient and continuous care claims, OAS recommended that VITAS repay approximately $140.0 million of the $210.0 million VITAS’ Florida program received from Medicare for hospice services during the applicable two-year period, despite the fact that at the time of the release of the results of the audit, many of the disputed claims were time-barred from being challenged.

On August 29, 2022, VITAS received a demand letter from its Medicare Administrative Contractor (“MAC”) seeking repayment of $50.3 million. VITAS appealed the overpayment decision and deposited $50.3 million under the “Immediate Recoupment” process. The amount deposited was recorded as an “other long-term asset” in the consolidated balance sheets, as detailed in Note 13.

On February 3, 2025, an Administrative Law Judge (“ALJ”) ruled that VITAS’ care met Medicare’s hospice standards for the applicable higher level of care as originally billed for all but one of the claims appealed, and therefore VITAS was entitled to receive payment for all such claims. With respect to the one claim that the judge did not fully side with VITAS, the judge found that four of the five days billed met the applicable standard and only one day did not.

In a letter dated March 18, 2025, VITAS’ MAC provided notice that due to the ALJ’s ruling the total overpayment amount was reduced to a de minimis amount, and has since refunded VITAS all previously unreturned deposited amounts in excess of that dollar figure.

Regardless of the outcome of the preceding matter, dealing with the various regulatory agencies and opposing parties can adversely affect us through defense costs, potential payments, withholding of governmental funding, diversion of management time, and related publicity.