Coronavirus Pandemic ("COVID-19")

3 Months Ended

Mar. 31, 2021

2.	Coronavirus Pandemic (“COVID-19”):

COVID-19

has had a continued impact on the demand for medical services provided by the Company’s affiliated clinicians. Beginning in

mid-March

2020, the Company’s affiliated office-based practices, which specialize in maternal-fetal medicine, pediatric cardiology, and numerous pediatric subspecialties, experienced a significant elevation of appointment cancellations compared to historical normal levels. The Company believes

COVID-19,

either directly or indirectly, has also had an impact on its neonatology intensive care unit (“NICU”) patient volumes, and there is no assurance that impacts from

COVID-19

will not further adversely affect its NICU patient volumes or otherwise adversely affect its NICU and related neonatology business. Further, in late 2020, the Company saw a shift in the mix of patients reimbursed under government-sponsored healthcare programs, but that shift reversed during the three months ended March 31, 2021. Overall, the Company’s operating results were significantly impacted by

COVID-19

beginning in

mid-March

2020, but volumes began to normalize in

mid-2020

and substantially recovered throughout 2020 and early 2021.

During 2020, the Company implemented a number of ac

ions to preserve financial flexibility and partially mitigate the significant anticipated impact of

COVID-19.

These steps included a suspension of most activities related to the Company’s transformational and restructuring programs, limiting these expenditures to those that provide essential support for the Company’s response to

COVID-19.

In addition, (i) the Company temporarily reduced executive and key management base salaries, including 50% reductions in salaries for its named executive officers during the second quarter of 2020; (ii) the Board of Directors agreed to forego their annual cash retainer and cash meeting payments, also during the second quarter of 2020; (iii) the Company enacted a combination of salary reductions and furloughs for

non-clinical

employees; (iv) the Company enacted significant operational and practice-specific expense reduction plans across its clinical operations; and (v) amended and restated its Credit Agreement

Due to the continued uncertainties surrounding the timeline of and impacts from

COVID-19,

the Company is unable to predict the ultimate impact on its business, financial condition, results of operations and cash flows. The Company, however, believes it will be able to generate sufficient liquidity to satisfy its obligations for the next twelve months.

CARES Act

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act is a relief package intended to assist many aspects of the American economy, including providing up to $100 billion in aid to the healthcare industry to reimburse healthcare providers for lost revenue and expenses attributable to

COVID-19.

The remaining $70 billion in aid is intended to focus on providers in areas particularly impacted by

COVID-19,

rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for the treatment of uninsured Americans. It is unknown what, if any, portion of the remaining healthcare industry funding o

the CARES Act the Company and its affiliated physician practices will qualify for and receive. The Department of Health and Human Services (“HHS”) is administering this program and began disbursing funds in April 2020, of which the Company’s affiliated physician practices within continuing operations received an aggregate of $22.0 million during the year ended December 31, 2020 and $7.7

million during the three months ended March 31, 2021. The Company has applications pending for certain affiliated physician practices for incremental relief beyond what has been received.

In addition, the CARES Act also provided for deferred payment of the employer portion of social security taxes through the end of 2020, and while the Company utilized this deferral option throughout 2020, it expects to pay the deferred amounts during the second quarter of 2021.

Under current tax law, net operating losses can be carried forward indefinitely. The CARES Act enacted rules allowing net operating losses arising in 2020 to be carried back five taxab

e years. The Company currently expects to generate a net operating loss for the 2020 tax year which it intends to carry back to the 2015 tax year under these provisions to obtain a refund of income tax at the prior 35% corporate tax rate.