Japan Hospice Holdings Inc.

The Group's core businesses are visiting nursing care and home care services based on the medical insurance system (revised every 2 years), the long-term care insurance system (revised every 3 years), and the Act on Comprehensive Support for Persons with Disabilities. If a significant reduction is made to medical treatment fees or long-term care fees, it will directly affect sales and profit. Because the revenue structure depends on officially set prices, the Company's ability to respond to system changes on its own is limited.

Businesses such as visiting nursing care, visiting care, care management, day care, and small-scale multifunctional home care (combining visiting and day care with nursing) require designation from prefectural governors, etc., based on the Health Insurance Act, the Long-Term Care Insurance Act, and other laws. If non-compliance with staffing, facility, or operational standards, or fraudulent billing of fees is found, there is a risk of designation revocation or suspension. If a designation is revoked under the Long-Term Care Insurance Act, the relevant company will be unable to obtain a new designation or renewal for 5 years from the revocation.

The balance of interest-bearing debt (including lease liabilities) at the end of the consolidated fiscal year under review was ¥13,184,245 thousand (equivalent to approximately ¥13,184 million, as figures are stated in thousands of yen), with an interest-bearing debt dependency ratio of 69.7%, a high level. If interest rates rise or if fundraising as planned becomes difficult, there is a risk of increased interest expenses and a slowdown in the pace of business expansion, particularly with respect to the opening of new facilities.

With the increase in hospice facilities, facility-related fixed assets account for a growing proportion of total assets. Impairment testing is conducted with facilities grouped as the basic unit, and if a facility's operating income/loss remains negative continuously due to significant changes in the external environment or other factors, a substantial impairment loss may occur, potentially having a material impact on operating results and financial position.

Expansion of the Home Hospice Business requires continuous recruitment and training of nurses and care workers, and care for terminal cancer, ALS, and other intractable diseases requires a high degree of specialized expertise. If the Company is unable to recruit and secure the necessary personnel, or if on-the-job training and other training programs cannot be sufficiently conducted, resulting in difficulty in developing human resources, this may lead to a decline in service quality and stagnation in business development.

In hospice facilities where elderly and disabled persons with high medical dependency live communally, the risk of cluster infections such as infectious diseases and food poisoning is particularly high. If a natural disaster such as an earthquake or typhoon, or an accident such as a fire, occurs and leads to a long-term suspension of a facility's operations, this could affect the operating results and financial position not only of that facility but of the Group as a whole, and management responsibility may also be called into question.

Due to the nature of the business, which specializes in terminal care, resident deaths and departures occur more frequently than at typical nursing care facilities. If newly opened facilities do not attract residents as expected, or if deaths and departures exceed expectations, facility occupancy rates may decline, potentially affecting operating results.

For some Hospice Housing facilities, the Company has entered into agreements with LA Living Solutions Co., Ltd. regarding early termination in order to be exempt from penalty fees; however, for facilities without such an agreement, a substantial penalty fee must be paid upon early termination. If the Company is forced to discontinue operation of a facility for any reason, the burden of a substantial penalty fee may affect operating results and financial position.

Inflation in lumber, steel, energy resources, consumables, and other items poses a risk of increasing the operating costs of existing hospice facilities. If further inflation causes rents, construction costs, and other costs for procuring new facilities to rise further, the cost of executing the business expansion strategy will increase, potentially affecting operating results and financial position.

Representative Director, President and CEO Masashi Takahashi plays a central role in formulating and deciding management policy and business strategy, resulting in a high degree of dependence on him. Although the Company is promoting information sharing and delegation of authority through the Board of Directors and the Management Strategy Committee, if he becomes unable to continue his duties for any reason, this may affect operating results and financial position.