NUTEX HEALTH, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the unaudited
consolidated financial statements and the notes thereto included in Part I, Item
1, "Financial Statements" of this Quarterly Report on Form 10-Q.

                                Explanatory Note

On April 1, 2022 (the "Merger Date"), Nutex Health Holdco LLC and Clinigence
Holdings, Inc. ("Clinigence") completed the merger (the "Merger") contemplated
by the Agreement and Plan of Merger (the "Merger Agreement") dated as of
November 23, 2021 between Clinigence, Nutex Acquisition LLC, a Delaware limited
liability company and wholly-owned subsidiary of Clinigence, Nutex, Micro
Hospital Holding LLC (solely for the purposes of certain sections of the Merger
Agreement), Nutex Health Holdco LLC and Thomas Vo, M.D., solely in his capacity
as the representative of the equity holders of Nutex. Immediately following the
completion of the Merger, Clinigence amended its certificate of incorporation
and bylaws to change its name to "Nutex Health Inc." In connection with the
Merger, each outstanding equity interest of Nutex Health Holdco LLC was
exchanged for 3.571428575 shares of Clinigence common stock. The Merger was
accounted for as a reverse business combination under U.S. GAAP. Therefore,
Nutex Health Holdco LLC was treated as the accounting acquirer in the Merger.
Our financial statements presented for periods prior to the Merger Date are
those of Nutex Health Holdco, LLC, as the Company's predecessor entity.
Beginning with the second quarter of 2022, our financial statements are
presented on a consolidated basis and include Clinigence.

Except where the context indicates otherwise, (i) references to "we," "us,"
"our," or the "Company" refer, for periods prior to the completion of the
Merger, to Nutex Health Holdco LLC and its subsidiaries, (ii) references the
"Nutex Health" for periods following the completion of the Merger, refer to
Nutex Health Inc. and its subsidiaries and (ii) references to "Clinigence" refer
to Clinigence Holdings, Inc. and its subsidiaries prior to the completion of the
Merger.

Overview

Nutex Health Inc. is a physician-led, healthcare services and operations company
with 21 hospital facilities in eight states (hospital division), and a primary
care-centric, risk-bearing population health management division. Our hospital
division implements and operates different innovative health care models,
including micro-hospitals, specialty hospitals and hospital outpatient
departments ("HOPDs"). The population health management division owns and
operates provider networks such as independent physician associations ("IPAs")
and offers a cloud-based proprietary technology platform to IPAs which
aggregates clinical and claims data across multiple settings, information
systems and sources to create a holistic view of patients and providers.

We employ approximately 942 full time employees and partner with over 800
physicians. Our corporate headquarters is based in Houston, Texas. We were
incorporated on April 13, 2000 in the state of Delaware.

Our financial statements present the Company's consolidated financial condition
and results of operations including those of majority-owned subsidiaries and
variable interest entities ("VIEs") for which we are the primary beneficiary.

The hospital division includes our healthcare billing and collections
organization and hospital entities. In addition, we have financial and operating
relationships with multiple professional entities (the "Physician LLCs") and
real estate entities (the "Real Estate Entities"). The Physician LLCs employ the
doctors who work in our hospitals. These entities are consolidated by the
Company as VIEs because they do not have significant equity at risk, and we have
historically provided support to the Physician LLCs in the event of cash
shortages and received the benefit of their cash surpluses.

The Real Estate Entities own the land and hospital buildings which are leased to
our hospital entities. The Real Estate Entities have mortgage loans payable to
third parties which are collateralized by the land and buildings. We consolidate
the Real Estate Entities as VIEs in instances where our hospital entities are
guarantors or co-borrowers under their outstanding mortgage loans. During the
second quarter of 2022, we deconsolidated 17 Real Estate Entities after the
third-party lenders released our guarantees of associated mortgage loans.

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The Company has no direct or indirect ownership interest in the Physician LLCs
or Real Estate Entities, so 100% of the equity for these entities is shown as
noncontrolling interest in the consolidated balance sheets and statements of
operations.

The population health management division includes our management services
organizations and a healthcare information technology company providing a
cloud-based platform for healthcare organizations. In addition, AHISP, IPA, a
physician-affiliated entity that is not owned by us-is consolidated as a VIE of
our wholly-owned subsidiary AHP since we are the primary beneficiary of their
operations under AHP's management services contracts with them.

Sources of revenue. Our hospital division recognizes net patient service revenue
for contracts with patients and in most cases a third-party payor (commercial
insurance, workers compensation insurance or, in limited cases,
Medicare/Medicaid).

We receive payment for facility services rendered by us from federal agencies,
private insurance carriers, and patients. The Physician LLCs receive payment for
doctor services from these same sources. On average, greater than 90% of our net
patient service revenue are paid by insurers, federal agencies, and other
non-patient third parties. The remaining revenues are paid by our patients in
the form of copays, deductibles, and self-payment. The following tables present
the allocation of the estimated transaction price with the patient between the
primary patient classification of insurance coverage:

                                       Three months ended September 30      

Nine months ended September 30

                                          2022                 2021                2022                 2021
Insurance                                      91 %                  95 %               94 %                  96 %
Self pay                                        7 %                   4 %                5 %                   3 %
Workers compensation                            1 %                   1 %                1 %                   1 %
Medicare/Medicaid                               1 %                   0 %                0 %                   0 %
Total                                         100 %                 100 %              100 %                 100 %

The population health management division recognizes revenue for capitation and
management fees for services to IPAs and physician groups and for the licensing,
training, and consulting related to our cloud-based proprietary technology.
Capitation revenue consists primarily of capitated fees for medical services
provided by physician-owned entities we consolidate as VIEs. Capitated
arrangements made directly with various managed care providers including HMOs.
Capitation revenues are typically prepaid monthly to us based on the number of
enrollees selecting us as their healthcare provider. Capitation is a fixed
payment amount per patient per unit of time paid in advance for the delivery of
health care services, whereby the service providers are generally liable for
excess medical costs. We receive management fees that are received based on
gross capitation revenues of the IPAs or physician groups we manage.

Our growth plans. We plan to expand our operations by entering new market areas
either through development of new hospitals, formation of new IPAs or by making
acquisitions.

We identify new market areas for hospitals based on the area's need for access
to emergency health services and growth expectations. We identify and partner
with local physicians who will operate and manage the new location. When
developing new hospitals, we have a turn-key process for location selection,
real estate acquisition, design, ?and development of the facility including
staffing, training and operations. We extend our existing comprehensive suite of
?centralized services to operating hospitals, including executive management,
billing, collections, recruiting ?and marketing.

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COVID-19 Pandemic

A novel strain of coronavirus causing the disease known as COVID-19 was first
identified in December 2019, and has spread throughout the world. While vaccines
and booster shots for the COVID-19 virus became widely available in the United
States during 2021, COVID-19 continued to result in a significant number of
hospitalizations.

As a provider of healthcare services, we were significantly affected by the
public health and economic effects of the COVID-19 pandemic. Our hospitals,
medical personnel, and employees have been actively caring for COVID-19
patients. We implemented considerable safety measures for treatment of COVID-19
patients and have incurred, and may continue to incur, certain increased
expenses arising from the COVID-19 pandemic, including additional labor, supply
chain, capital and other expenditures. Moreover, in recent months, the COVID-19
pandemic resulted in general inflationary pressures and significant disruptions
to global supply networks. In this regard, we have experienced disruptions in
connection with the provision of equipment, construction services, as well as
inflationary pressures in connection with labor, supply chain, capital and other
expenditures. We also experienced a delay in billing and collection of patient
claims during this period.

The COVID-19 pandemic affected, and may continue to affect, our service mix,
revenue mix, payor mix and/or patient volumes, as well as our ability to collect
outstanding receivables. Pandemic-related factors may continue to adversely
affect demand for our services, as well as the ability of patients and other
payors to pay for services rendered.

While we are not able to fully quantify the impact that the COVID-19 pandemic
will have on our future financial results, we expect developments related to
COVID-19 to continue to affect our financial performance. Moreover, the COVID-19
pandemic may otherwise have material adverse effects on our results of
operations, financial position, and/or our cash flows if economic and/or public
health conditions in the United States deteriorate.

Overview of Legislative Developments

The U.S. Congress and many state legislatures have introduced and passed a large
number of proposals and legislation designed to make major changes in the
healthcare system, including changes that have impacted access to health
insurance. The most prominent of these efforts, the Affordable Care Act, affects
how healthcare services are covered, delivered and reimbursed. The Affordable
Care Act increased health insurance coverage through a combination of public
program expansion and private sector health insurance reforms. There is
uncertainty regarding the ongoing net effect of the Affordable Care Act due to
the potential for continued changes to the law's implementation and its
interpretation by government agencies and courts. There is also uncertainty
regarding the potential impact of other health reform efforts at the federal and
state levels.

In response to the COVID-19 pandemic, federal and state governments passed
legislation, promulgated regulations, and have taken other administrative
actions intended to assist healthcare providers in providing care to COVID-19
and other patients during the public health emergency and to provide financial
relief. Among these, the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act") had the most impact on our business.

The CARES Act included a waiver of insurance copayments, coinsurance, and annual
deductibles for laboratory tests to diagnose COVID-19 and visits to diagnose
COVID-19 at an emergency department of a hospital. These provisions of the CARES
Act expired on June 30, 2021. While these provisions were effective, we
experienced higher levels of revenue due to a shift of payor mix. The larger
number and acuity of patient claims for COVID-19 also resulted in higher
revenue.

No Surprises Act

The No Surprises Act ("NSA") is a federal law that took effect January 1, 2022,
to protect consumers from most instances of "surprise" balance billing. The
legislation was included in the Consolidated Appropriations Act, 2021, which was
passed by Congress and signed into law by President Trump on December 27, 2020.
With respect to the Company, ?the NSA limits the amount an insured patient will
pay for emergency services furnished by an out-of-network ?provider. The NSA
addresses the payment of these out-of-network providers by group health plans or
health ?insurance issuers (collectively, "insurers"). In particular, the NSA
requires insurers to reimburse out-of-network ?providers at a statutorily
calculated "out-of-network rate." In states without an all-payor model agreement
or ?specified state law, the out-of-network rate is either the amount agreed to
by the insurer and the out-of-network ?provider or an amount determined through
an independent dispute resolution ("IDR") process.

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Under the NSA, insurers must issue an initial payment or notice of denial of
payment to a provider within ?thirty days after the provider submits a bill for
an out-of-network service. If the provider disagrees with the ?insurer's
determination, the provider may initiate a thirty-day period of open negotiation
with the insurer over the ?claim. If the parties cannot resolve the dispute
through negotiation, the parties may then proceed to IDR ?arbitration. ?

Independent Dispute Resolution. The provider and insurer each submits a proposed
payment amount and ?explanation to the arbitrator. The arbitrator must select
one of the two proposed payment amounts taking into ?account the "qualifying
payment amount" and additional circumstances including among other things the
level of training, outcomes ?measurements of the facility, the acuity of the
individual treated, and the case mix and scope of services of the ?facility
providing the service. The NSA prohibits the arbitrator from considering the
provider's usual and ?customary charges for an item or service, or the amount
the provider would have billed for the item or service in ?the absence of the
NSA. ?

Qualifying Payment Amount. The "qualifying payment amount" is generally "the
median of the contracted ?rates recognized by the plan or issuer…under such
plans or coverage, respectively, on January 31, 2019, for the ?same or a similar
item or service that is provided by a provider in the same or similar specialty
and provided in the ?geographic region in which the items or service is
furnished," with annual increases based on the consumer price ?index. In other
words, the qualifying payment amount is typically the median rate the insurer
would have paid for ?the service if provided by an in-network provider or
facility.?

HHS Final Rule. As required by the NSA, the United States Department of Health
and Human ?Services ("HHS") has established an IDR process under which a
certified IDR ?entity determines the ultimate amount of payment. The HHS' final
rule became effective October 25, 2022. The final rule eliminated the rebuttable
presumption that the qualified payment amount is the correct price and also
abandoned the requirement that the certified IDR entity must select the offer
closest to the qualifying payment amount. These key provisions were initially
part of the interim rule issued in 2021 and were challenged by several court
cases. Under the final rule, the certified IDR entity must instead select the
offer that best reflects the value of the item or service provided, by first
considering the QPA and then considering "additional information" that is
relevant to the dispute.

Since the NSA became effective January 1, 2022, our average payment by insurers
of patient claims for emergency services has declined by approximately 30%. In
our experience, insurers often initially pay amounts lower than the QPA without
regard for other information relevant to the claim. This requires us to make
more appeals using the IDR process. While we are working within the established
processes for IDR, we have had varying successes at achieving collections higher
than the established QPA. For these reasons, we have reduced our estimate of the
ultimate amounts of accounts receivable we will collect for prior periods. This
change in estimate reduced revenue for the three months ended September 30, 2022
by approximately $29.0 million. Similar changes in estimates made in the first
half of 2022 reduced accounts receivable and revenue by approximately $9.6
million.

We have undertaken several strategic actions designed to improve our collections
results. These include

•  maximizing our claims coding efficiency,


•  increasing efforts to collect co-pays and co-insurance,

• adding additional administrative staff to handle the increased administrative

IDR burden

• having a dedicated IDR team to accelerate resubmission of claims under the IDR

process,

• making appeals for additional payment of claims for periods before and after

the NSA final rule was adopted through the IDR process,

• making efforts to sign favorable contracts with insurers, and

working with both

• local and national legislatures to enforce the NSA rules and guidelines for

   Insurers,


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The final rule is already the subject of legal challenges. The Texas Medical
Association (TMA) in September of 2022 filed motions for summary judgment
seeking to invalidate the IDR related provisions of the final rule, arguing that
the QPA does not represent the fair value of the services rendered by the
physicians and providers and that the final rule illegally favors the QPA over
the fair value of the provider services in contravention of the statutory
language of the NSA.



On October 19, 2022, and in addition to amicus briefs by several other national
medical associations, the American Society of Anesthesiologists, the American
College of Emergency Physicians, and the American College of Radiology,
professional associations representing an aggregate of approximately 136,000
physicians, filed an Amicus brief supporting the TMA Motion. As of November 11,
2022, the court in the Eastern District of Texas has not yet ruled on the
motions.



We are supportive of industry efforts seeking to amend the NSA final rule. Our
experience, like that of many other healthcare providers, is that the final rule
continues to unfairly favor insurers in the determination of the QPA we receive
for our healthcare services. It is difficult to predict the outcome of efforts
to challenge or amend the final rule. As well, there can be no assurance that
third-party payors will not attempt to further reduce the rates they pay for our
services or that additional rules issued under the NSA will not have adverse
consequences to our business.

Results of Operations

We report the results of our operations as three segments in our consolidated
financial statements: (i) the hospital division, (ii) the population health
management division and (ii) the real estate division. Activity within our
business segments is significantly impacted by demand for healthcare services we
provide, competition for these services in each of the market areas we serve,
and the legislative changes discussed above.

                                       Three months ended September 30      

Nine months ended September 30

                                           2022                 2021                 2022                2021
Revenue:
Hospital division                   $      21,244,305      $ 117,971,732      $    151,976,226      $ 268,129,646
Population health management
division                                    7,150,753                 -             13,594,007                 -
Total revenue                              28,395,058        117,971,732           165,570,233        268,129,646
Segment operating income (loss):
Hospital division                         (26,498,148 )       76,008,468            13,149,358        159,795,643
Population health management
division                                       29,702                 -               (227,300 )               -
Total segment operating income
(loss)                                    (26,468,446 )       76,008,468            12,922,058        159,795,643
Corporate and other costs:
Acquisition costs                                  -                  -              3,885,666                 -
Impairment of goodwill                    408,466,575                 -            408,466,575                 -
General and administrative
expenses                                    4,077,255          1,545,685            11,721,597          5,067,725

Total corporate and other costs           412,543,830          1,545,685   

       424,073,838          5,067,725
Interest expense                            3,402,606          1,260,187             9,628,189          4,251,277
Other expense (income)                       (630,450 )       (1,745,277 )             346,873         (5,666,633 )
Income before taxes                      (441,784,432 )       74,947,873          (421,126,842 )      156,143,274

Income tax expense (benefit)               (8,543,880 )          453,621   

        11,285,729          1,091,975

Net income (loss)                        (433,240,552 )       74,494,252          (432,412,571 )      155,051,299
Less: net income (loss)
attributable to noncontrolling
interests                                 (10,722,749 )       20,700,975           (12,052,765 )       36,436,485
Net income (loss) attributable
to Nutex Health Inc.                $    (422,517,803 )    $  53,793,277      $   (420,359,806 )    $ 118,614,814
Adjusted EBITDA                     $     (15,703,878 )    $  55,720,823      $     18,456,057      $ 125,469,515


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Three Months Ended September 30, 2022 Compared to Three Months Ended September
30, 2021

We reported a net loss attributable to Nutex Health Inc. of $422.5 million, or a
loss of $0.65 per share, for the three months ended September 30, 2022 as
compared with net income attributable to Nutex Health Inc. of $53.8 million, or
$0.09 per diluted share, for same period of 2021. Our 2022 results were
principally affected by:

• A non-cash impairment charge of $408.5 million to reduce the carrying amount of

goodwill for the population health management division reporting unit acquired

in the reverse business combination;

• Decrease in revenue caused by legislative changes reducing the amounts we are

able to collect for patient services to median in-network rates and the

resulting change in estimate for collection of accounts receivable and revenue

for prior periods totaling approximately $29.0 million;

• Start-up costs associated with five new facilities opened since April 2021

which are experiencing favorable market acceptance but not yet fully achieving

break-even profitability;

• Higher overall cost of employees and independent contractors.

Adjusted EBITDA for the three months ended September 30, 2022 was a loss of
$15.7 million as compared to income of $55.7 million for the comparable period
of 2021. Refer to Non-GAAP Financial Measures discussed below for a definition
and reconciliation of Adjusted EBITDA. The items affecting revenue and start-up
costs contributed significantly to the decline in Adjusted EBITDA in the 2022
period.

A discussion of our segment results is included below.

Hospital Division. Our revenue for the three months ended September 30, 2022
totaled $21.2 million as compared to $118.0 million for the same period of 2021,
a decrease of 82% caused by a reduction in both collection amounts and the
number of patient visits.

The following table shows the number of patient visits during the periods:

                     Three months ended September 30
                        2022                 2021
Patient visits:
Hospital          .       36,500               59,990

Total patient visits decreased 39% during the three months ended September 30,
2022 as compared with the same period of 2021. Patient visits in the 2021 period
included significant volumes of COVID-19 related cases. The average acuity or
severity of patient cases in the 2022 period was slightly higher than the same
period of 2021 but only minimally offset the impact of the lower number of total
patient visits.

The average payment by insurers for patient claims for emergency services has
declined by approximately 30% in 2022 because of the NSA compared to prior
periods. We have also experienced a decrease in collection for the remaining
amounts of account receivable for periods before 2022. We believe this decline
is caused, in part, by insurers underpaying these claims in the same way we are
experiencing claim payments since the NSA became effective. In the three months
ended September 30, 2022, we accordingly reduced our estimate of the ultimate
amounts of accounts receivable we expect to collect for prior periods. This
change in estimate reduced revenue for the three months ended September 30, 2022
by approximately $29 million.

The hospital division's operating loss was $26.5 million during the three months
ended September 30, 2022, down as compared with income of $76.0 million in the
same period of 2021. Our operating income for the third quarter of 2022 was
adversely affected by the reduction in net revenue discussed above. Further,
start-up costs for newer facilities contributed to reduced segment operating
results. We have opened five new facilities since April 2021. Start-up costs
include complete staffing for 24/7 operations, lease costs, in-market
advertising and other operating expenses. These costs often exceed our revenue
at these facilities until they achieve sustaining volumes of patient visits. In
general, we expect new facilities to reach profitability within 12 months. In
this time, we also added additional staff to manage higher volumes of medical
claims billing and collection administration.

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Population Health Management Division. We acquired the population health
management division in April 2022 upon completion of the reverse business
combination with Clinigence. Our total revenue for the three months ended
September 30, 2022 was $7.2 million consisting of capitation revenue of $4.9
million, management fees of $1.7 million and SaaS revenue of $561 thousand.
Capitation revenue is recognized by our consolidated VIE, AHISP. We do not have
an equity interest in this VIE but consolidate it since we are the primary
beneficiary of its operations under our management services contract with them.
We also earn management fees under our management services contracts with other
IPAs and MSOs which are reported as revenue.

The population health management division had $30 thousand of operating income
for the three months ended September 30, 2022. Strategically, we are focused on
the growth of this division principally through the addition of new independent
physician associations and have staffed our organization to manage larger
numbers of such organizations.

Real Estate Division. This division reports the operations of consolidated Real
Estate Entities where we provide guarantees of their indebtedness or are
co-borrowers. During the second quarter of 2022, we deconsolidated 17 Real
Estate Entities after the third-party lenders released our guarantees of
associated mortgage loans.

Revenue and operating expenses of consolidated Real Estate Entities are not
significant since the extent of these entities' operations is to own facilities
leased to our hospital division entities which are financed by a combination of
contributed equity by related parties and third-party mortgage indebtedness.
Such leases are typically on a triple net basis where our hospital division is
responsible for all operating costs, repairs and taxes on the facilities.
Finance lease income is recognized outside of segment operating income as other
income by the Real Estate Entities. However, these amounts are largely
eliminated in the consolidation of these entities into our financial statements.

At September 30, 2022, three Real Estate Entities continue to be consolidated in
our financial statements. We expect that hospitals we open in the future may be
leased from new Real Estate Entities which may be owned in whole or part by
related parties. Third-party lenders to these entities may require that we
provide a guarantee or become co-borrowers under mortgage indebtedness
financings for such facilities. In such instances, we may be required to
consolidate these new Real Estate Entities in our financial statements as VIEs.

Corporate and other costs. Corporate and other costs in the three months ended
September 30, 2022 included general and administrative expenses totaling $4.1
million and a non-cash impairment charge reducing goodwill totaling $408.5
million. Our corporate costs for the three months ended September 30, 2021
totaled $1.5 million and consisted of general and administrative expenses.
General and administrative costs include our executive management, accounting,
human resources, corporate technology, insurance and professional fees. We have
incurred higher levels of professional fees as a public company. In 2022, we
have made staffing additions commensurate with our operational growth and made
key additions to our executive management team.

As a public company, we must comply with new laws, regulations and requirements,
certain corporate governance provisions of the Sarbanes-Oxley Act of 2002,
related regulations of the SEC and the continued listing requirements of the
NASDAQ, with which we were not required to comply with as a private company. We
expect to incur additional annual expenses related to these matters and, among
other things, additional directors' and officers' liability insurance, director
fees, reporting requirements of the SEC, transfer agent fees, hiring additional
accounting, legal and administrative personnel, increased auditing and legal
fees and similar expenses.

During the three months ended September 30, 2022, we recognized a non-cash
impairment charge of $408.5 million to reduce the carrying amount of goodwill
for the population health management division reporting unit acquired in the
reverse business combination. This impairment was determined as part of our
annual test for impairment of goodwill. This test is made by comparing the
estimated fair values of our reporting units to their respective carrying
values. We use an income method to estimate the fair value of these assets,
which is based on forecasts of the expected future cash flows attributable to
the respective assets and is subject to significant estimates and assumptions.
In performing this test, we determined that the estimated fair value of our
population health management division reporting unit was less than its carrying
value recorded in the reverse business combination. Therefore, we conducted a
second step of the goodwill impairment test to determine the implied fair value
of the reporting unit's goodwill. The non-cash impairment charge reduced the
excess carrying amount of goodwill for the population health management division
that were greater than its residual fair value.

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Nonoperating items

Interest expense. Interest expense totaled $3.4 million in the three months
ended September 30, 2022 as compared with $1.3 million for the same period of
2021. This includes interest expense associated with the mortgage indebtedness
of consolidated Real Estate Entities, interest expense on outstanding term notes
and lines of credit for financing operating equipment and working capital needs,
interest expense for financing leases and the accretion costs related to the
conversion of notes from the Clinigence transaction. Interest expense is
expected to decline in future periods as a result of the deconsolidation of 17
Real Estate Entities and their associated mortgage indebtedness during the
second quarter of 2022 as well as due to the elimination of accretion costs
related to the conversion of notes payable from the Clinigence transaction.

Income tax expense. Income tax provisions for interim quarterly periods are
generally based on an estimated annual effective income tax rate calculated
separately from the effect of significant, infrequent or unusual items related
specifically to interim periods. The income tax impact of discrete items is
recognized in the period these occur.

Our effective tax rate for the three months ended September 30, 2022, excluding
the non-deductible goodwill impairment expense, was approximately 26%. The
primary difference from the federal statutory rate of 21% is related to state
taxes, income of noncontrolling interests in flow-through entities and permanent
differences for non-deductible expenses.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30,
2021

We reported a net loss attributable to Nutex Health Inc. of $420.4 million, or
$0.67 per share, for the nine months ended September 30, 2022 as compared with
net income attributable to Nutex Health Inc. of $118.6 million, or $0.20 per
diluted share, for same period of 2021. Our 2022 results were principally
affected by:

• A non-cash impairment charge of $408.5 million to reduce the carrying amount of

goodwill for the population health management division reporting unit acquired

in the reverse business combination;

• Decrease in revenue caused by legislative changes reducing the amounts we are

able to collect for patient services to median in-network rates and the

resulting change in estimate for collection of accounts receivable and revenue

for prior periods totaling approximately $38.6 million;

• Start-up costs associated with five new facilities opened since April 2021

which are experiencing favorable market acceptance but not yet fully achieving

break-even profitability;

• Significant, non-cash income tax expense totaling $18.4 million, net, for the

one-time change in our tax status and release of the acquired valuation

allowance of Clinigence;

• Acquisition-related costs related to the Clinigence merger transaction and

higher levels of general and administrative expenses related to our operations

as a public company; and

• Higher overall cost of employees and independent contractors.

Adjusted EBITDA for the nine months ended September 30, 2022 was $18.45 million
as compared with $125.5 million for the same period of 2021 with the special
items affecting revenue and start-up costs causing the decline during the 2022
period.

A discussion of our segment results is included below.

Hospital Division. Revenue totaling $152.0 million for the nine months ended
September 30, 2022 decreased 43% from $268.1 million for the same period of
2021. This decrease was caused by reductions in the number of patient visits and
reduced amounts collected for patient claims in the 2022 period. As previously
noted, our revenue has been adversely impacted in the 2022 period because of the
NSA and changes in our estimate of the ultimate amounts of accounts receivable
we will collect for prior periods. During the nine months ended September 30,
2022, these changes in estimates reduced our accounts receivable and revenue by
$38.6 million.

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The following table shows the number of patient visits during the periods:

                      Nine months ended September 30
                         2022                 2021
Patient visits:
Hospital                  121,414               137,041


Total patient visits during the nine months ended September 30, 2022 decreased
11% as compared with the same period of 2021. Five newly opened facilities, most
opened in the second half of 2021, helped offset reductions in patient visits
for COVID-19 related needs.

Typically, we experience some seasonality in the number of patient visits and
revenue during the year usually corresponding with the late-fall and winter
months when flu and other seasonal infirmities peak. As an emergency care
provider, we are not able to predict the number of patient visits or the
severity of patient healthcare needs. We operate our facilities 24 hours daily
to be responsive to our communities' needs.

The hospital division's segment operating income was $13.1 million for the nine
months ended September 30, 2022, down 92% from the same period of 2021. Our
operating income for the 2022 period was adversely affected by the reduction in
net revenue as well as the changes in estimate of the ultimate collections of
accounts receivable discussed above.

As mentioned above, we have opened five new facilities since April 2021.
Start-up costs at newly facilities often exceed our revenue at these facilities
for the first 12 to 15 months after their opening. In addition, in late-2021 and
through the third quarter of 2022, we made several staffing additions to manage
higher volumes of medical claims billing and collection administration.

Population Health Management Division. The population health management division
was started in April 2022 upon completion of the merger with Clinigence. Our
results of operations for this division include periods since April 1, 2022.

Total revenue for the nine months ended September 30, 2022 was $13.6 million
consisting of capitation revenue of $10.0 million, management fees of $2.7
million and SaaS revenue of $851 thousand.

The population health management division had an operating loss of $227 thousand
for the nine months ended September 30, 2022.

Real Estate Division. This division reports the operations of consolidated Real
Estate Entities which are partially owned by related parties. As noted, we have
no equity interest in these entities but consolidate these as VIEs when Nutex is
a co-borrower or provides a guarantee of the Real Estate Entities mortgage
indebtedness. In the second quarter of 2022, we deconsolidated 17 Real Estate
Entities.

Revenue and operating expenses for the real estate division are not significant
since finance lease income is recognized outside of segment operating income as
other income by the Real Estate Entities. Such amounts are generally eliminated
in the consolidation of these entities into our financial statements.

Corporate and other costs. Corporate and other costs in the nine months ended
September 30, 2022 included general and administrative expenses of $11.7
million, acquisition-related costs associated with the merger with Clinigence
totaling $3.9 million and a non-cash impairment charge to reduce goodwill
totaling $408.5 million. Corporate costs for the nine months ended September 30,
2021 totaled $5.1 million and consisted of general and administrative expenses.
In the 2022 period, we incurred higher levels of professional fees as we
prepared for our public listing, made staffing additions commensurate with our
operational growth and made key additions to our executive management team. As
discussed above, we recognized a non-cash impairment charge of $408.5 million in
the three months ended September 30, 2022 to reduce the carrying amount of
goodwill resulting from the reverse business combination with Clinigence.

  39




Nonoperating items

Interest expense. Interest expense for the nine months ended September 30, 2022
totaled $9.6 million as compared with $4.3 million for the same period of 2021.
This increase in interest expense was principally a result of higher mortgage
indebtedness of consolidated Real Estate Entities, interest expense on
outstanding term notes and lines of credit for financing operating equipment and
working capital needs, interest expense for financing lease obligations and
accretion costs related to the conversion of notes payable from the Clinigence
transaction.

Other expense (income). Other expense (income) for the nine months ended
September 30, 2021 included $5.2 million for the forgiveness of SBA Paycheck
Protection Program loans we obtained.

Income tax expense. As discussed above, our tax status changed as a result of
the merger with Clinigence. Previously, Nutex Health Holdco LLC and the Nutex
Subsidiaries were pass-through entities treated as partnerships for U.S. federal
income tax purposes. No provision for federal income taxes was provided for
these periods as federal taxes were obligations of these companies' members. We
recognized a non-cash charge of $20.8 million to income tax expense during the
nine months ended September 30, 2022 for this change in tax status. Secondly, we
recorded an offsetting non-cash benefit during the nine months ended September
30, 2022 of $2.4 million to income tax expense to remove the acquired valuation
allowance Clinigence had against its deferred tax assets.

Each of the discrete items above, as well as the non-deductible goodwill
impairment expense recognized in the nine months ended September 30, 2022, are
one-time, non-cash items. Our effective tax rate for the nine months ended
September 30, 2022, excluding the discrete items above, was approximately 26%.
The primary difference from the federal statutory rate of 21% is related to
state taxes, income of noncontrolling interests in flow-through entities and
permanent differences for non-deductible expenses.

Liquidity and Capital Resources

As of September 30, 2022, we had $36.6 million of cash and equivalents, compared
to $36.2 million of cash and equivalents at December 31, 2021.

Significant sources and uses of cash during the first nine months of 2022.

Sources of cash:

• Cash from operating activities was $46.1 million, which included $54.9 million

from the primary components of our working capital (receivables, inventories,

accounts payable and expenses).

• Clinigence's balance sheet at the merger date included $12.7 million of cash.

• We received net proceeds of $8.0 million from borrowings under notes payable

and lines of credit.

• We received net proceeds of $4.8 million from the exercise of common stock

   warrants and options.


 Uses of cash:

• Capital expenditures were $22.5 million.

• We made distributions to our owners related to operations prior to the merger

with Clinigence and to noncontrolling interest owners totaling $49.9 million.

• Cash associated with the 17 deconsolidated Real Estate Entities totaled $2.4

million.

Future sources and uses of cash. Our operating activities are financed with cash
on hand which is generated from revenues. Most of our hospital facilities are
leased from various lessors including related parties. These leases are
presented in our consolidated balance sheets unless the lease is from a
consolidated Real Estate Entity. Our growth plans include the development of new
hospital locations. We expect that in many of these locations we will lease
facilities from newly established entities partially owned by related parties.

  40




We routinely enter into equipment lease agreements to procure new or replacement
equipment and may also finance these purchases with term debt?. We have smaller
lines of credits available for working capital purposes and are presently
working to supplement or replace these with larger financing commitments. These
larger financing commitments are subject to market conditions and we may not be
able to obtain such larger financing commitments at favorable economic terms or
at all.

Indebtedness. The Company's indebtedness at September 30, 2022 is presented in
Item I, "Financial Statements - Note 8 - Debt" and our lease obligations are
presented in Item I, "Financial Statements-Note 9 - Leases."

Off-Balance Sheet Arrangements

As of September 30, 2022, we had no material off-balance sheet arrangements.

Non-GAAP Financial Measures

Adjusted EBITDA. Adjusted EBITDA is used as a supplemental non-GAAP financial
measure by management and external users of our financial statements, such as
industry analysts, investors, lenders and rating agencies. We believe Adjusted
EBITDA is useful because it allows us to more effectively evaluate our operating
performance.

We define Adjusted EBITDA as net income (loss) attributable to Nutex Health Inc.
plus net interest expense, income taxes, depreciation and amortization, further
adjusted for stock-based compensation, any acquisition related costs and
impairments. A reconciliation of net income to Adjusted EBITDA is included
below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP
measures of performance and may not be comparable to similarly-titled measures
presented by other companies.

                                       Three months ended September 30      

Nine months ended September 30

                                            2022                 2021                2022                2021
Reconciliation of net income
(loss) attributable to Nutex
Health Inc. to Adjusted EBITDA:
Net income (loss) attributable
to Nutex Health Inc.                $    (422,517,803 )     $ 53,793,277      $   (420,359,806 )    $ 118,614,814
Depreciation and amortization               4,330,167          1,871,799             9,859,513          5,873,439
Interest expense, net                       3,402,606          1,260,187             9,628,189          4,251,277
Income tax expense (benefit)               (8,543,880 )          453,621            11,285,729          1,091,975
Allocation to noncontrolling
interests                                    (922,792 )       (1,658,061 )          (4,445,224 )       (4,361,990 )
EBITDA                                   (424,251,702 )       55,720,823          (394,031,599 )      125,469,515
Stock-based compensation expense               81,249                 -    

           135,415                 -
Impairment of goodwill                    408,466,575                 -            408,466,575                 -
Acquisition costs                                  -                  -              3,885,666                 -
Adjusted EBITDA                     $     (15,703,878 )     $ 55,720,823      $     18,456,057      $ 125,469,515

Significant Accounting Policies

Revenue recognition.

Hospital division - Our hospital division recognizes net patient service revenue
for contracts with patients and in most cases a third-party payor (commercial
insurance, workers compensation insurance or, in limited cases,
Medicare/Medicaid). The Company's performance obligations are to provide
emergency health care services primarily on an outpatient basis. Net patient
service revenues are recorded at the amount that reflects the consideration to
which the Company expects to be entitled in exchange for providing patient care.
These amounts are net of appropriate discounts giving recognition to differences
between the Company's charges and reimbursement rates from third party payors.

  41




Patient service net revenues earned by the Company are recognized at a point in
time when the services are provided, net of adjustments and discounts. Because
all the Company's performance obligations relate to contracts with a duration of
less than one-year, certain disclosures are limited.

The transaction price is determined based on gross charges for services
provided, reduced by contractual adjustments provided to third-party payors,
discounts and implicit price concessions provided primarily to uninsured
patients in accordance with the Company's policy. For uninsured patients, the
Company recognizes revenue based on established rates, subject to certain
discounts and implicit price concessions. The Company is reimbursed from third
party payors under various methodologies based on the level of care provided. We
are considered "out-of-network" with commercial health plans. As there are no
contractual rates established with insurance entities, revenues are estimated
based on the "usual and customary" charges allowed by insurance payors using
historical collection experience, historical trends of refunds and payor payment
adjustments (retractions). Revenue from the Medicare program is based on
reimbursement rates set by governmental authorities.

Patients who have health care insurance may also have discounts applied related
to their copayment or deductible. Estimates of contractual adjustments and
discounts are determined by major payor classes for outpatient revenues based on
historical experience. The Company estimates implicit price concessions based on
its historical collection experience with these classes of patients using a
portfolio approach. The portfolios consist of major payor classes for outpatient
revenue. Based on historical collection trends and other analyses, the Company
concluded that revenue for a given portfolio would not be materially different
than if accounting for revenue on a contract-by-contract basis.

Customer payments are due upon receipt of an explanation of benefits for insured
patients or it is due upon receipt of the bill from the Company for uninsured
payments. There is no financing component associated with payments due from
insurers or patients.

Population health management division - The population health management
division recognizes revenue for capitation and management fees for services to
IPAs and physician groups and for the licensing, training, and consulting
related to our cloud-based proprietary technology.

Capitation revenue consists primarily of capitated fees for medical services
provided by physician-owned entities we consolidate as VIEs. Capitated
arrangements made directly with various managed care providers including HMOs.
Capitation revenues are typically prepaid monthly to us based on the number of
enrollees selecting us as their healthcare provider. Capitation is a fixed
payment amount per patient per unit of time paid in advance for the delivery of
health care services, whereby the service providers are generally liable for
excess medical costs.

We receive management fees that are received based on gross capitation revenues
of the IPAs or physician groups we manage. Revenue is recognized and received
monthly for our services. In addition, we provide consultant services that are
charged as a flat fixed rate and recognized as revenue when the service is
performed. Consultant services revenues represent a small portion of our total
revenue.

Software licenses are provided as SaaS-based subscriptions that grants access to
proprietary online databases and data management solutions. Training and
consulting are project based and billable to customers on a monthly-basis or
task-basis. Revenue from training and consulting are generally recognized upon
delivery of training or completion of the consulting project. The duration of
training and consulting projects are typically a few weeks or months and last no
longer than 12 months.

SaaS-based subscriptions are generally marketed under multi-year agreements with
annual, semi-annual, quarterly, or month-to-month renewals and revenue is
recognized ratably over the renewal period with the unearned amounts received
recorded as deferred revenue. For multiple-element arrangements accounted for in
accordance with specific software accounting guidance, multiple deliverables are
segregated into units of accounting which are delivered items that have value to
a customer on a standalone basis.

  42




Cash payments for SaaS-based subscriptions received in advance of the
satisfaction of our performance obligations as deferred revenue and recognized
as revenue over the period in which the performance obligations are satisfied.
The Company completes its contractual performance obligations through providing
its customers access to specified data through subscriptions for a service
period, and training on consulting associated with the subscriptions. We
primarily invoice our customers on a monthly basis and do not provide any
refunds, rights of return, or warranties.

Construction in Progress. The Company regularly is in the process of
constructing new facilities. Generally, our ER Entities are responsible for the
leasehold buildout and equipment while the associated Real Estate Entity
procures the land, if any, and constructs a new or remodeled facility. Costs
incurred to construct assets which will ultimately be classified as fixed assets
are capitalized and classified in our financial statements as construction in
progress until construction is completed and the asset is available for use.
Once the asset is available for use, it is reclassified as another category of
fixed assets and depreciated across its useful life.?

Goodwill Impairment. We test goodwill for impairment at least annually by
comparing the estimated fair values of our reporting units to their respective
carrying values. We use an income method to estimate the fair value of these
assets, which is based on forecasts of the expected future cash flows
attributable to the respective assets. Significant estimates and assumptions
inherent in the valuations reflect a consideration of other marketplace
participants, and include the amount and timing of future cash flows (including
expected growth rates and profitability). Estimates utilized in the projected
cash flows include consideration of macroeconomic conditions, overall category
growth rates, competitive activities, Company business plans and the discount
rate applied to the cash flows. Unanticipated market or macroeconomic events and
circumstances may occur, which could affect the accuracy or validity of the
estimates and assumptions.

During the three months ended September 30, 2022, we determined that the
estimated fair value of our population health management division reporting unit
which was acquired in the reverse business combination with Clinigence was less
than its' carrying value. Therefore, we conducted a second step of the goodwill
impairment test to determine the implied fair value of the reporting unit's
goodwill. In this analysis, we allocated the fair value of the reporting unit to
identifiable assets and liabilities of the reporting unit. The residual fair
value after this allocation was compared to the goodwill balance with the excess
goodwill charged to expense. Based on this analysis, we recognized a non-cash
impairment charge of $408.5 million to reduce the carrying amount of goodwill
for the population health management division reporting unit.

We believe the estimates and assumptions utilized in our impairment testing are
reasonable and are comparable to those that would be used by other marketplace
participants. However, actual events and results could differ substantially from
those used in our valuations. To the extent such factors result in a failure to
achieve the level of projected cash flows used to estimate fair value for
purposes of establishing or subsequently impairing the carrying amount of
goodwill and intangible assets, we may need to record additional noncash
impairment charges in the future.