ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 95-4472349 (IRS Employer Identification No.) |
Large accelerated filer ¨ | Accelerated filer x |
Non-accelerated filer ¨ | Smaller reporting company ¨ |
Emerging growth company ¨ |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Common Stock, $0.001 par value per share | AMEH | Nasdaq Capital Market |
PAGE | ||
Accountable Health Care | Accountable Health Care IPA, a Professional Medical Corporation |
AHMC | AHMC Healthcare Inc. |
AIPBP | All-Inclusive Population-Based Payments |
Alpha Care | Alpha Care Medical Group, Inc. |
AMG | AMG, a Professional Medical Corporation |
AMH | ApolloMed Hospitalists |
AMM | Apollo Medical Management, Inc. |
AP-AMH | AP-AMH Medical Corporation |
APAACO | APA ACO, Inc. |
APC | Allied Pacific of California IPA |
Apollo Care Connect | Apollo Care Connect, Inc. |
BAHA | Bay Area Hospitalist Associates |
CDSC | Concourse Diagnostic Surgery Center, LLC |
CQMC | Critical Quality Management Corporation |
CSI | College Street Investment LP, a California limited partnership |
DMHC | California Department of Managed Healthcare |
DMG | Diagnostic Medical Group |
HSMSO | Health Source MSO Inc., a California corporation |
ICC | AHMC International Cancer Center, a Medical Corporation |
IPA | independent practice association |
LMA | LaSalle Medical Associates |
MMG | Maverick Medical Group, Inc. |
MPP | Medical Property Partners |
NGACO | Next Generation Accountable Care Organization |
NMM | Network Medical Management, Inc. |
PASC | Pacific Ambulatory Health Care, LLC |
PMIOC | Pacific Medical Imaging and Oncology Center, Inc. |
SCHC | Southern California Heart Centers |
UCAP | Universal Care Acquisition Partners, LLC |
UCI | Universal Care, Inc. |
VIE | variable interest entity |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 80,892 | $ | 103,189 | |||
Restricted cash | 75 | 75 | |||||
Investment in marketable securities | 117,075 | 116,539 | |||||
Receivables, net | 18,012 | 11,004 | |||||
Receivables, net – related parties | 50,911 | 48,136 | |||||
Other receivables | 16,362 | 16,885 | |||||
Prepaid expenses and other current assets | 11,811 | 10,315 | |||||
Loans receivable | 6,425 | 6,425 | |||||
Loans receivable – related parties | 16,500 | 16,500 | |||||
Total current assets | 318,063 | 329,068 | |||||
Noncurrent assets | |||||||
Land, property and equipment, net | 11,876 | 12,130 | |||||
Intangible assets, net | 98,840 | 103,012 | |||||
Goodwill | 238,539 | 238,505 | |||||
Investment in other entities – equity method | 30,781 | 28,427 | |||||
Investments in privately held entities | 896 | 896 | |||||
Restricted cash | 746 | 746 | |||||
Operating lease right-of-use assets | 18,199 | 14,248 | |||||
Other assets | 6,475 | 1,681 | |||||
Total noncurrent assets | 406,352 | 399,645 | |||||
Total assets | $ | 724,415 | $ | 728,713 | |||
Liabilities, mezzanine equity and stockholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable and accrued expenses | $ | 20,106 | $ | 27,279 | |||
Fiduciary accounts payable | 1,709 | 2,027 | |||||
Medical liabilities | 63,698 | 58,725 | |||||
Income taxes payable | 8,034 | 4,529 | |||||
Dividend payable | 337 | 271 | |||||
Finance lease liabilities | 102 | 102 | |||||
Operating lease liabilities | 3,119 | 2,990 | |||||
Current portion of long-term debt | 9,500 | 9,500 | |||||
Total current liabilities | 106,605 | 105,423 | |||||
March 31, 2020 | December 31, 2019 | ||||||
Noncurrent liabilities | |||||||
Deferred tax liability | 16,332 | 18,269 | |||||
Finance lease liabilities, net of current portion | 390 | 416 | |||||
Operating lease liabilities, net of current portion | 15,583 | 11,373 | |||||
Long-term debt, net of current portion and deferred financing costs | 230,105 | 232,172 | |||||
Total noncurrent liabilities | 262,410 | 262,230 | |||||
Total liabilities | 369,015 | 367,653 | |||||
Commitments and contingencies (Note 11) | |||||||
Mezzanine equity | |||||||
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation | 157,439 | 168,725 | |||||
Stockholders’ equity | |||||||
Series A Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series B Preferred stock); 1,111,111 issued and zero outstanding | — | — | |||||
Series B Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series A Preferred stock); 555,555 issued and zero outstanding | — | — | |||||
Common stock, $0.001 par value per share; 100,000,000 shares authorized, 36,042,761 and 35,908,057 shares outstanding, excluding 17,475,707 and 17,458,810 treasury shares, at March 31, 2020, and December 31, 2019, respectively | 36 | 36 | |||||
Additional paid-in capital | 161,087 | 159,608 | |||||
Retained earnings | 35,957 | 31,905 | |||||
197,080 | 191,549 | ||||||
Noncontrolling interest | 881 | 786 | |||||
Total stockholders’ equity | 197,961 | 192,335 | |||||
Total liabilities, mezzanine equity and stockholders’ equity | $ | 724,415 | $ | 728,713 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Revenue | |||||||
Capitation, net | $ | 140,421 | $ | 71,517 | |||
Risk pool settlements and incentives | 11,236 | 10,094 | |||||
Management fee income | 8,815 | 8,997 | |||||
Fee-for-service, net | 3,427 | 4,081 | |||||
Other income | 1,206 | 1,069 | |||||
Total revenue | 165,105 | 95,758 | |||||
Operating expenses | |||||||
Cost of services | 144,204 | 83,432 | |||||
General and administrative expenses | 11,834 | 10,264 | |||||
Depreciation and amortization | 4,702 | 4,418 | |||||
Provision for doubtful accounts | — | 951 | |||||
Total expenses | 160,740 | 99,065 | |||||
Income (loss) from operations | 4,365 | (3,307 | ) | ||||
Other income (expense) | |||||||
Income (loss) from equity method investments | 2,054 | (850 | ) | ||||
Interest expense | (2,868 | ) | (211 | ) | |||
Interest income | 929 | 323 | |||||
Other income | 102 | 187 | |||||
Total other income (expense), net | 217 | (551 | ) | ||||
Income (loss) before provision for (benefit from) income taxes | 4,582 | (3,858 | ) | ||||
Provision for (benefit from) income taxes | 1,595 | (1,408 | ) | ||||
Net income (loss) | 2,987 | (2,450 | ) | ||||
Net loss attributable to noncontrolling interests | (1,065 | ) | (2,590 | ) | |||
Net income attributable to Apollo Medical Holdings, Inc. | $ | 4,052 | $ | 140 | |||
Earnings per share – basic | $ | 0.11 | $ | — | |||
Earnings per share – diluted | $ | 0.11 | $ | — | |||
Weighted average shares of common stock outstanding – basic | 36,010,268 | 34,496,622 | |||||
Weighted average shares of common stock outstanding – diluted | 37,439,099 | 38,074,174 |
Mezzanine Equity – Noncontrolling Interest in APC | Retained Earnings | |||||||||||||||||||||||||
Common Stock Outstanding | Additional Paid-in Capital | Noncontrolling Interest | Shareholders' Equity | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance January 1, 2020 | $ | 168,725 | 35,908,057 | $ | 36 | $ | 159,608 | $ | 31,905 | $ | 786 | $ | 192,335 | |||||||||||||
Net (loss) income | (1,161 | ) | — | — | — | 4,052 | 95 | 4,147 | ||||||||||||||||||
Purchase of treasury shares | — | (16,897 | ) | — | (301 | ) | — | — | (301 | ) | ||||||||||||||||
Purchase of noncontrolling interest | (125 | ) | — | — | — | — | — | — | ||||||||||||||||||
Shares issued for exercise of options and warrants | — | 151,601 | — | 722 | — | — | 722 | |||||||||||||||||||
Share-based compensation | — | — | — | 1,058 | — | — | 1,058 | |||||||||||||||||||
Dividends | (10,000 | ) | — | — | — | — | — | — | ||||||||||||||||||
Balance at March 31, 2020 | $ | 157,439 | 36,042,761 | $ | 36 | $ | 161,087 | $ | 35,957 | $ | 881 | $ | 197,961 |
Mezzanine Equity – Noncontrolling Interest in APC | Retained Earnings | |||||||||||||||||||||||||
Common Stock Outstanding | Additional Paid-in Capital | Noncontrolling Interest | Shareholders' Equity | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance January 1, 2019 | $ | 225,117 | 34,578,040 | $ | 35 | $ | 162,723 | $ | 17,788 | $ | 998 | $ | 181,544 | |||||||||||||
Net (loss) income | (3,000 | ) | — | — | — | 140 | 410 | 550 | ||||||||||||||||||
Purchase of treasury shares | (40 | ) | (93,451 | ) | — | — | — | — | — | |||||||||||||||||
Shares issued for exercise of options and warrants | 155 | 17,516 | — | 140 | — | — | 140 | |||||||||||||||||||
Share-based compensation | 202 | 1,599 | — | 143 | — | — | 143 | |||||||||||||||||||
Dividends | (10,000 | ) | — | — | — | — | — | — | ||||||||||||||||||
Balance at March 31, 2019 | $ | 212,434 | 34,503,704 | $ | 35 | $ | 163,006 | $ | 17,928 | $ | 1,408 | $ | 182,377 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities | |||||||
Net income (loss) | $ | 2,987 | $ | (2,450 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Depreciation and amortization | 5,010 | 4,418 | |||||
Provision for doubtful accounts | — | 951 | |||||
Share-based compensation | 1,058 | 345 | |||||
Unrealized gain from investment in equity securities | (162 | ) | (8 | ) | |||
(Income) loss from equity method investments | (2,054 | ) | 850 | ||||
Deferred tax | (1,915 | ) | (2,623 | ) | |||
Changes in operating assets and liabilities, net of business combinations: | |||||||
Receivable, net | (7,043 | ) | 487 | ||||
Receivable, net – related parties | (2,774 | ) | (7,511 | ) | |||
Other receivables | 521 | (11,245 | ) | ||||
Prepaid expenses and other current assets | (1,495 | ) | (729 | ) | |||
Right-of-use assets | 794 | 448 | |||||
Other assets | (4,801 | ) | (443 | ) | |||
Accounts payable and accrued expenses | (7,173 | ) | 22,579 | ||||
Fiduciary accounts payable | (318 | ) | 546 | ||||
Medical liabilities | 4,973 | (10,376 | ) | ||||
Income taxes payable | 3,505 | 1,210 | |||||
Operating lease liabilities | (406 | ) | (416 | ) | |||
Net cash used in operating activities | (9,293 | ) | (3,967 | ) | |||
Cash flows from investing activities | |||||||
Purchases of marketable securities | (374 | ) | (8 | ) | |||
Purchases of investment – equity method | (300 | ) | — | ||||
Purchases of property and equipment | (269 | ) | (104 | ) | |||
Net cash used in investing activities | (943 | ) | (112 | ) | |||
Cash flows from financing activities | |||||||
Repayment of bank loan and lines of credit | — | (40 | ) | ||||
Dividends paid | (9,934 | ) | (10,000 | ) | |||
Repayment of term loan | (2,375 | ) | — | ||||
Payment of finance lease obligations | (26 | ) | (25 | ) | |||
Proceeds from the exercise of stock options and warrants | 700 | 140 | |||||
Repurchase of shares | (426 | ) | (40 | ) | |||
Proceeds from common stock offering | — | 155 | |||||
Net cash used in financing activities | (12,061 | ) | (9,810 | ) | |||
Net decrease in cash, cash equivalents and restricted cash | (22,297 | ) | (13,889 | ) | |||
Cash, cash equivalents and restricted cash, beginning of period | 104,010 | 107,637 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 81,713 | $ | 93,748 | |||
Supplementary disclosures of cash flow information: | |||||||
Cash paid for interest | $ | 2,619 | $ | 182 | |||
Supplemental disclosures of non-cash investing and financing activities | |||||||
Dividend declared included in dividend payable | $ | 66 | $ | — |
March 31, | |||||||
2020 | 2019 | ||||||
Cash and cash equivalents | $ | 80,892 | $ | 93,008 | |||
Restricted cash – current | 75 | — | |||||
Restricted cash – non-current | 746 | 740 | |||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 81,713 | $ | 93,748 |
1. | Description of Business |
1. | ApolloMed loaned AP-AMH $545.0 million pursuant to a ten-year secured loan agreement (the "AP-AMH Loan"). The loan bears interest at a rate of 10% per annum simple interest, is not prepayable (except in certain limited circumstances), requires quarterly payments of interest only in arrears, and is secured by a first priority security interest in all of AP-AMH's assets, including the shares of APC Series A Preferred Stock to be purchased by AP-AMH. To the extent that AP-AMH is unable to make any interest payment when due because it has received dividends on the APC Series A Preferred Stock insufficient to pay in full such interest payment, then the outstanding principal amount of the loan will be increased by the amount of any such accrued but unpaid interest, and any such increased principal amounts will bear interest at the rate of 10.75% per annum simple interest. |
2. | AP-AMH purchased 1,000,000 shares of APC Series A Preferred Stock for aggregate consideration of $545.0 million in a private placement. Under the terms of the APC Certificate of Determination of Preferences of Series A Preferred Stock (the "Certificate of Determination"), AP-AMH is entitled to receive preferential, cumulative dividends that accrue on a |
3. | APC purchased 15,015,015 shares of ApolloMed's common stock for total consideration of $300.0 million in private placement. In connection therewith, ApolloMed granted APC certain registration rights with respect to ApolloMed's common stock that APC purchased, and APC agreed that APC votes in excess of 9.99% of ApolloMed's then outstanding shares will be voted by proxy given to the ApolloMed's management, and that those proxy holders will cast the excess votes in the same proportion as all other votes cast on any specific proposal coming before the ApolloMed's stockholders. |
4. | ApolloMed licensed to AP-AMH the right to use certain tradenames for certain specified purposes for a fee equal to a percentage of the aggregate gross revenues of AP-AMH. The license fee is payable out of any Series A Preferred Stock dividends received by AP-AMH from APC. |
5. | Through its subsidiary, NMM, the Company agreed to provide certain administrative services to AP-AMH for a fee equal to a percentage of the aggregate gross revenues of AP-AMH. The administrative fee also is payable out of any APC Series A Preferred Stock dividends received by AP-AMH from APC. |
2. | Basis of Presentation and Summary of Significant Accounting Policies |
For the Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Commercial | $ | 24,710 | $ | 26,761 | |||
Medicare | 68,641 | 25,465 | |||||
Medicaid | 62,690 | 37,232 | |||||
Other third parties | 9,064 | 6,300 | |||||
Revenue | $ | 165,105 | $ | 95,758 |
For the Three Months Ended March 31, | |||||
2020 | 2019 | ||||
Payor A | 12.1 | % | 17.4 | % | |
Payor B | 10.3 | % | 15.3 | % | |
Payor C | * | 12.0 | % | ||
Payor D | 17.6 | % | * | ||
Payor E | 13.3 | % | * |
* | Less than 10% of total net revenues |
As of March 31, 2020 | As of December 31, 2019 | ||||
Payor D | 13.6 | % | * | ||
Payor F | 33.5 | % | 30.4 | % | |
Payor G | 33.6 | % | 36.0 | % |
* | Less than 10% of total receivables and receivables — related parties, net |
Fair Value Measurements | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Money market funds* | $ | 41,675 | $ | — | $ | — | $ | 41,675 | |||||||
Marketable securities – certificates of deposit | 117,036 | — | — | 117,036 | |||||||||||
Marketable securities – equity securities | 39 | — | — | 39 | |||||||||||
Total | $ | 158,750 | $ | — | $ | — | $ | 158,750 |
Fair Value Measurements | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Money market funds* | $ | 50,731 | $ | — | $ | — | $ | 50,731 | |||||||
Marketable securities – certificates of deposit | 116,469 | — | — | 116,469 | |||||||||||
Marketable securities – equity securities | 70 | — | — | 70 | |||||||||||
Total | $ | 167,270 | $ | — | $ | — | $ | 167,270 |
3. | Business Combination and Goodwill |
Balance Sheet | |||
Assets acquired | |||
Cash and cash equivalents | $ | 3,569 | |
Accounts receivable, net | 10,336 | ||
Other current assets | 4,342 | ||
Network relationship intangible assets | 22,636 | ||
Goodwill | 28,585 | ||
Accounts payable | (2,758 | ) | |
Deferred tax liabilities | (6,334 | ) | |
Medical liabilities | (15,320 | ) | |
Net assets acquired | $ | 45,056 | |
Cash paid | $ | 45,056 |
Balance Sheet | |||
Assets acquired | |||
Cash and cash equivalents | $ | 582 | |
Accounts receivable, net | 5,150 | ||
Other current assets | 198 | ||
Network relationship intangible assets | 11,411 | ||
Goodwill | 23,052 | ||
Accounts payable | (3,245 | ) | |
Medical liabilities | (12,154 | ) | |
Subordinated loan | (15,327 | ) | |
Net asset acquired | $ | 9,667 | |
Equity investment contributed | $ | 2,417 | |
Cash paid | $ | 7,250 |
Balance, January 1, 2020 | $ | 238,505 | |
Adjustments | 34 | ||
Balance, March 31, 2020 | $ | 238,539 |
4. | Intangible Assets, Net |
Useful Life (Years) | Gross March 31, 2020 | Accumulated Amortization | Net March 31, 2020 | ||||||||||
Amortized intangible assets: | |||||||||||||
Network relationships | 11-15 | 143,930 | (63,831 | ) | 80,099 | ||||||||
Management contracts | 15 | 22,832 | (10,206 | ) | 12,626 | ||||||||
Member relationships | 12 | 6,696 | (2,573 | ) | 4,123 | ||||||||
Patient management platform | 5 | 2,060 | (961 | ) | 1,099 | ||||||||
Trade name/trademarks | 20 | 1,011 | (118 | ) | 893 | ||||||||
$ | 176,529 | $ | (77,689 | ) | $ | 98,840 |
Useful Life (Years) | Gross December 31, 2019 | Accumulated Amortization | Net December 31, 2019 | ||||||||||
Amortized intangible assets: | |||||||||||||
Network relationships | 11-15 | 143,930 | (60,526 | ) | 83,404 | ||||||||
Management contracts | 15 | 22,832 | (9,676 | ) | 13,156 | ||||||||
Member relationships | 12 | 6,696 | (2,352 | ) | 4,344 | ||||||||
Patient management platform | 5 | 2,060 | (858 | ) | 1,202 | ||||||||
Trade name/trademarks | 20 | 1,011 | (105 | ) | 906 | ||||||||
$ | 176,529 | $ | (73,517 | ) | $ | 103,012 |
Amount | |||
2020 (excluding the three months ended March 31, 2020) | $ | 11,856 | |
2021 | 14,524 | ||
2022 | 12,673 | ||
2023 | 10,842 | ||
2024 | 9,830 | ||
Thereafter | 39,115 | ||
Total | $ | 98,840 |
5. | Investments in Other Entities — Equity Method |
December 31, 2019 | Allocation of Income (Loss) | Contribution | March 31, 2020 | |||||||||
LaSalle Medical Associates – IPA Line of Business | $ | 6,397 | $ | (643 | ) | $ | — | $ | 5,754 | |||
Pacific Medical Imaging & Oncology Center, Inc. | 1,396 | 87 | — | 1,483 | ||||||||
Universal Care, Inc. | 1,438 | 2,670 | — | 4,108 | ||||||||
Diagnostic Medical Group | 2,334 | (5 | ) | — | 2,329 | |||||||
531 W. College, LLC – related party | 16,698 | (111 | ) | 300 | 16,887 | |||||||
MWN, LLC – related party | 164 | 56 | — | 220 | ||||||||
$ | 28,427 | $ | 2,054 | $ | 300 | $ | 30,781 |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | — | $ | 6,345 | |||
Receivables, net | 8,901 | 5,124 | |||||
Other current assets | 3,380 | 3,526 | |||||
Loan receivable | 2,250 | 2,250 | |||||
Restricted cash | 686 | 683 | |||||
Total assets | $ | 15,217 | $ | 17,928 | |||
Liabilities and Stockholders’ (Deficit) Equity | |||||||
Current liabilities | $ | 23,390 | $ | 23,530 | |||
Stockholders’ deficit | (8,173 | ) | (5,602 | ) | |||
Total liabilities and stockholders’ deficit | $ | 15,217 | $ | 17,928 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Revenues | $ | 46,304 | $ | 46,406 | |||
Expenses | 48,730 | 50,702 | |||||
Net loss | $ | (2,426 | ) | $ | (4,296 | ) |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Cash | $ | 34,757 | $ | 33,890 | |||
Receivables, net | 83,454 | 63,843 | |||||
Other current assets | 43,417 | 38,280 | |||||
Other assets | 885 | 882 | |||||
Property and equipment, net | 4,429 | 4,021 | |||||
Total assets | $ | 166,942 | $ | 140,916 | |||
Liabilities and Stockholders’ (Deficit) Equity | |||||||
Current liabilities | $ | 148,902 | $ | 128,330 | |||
Other liabilities | 33,126 | 33,133 | |||||
Stockholders’ deficit | (15,086 | ) | (20,547 | ) | |||
Total liabilities and stockholders’ deficit | $ | 166,942 | $ | 140,916 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Revenues | $ | 146,481 | $ | 113,319 | |||
Expenses | 141,771 | 111,408 | |||||
Income before benefit from income taxes | 4,710 | 1,911 | |||||
Benefit from income taxes | — | (211 | ) | ||||
Net income | $ | 4,710 | $ | 2,122 |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Cash | $ | 48 | $ | 139 | |||
Other current assets | 124 | 17 | |||||
Other assets | 70 | 70 | |||||
Property and equipment, net | 33,697 | 33,581 | |||||
Total assets | $ | 33,939 | $ | 33,807 | |||
Liabilities and Members’ Equity | |||||||
Current liabilities | $ | 1,114 | $ | 1,062 | |||
Stockholders’ equity | 32,825 | 32,745 | |||||
Total liabilities and members’ equity | $ | 33,939 | $ | 33,807 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Revenues | — | — | |||||
Expenses | 338 | 469 | |||||
Loss from operations | (338 | ) | (469 | ) | |||
Other income | $ | 21 | $ | 289 | |||
Net loss | $ | (317 | ) | $ | (180 | ) |
6. | Loan Receivable and Loan Receivable – Related Parties |
7. | Accounts Payable and Accrued Expenses |
March 31, 2020 | December 31, 2019 | ||||||
Accounts payable | $ | 7,745 | $ | 6,914 | |||
Capitation payable | 2,802 | 2,813 | |||||
Subcontractor IPA payable | 2,886 | 3,360 | |||||
Professional fees | 1,792 | 1,837 | |||||
Due to related parties | 55 | 225 | |||||
Accrued compensation | 4,162 | 3,238 | |||||
Contract liabilities | 664 | 8,892 | |||||
Total accounts payable and accrued expenses | $ | 20,106 | $ | 27,279 |
8. | Medical Liabilities |
March 31, 2020 | March 31, 2019 | ||||||
Medical liabilities, beginning of period | $ | 58,725 | $ | 33,642 | |||
Components of medical care costs related to claims incurred: | |||||||
Current period | 85,928 | 31,870 | |||||
Prior periods | (602 | ) | 3,105 | ||||
Total medical care costs | 85,326 | 34,975 | |||||
Payments for medical care costs related to claims incurred: | |||||||
Current period | (37,004 | ) | (16,587 | ) | |||
Prior periods | (43,247 | ) | (28,850 | ) | |||
Total paid | (80,251 | ) | (45,437 | ) | |||
Adjustments | (102 | ) | 86 | ||||
Medical liabilities, ending balance | $ | 63,698 | $ | 23,266 |
9. | Credit Facility, Bank Loan and Lines of Credit |
March 31, 2020 | |||
Term loan A | $ | 185,250 | |
Revolver loan | 60,000 | ||
Total debt | 245,250 | ||
Less: Current portion of debt | (9,500 | ) | |
Less: Unamortized financing costs | (5,645 | ) | |
Long-term debt | $ | 230,105 |
Amount | |||
2020 (excluding the three months ended March 31, 2020) | $ | 7,125 | |
2021 | 10,688 | ||
2022 | 14,250 | ||
2023 | 15,437 | ||
2024 | 197,750 | ||
Total | $ | 245,250 |
10. | Mezzanine and Stockholders’ Equity |
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Options outstanding at January 1, 2020 | 607,346 | $ | 9.22 | 3.42 | $ | 5,600 | |||||||
Options granted | 11,742 | 18.41 | — | — | |||||||||
Options exercised | (100,000 | ) | 2.10 | — | 1,600 | ||||||||
Options forfeited | (12,228 | ) | 17.57 | — | — | ||||||||
Options outstanding at March 31, 2020 | 506,860 | $ | 10.63 | 3.31 | $ | 2,000 | |||||||
Options exercisable at March 31, 2020 | 375,960 | $ | 6.25 | 2.11 | $ | 2,000 |
March 31, 2020 | Board Members | ||
Expected term | 3.0 years | ||
Expected volatility | 90.01 | % | |
Risk-free interest rate | 1.43 | % | |
Market value of common stock | $ | 10.56 | |
Annual dividend yield | — | % | |
Forfeiture rate | — | % |
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Warrants outstanding at January 1, 2020 | 3,154,590 | $ | 9.96 | 2.01 | $ | 26,700 | |||||||
Warrants granted | — | — | — | — | |||||||||
Warrants exercised | (51,601 | ) | 9.50 | — | 400 | ||||||||
Warrants expired/forfeited | — | — | — | — | |||||||||
Warrants outstanding at March 31, 2020 | 3,102,989 | $ | 9.97 | 1.78 | $ | 9,200 |
Exercise Price Per Share | Warrants Outstanding | Weighted Average Remaining Contractual Life | Warrants Exercisable | Weighted Average Exercise Price Per Share | ||||||||||
$ | 9.00 | 919,048 | 0.54 | 919,048 | $ | 9.00 | ||||||||
10.00 | 1,367,451 | 2.06 | 1,367,451 | 10.00 | ||||||||||
11.00 | 816,490 | 2.69 | 816,490 | 11.00 | ||||||||||
$ 9.00 –11.00 | 3,102,989 | 1.78 | 3,102,989 | $ | 9.97 |
11. | Commitments and Contingencies |
12. | Related-Party Transactions |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
AHMC – Risk pool and capitation | $ | 11,999 | $ | 11,600 | |||
HSMSO – Management fees, net | (132 | ) | (650 | ) | |||
Aurion – Management fees | (75 | ) | (100 | ) | |||
Net total | $ | 11,792 | $ | 10,850 |
13. | Income Taxes |
14. | Earnings Per Share |
Three Months Ended March 31, | 2020 | 2019 | ||||||
Earnings per share – basic | $ | 0.11 | $ | — | ||||
Earnings per share – diluted | $ | 0.11 | $ | — | ||||
Weighted average shares of common stock outstanding – basic | 36,010,268 | 34,496,622 | ||||||
Weighted average shares of common stock outstanding – diluted | 37,439,099 | 38,074,174 |
Three Months Ended March 31, | 2020 | 2019 | ||||
Weighted average shares of common stock outstanding – basic | 36,010,268 | 34,496,622 | ||||
10% shares held back pursuant to indemnification clause | — | 1,519,805 | ||||
Stock options | 185,830 | 455,381 | ||||
Warrants | 1,207,445 | 1,602,366 | ||||
Restricted stock units | 35,556 | — | ||||
Weighted average shares of common stock outstanding – diluted | 37,439,099 | 38,074,174 |
15. | Variable Interest Entities (VIEs) |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 57,015 | $ | 87,110 | |||
Restricted cash | 75 | 75 | |||||
Investment in marketable securities | 117,036 | 123,948 | |||||
Receivables, net | 16,332 | 9,300 | |||||
Receivables, net – related party | 49,279 | 42,976 | |||||
Other receivables | 734 | 744 | |||||
Prepaid expenses and other current assets | 7,257 | 7,403 | |||||
Loan receivable | 6,425 | 6,425 | |||||
Loan receivable – related parties | 16,500 | 16,500 | |||||
Total current assets | 270,653 | 294,481 | |||||
Noncurrent assets | |||||||
Land, property and equipment, net | 9,304 | 9,547 | |||||
Intangible assets, net | 78,247 | 81,439 | |||||
Goodwill | 108,946 | 108,913 | |||||
Investment in privately held entities | 223,796 | 319,930 | |||||
Investments in other entities – equity method | 30,785 | 28,427 | |||||
Restricted cash | 746 | 746 | |||||
Operating lease right-of-use assets | 4,444 | 4,751 | |||||
Other assets | 5,040 | 1,057 | |||||
Total noncurrent assets | 461,308 | 554,810 | |||||
Total assets | $ | 731,961 | $ | 849,291 | |||
Current liabilities | |||||||
Accounts payable and accrued expenses | $ | 11,317 | $ | 11,187 | |||
Fiduciary accounts payable | 1,709 | 2,027 | |||||
Medical liabilities | 45,029 | 49,019 | |||||
Income taxes payable | 8,034 | 4,530 | |||||
Amount due to affiliate | 23,128 | 28,058 | |||||
Dividends payable | 337 | 271 | |||||
Finance lease liabilities | 102 | 102 | |||||
Operating lease liabilities | 1,217 | 1,088 | |||||
Total current liabilities | 90,873 | 96,282 | |||||
Noncurrent liabilities | |||||||
Deferred tax liability | 12,587 | 14,059 | |||||
Finance lease liabilities, net of current portion | 390 | 416 | |||||
Operating lease liabilities, net of current portion | 3,336 | 3,742 | |||||
Total noncurrent liabilities | 16,313 | 18,217 | |||||
Total liabilities | $ | 107,186 | $ | 114,499 |
16. | Leases |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Operating lease cost | $ | 1,942 | $ | 1,102 | |||
Finance lease cost | |||||||
Amortization of lease expense | $ | 26 | $ | 25 | |||
Interest on lease liabilities | 4 | 5 | |||||
Sublease income | $ | (134 | ) | $ | (100 | ) | |
Total finance lease cost, net | $ | 1,838 | $ | 1,032 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Supplemental Cash Flows Information | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | 1,547 | $ | 1,034 | |||
Operating cash flows from finance leases | 4 | 5 | |||||
Financing cash flows from finance leases | 26 | 25 | |||||
Right-of-use assets obtained in exchange for lease liabilities: | |||||||
Operating leases | 4,745 | 8,855 | |||||
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Weighted Average Remaining Lease Term | |||||||
Operating leases | 7.33 years | 4.30 years | |||||
Finance leases | 4.42 years | 5.25 years | |||||
Weighted Average Discount Rate | |||||||
Operating leases | 6.10 | % | 6.13 | % | |||
Finance leases | 3.00 | % | 3.00 | % |
March 31, 2020 | Operating Leases | Finance Leases | |||||
2020 (excluding the three months ended March 31, 2020) | $ | 3,227 | $ | 89 | |||
2021 | 3,745 | 119 | |||||
2022 | 2,970 | 119 | |||||
2023 | 2,724 | 119 | |||||
2024 | 2,340 | 79 | |||||
Thereafter | 8,484 | — | |||||
Total future minimum lease payments | 23,490 | 525 | |||||
Less: imputed interest | 4,788 | 33 | |||||
Total lease liabilities | 18,702 | 492 | |||||
Less: current portion | 3,119 | 102 | |||||
Long-term lease liabilities | $ | 15,583 | $ | 390 |
17. | Subsequent Events |
For the Three Months Ended | ||||||||||||||
March 31, 2020 | March 31, 2019 | $ Change | % Change | |||||||||||
Revenue | ||||||||||||||
Capitation, net | $ | 140,421 | $ | 71,517 | $ | 68,904 | 96 | % | ||||||
Risk pool settlements and incentives | 11,236 | 10,094 | 1,142 | 11 | % | |||||||||
Management fee income | 8,815 | 8,997 | (182 | ) | (2 | )% | ||||||||
Fee-for-services, net | 3,427 | 4,081 | (654 | ) | (16 | )% | ||||||||
Other income | 1,206 | 1,069 | 137 | 13 | % | |||||||||
Total revenue | 165,105 | 95,758 | 69,347 | 72 | % | |||||||||
Operating expenses | ||||||||||||||
Cost of services | 144,204 | 83,432 | 60,772 | 73 | % | |||||||||
General and administrative expenses | 11,834 | 10,264 | 1,570 | 15 | % | |||||||||
Depreciation and amortization | 4,702 | 4,418 | 284 | 6 | % | |||||||||
Provision for doubtful accounts | — | 951 | (951 | ) | (100 | )% | ||||||||
Total expenses | 160,740 | 99,065 | 61,675 | 62 | % | |||||||||
Income (loss) from operations | 4,365 | (3,307 | ) | 7,672 | (232 | )% | ||||||||
Other income (expense) | ||||||||||||||
Income (loss) from equity method investments | 2,054 | (850 | ) | 2,904 | (342 | )% | ||||||||
Interest expense | (2,868 | ) | (211 | ) | (2,657 | ) | 1259 | % | ||||||
Interest income | 929 | 323 | 606 | 188 | % | |||||||||
Other income | 102 | 187 | (85 | ) | (45 | )% | ||||||||
Total other income (expense), net | 217 | (551 | ) | 768 | (139 | )% | ||||||||
Income (loss) before provision for (benefit from) income taxes | 4,582 | (3,858 | ) | 8,440 | (219 | )% | ||||||||
Provision for (benefit from) income taxes | 1,595 | (1,408 | ) | 3,003 | (213 | )% | ||||||||
Net income (loss) | $ | 2,987 | $ | (2,450 | ) | $ | 5,437 | (222 | )% | |||||
Net loss attributable to noncontrolling interests | (1,065 | ) | (2,590 | ) | 1,525 | (59 | )% | |||||||
Net income attributable to Apollo Medical Holdings, Inc. | $ | 4,052 | $ | 140 | $ | 3,912 | 2794 | % |
• | Maintaining total revenue of between $665.0 million and $675.0 million, |
• | Adjusting net income from a range of $20.0 million and $30.0 million (disclosed on March 12, 2020) to a range of $100.0 million and $110.0 million, the increase is primarily driven by the sale of UCI to Bright as disclosed above, |
• | Adjusting EBITDA from a range of $55.0 million and $67.0 million (disclosed on March 12, 2020) to a range of $155.0 million and $167.0 million, the increase is primarily driven by the sale of UCI to Bright as disclosed above, and |
• | Maintaining adjusted EBITDA of between $75.0 million and $90.0 million. |
Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA (in thousands) | ||||||||
Year Ending | ||||||||
December 31, 2020 | ||||||||
Low | High | |||||||
Net income(1) | $ | 100,000 | $ | 110,000 | ||||
Depreciation and amortization | 18,000 | 20,000 | ||||||
Provision for income taxes | 30,000 | 31,000 | ||||||
Interest expense | 8,000 | 9,000 | ||||||
Interest income | (1,000 | ) | (3,000 | ) | ||||
EBITDA(1) | 155,000 | 167,000 | ||||||
Income from equity method investments (2) | (95,000 | ) | (94,000 | ) | ||||
EBITDA adjustment for recently acquired IPAs | 15,000 | 17,000 | ||||||
Adjusted EBITDA | $75,000 | $90,000 |
March 31, 2020 | |||
Term loan A | $ | 185,250 | |
Revolver loan | 60,000 | ||
Total debt | 245,250 | ||
Less: Current portion of debt | (9,500 | ) | |
Less: Unamortized financing costs | (5,645 | ) | |
Long-term debt | $ | 230,105 |
Amount | |||
2020 (excluding the three months ended March 31, 2020) | $ | 7,125 | |
2021 | 10,688 | ||
2022 | 14,250 | ||
2023 | 15,437 | ||
2024 | 197,750 | ||
Total | $ | 245,250 |
Three Months Ended March 31, 2020 | |||||||||||||||||||||||
Entity | Facility | Interest rate per Annum | Maximum Balance During Period | Ending Balance | Principal Paid During Period | Interest Paid During Period | |||||||||||||||||
AMH | $ | 10,000 | 10 | % | $ | 5,996 | $ | 5,996 | $ | — | $ | — | |||||||||||
Apollo Care Connect | 1,000 | 10 | % | 1,283 | 1,283 | — | — | ||||||||||||||||
MMG | 3,000 | 10 | % | 3,482 | 3,482 | — | — | ||||||||||||||||
AKM | 5,000 | 10 | % | — | — | — | — | ||||||||||||||||
SCHC | 5,000 | 10 | % | 4,865 | 4,865 | — | — | ||||||||||||||||
BAHA | 250 | 10 | % | 4,066 | 4,066 | — | — | ||||||||||||||||
$ | 24,250 | $ | 19,692 | $ | 19,692 | $ | — | $ | — |
Exhibit No. | Description | |
2.4† | Stock purchase agreement dated March 15, 2019 (incorporated herein by reference to Exhibit 2.4 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2019). | |
10.1*† | ||
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
* | Filed herewith. | |
** | Furnished herewith | |
† | The schedules and exhibits thereof have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request. |
APOLLO MEDICAL HOLDINGS, INC. | ||
Dated: May 29, 2020 | By: | /s/ Kenneth Sim |
Kenneth Sim, M.D. Executive Chairman & Co-Chief Executive Officer (Principal Executive Officer) | ||
Dated: May 29, 2020 | By: | /s/ Thomas Lam |
Thomas Lam, M.D., M.P.H. Co-Chief Executive Officer & President (Principal Executive Officer) | ||
Dated: May 29, 2020 | By: | /s/ Eric Chin |
Eric Chin Chief Financial Officer and Interim Co-Chief Operating Officer (Principal Financial Officer) |
1. | I have reviewed this annual report on Form 10-Q of Apollo Medical Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 29, 2020 | /s/ Kenneth Sim |
Kenneth Sim Executive Chairman and Co-Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this annual report on Form 10-Q of Apollo Medical Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 29, 2020 | /s/ Thomas Lam |
Thomas Lam Co-Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this annual report on Form 10-Q of Apollo Medical Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 29, 2020 | /s/ Eric Chin |
Eric Chin Chief Financial Officer and Interim Co-Chief Operating Officer (Principal Financial Officer) |
Date: | May 29, 2020 | /s/ Kenneth Sim |
Kenneth Sim Executive Chairman and Co-Chief Executive Officer (Principal Executive Officer) |
Date: | May 29, 2020 | /s/ Thomas Lam |
Thomas Lam Co-Chief Executive Officer and President (Principal Executive Officer) |
Date: | May 29, 2020 | /s/ Eric Chin |
Eric Chin Chief Financial Officer and Interim Co-Chief Operating Officer (Principal Financial Officer) |
Commitments and Contingencies - Additional Information (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Apr. 03, 2018 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Commitments And Contingencies [Line Items] | ||||
General amount of guarantee (as a percent) | 2.00% | |||
Amount outstanding | $ 245,250,000 | |||
Damages sought | $ 5,000,000.0 | |||
APC | Standby Letters of Credit | ||||
Commitments And Contingencies [Line Items] | ||||
Term of facility | 1 year | |||
Alpha Care Medical Group, Inc. | Standby Letters of Credit | ||||
Commitments And Contingencies [Line Items] | ||||
Term of facility | 1 year | |||
Standby letters of credit assumed | $ 3,800,000 | |||
Standby Letters of Credit | APC | ||||
Commitments And Contingencies [Line Items] | ||||
Amount outstanding | $ 300,000 | |||
Preferred Bank | ||||
Commitments And Contingencies [Line Items] | ||||
Amount outstanding | $ 8,200,000 | $ 6,600,000 |
Earnings Per Share - Earnings Per Share Computations (Details) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Earnings Per Share [Abstract] | ||
Earnings per share – basic (in dollars per share) | $ 0.11 | $ 0.00 |
Earnings per share – diluted (in dollars per share) | $ 0.11 | $ 0.00 |
Weighted average shares of common stock outstanding – basic (in shares) | 36,010,268 | 34,496,622 |
Weighted average shares of common stock outstanding – diluted (in shares) | 37,439,099 | 38,074,174 |
Business Combination and Goodwill - Assumption of Identifiable Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Aug. 30, 2019 |
May 31, 2019 |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|
Assets acquired | ||||
Goodwill | $ 238,539 | $ 238,505 | ||
Accountable Health Care | Dr. Jay | ||||
Assets acquired | ||||
Cash and cash equivalents | $ 582 | |||
Accounts receivable, net | 5,150 | |||
Other current assets | 198 | |||
Network relationship intangible assets | 11,411 | |||
Goodwill | 23,052 | |||
Liabilities assumed | ||||
Accounts payable | (3,245) | |||
Medical liabilities | (12,154) | |||
Subordinated loan | (15,327) | |||
Net assets acquired | 9,667 | |||
Equity investment contributed | 2,417 | |||
Cash paid | $ 7,250 | |||
APC and APC-LSMA | Alpha Care Medical Group, Inc. | ||||
Assets acquired | ||||
Cash and cash equivalents | $ 3,569 | |||
Accounts receivable, net | 10,336 | |||
Other current assets | 4,342 | |||
Network relationship intangible assets | 22,636 | |||
Goodwill | 28,585 | |||
Liabilities assumed | ||||
Accounts payable | (2,758) | |||
Deferred tax liabilities | (6,334) | |||
Medical liabilities | (15,320) | |||
Net assets acquired | 45,056 | |||
Cash paid | $ 45,056 |
Basis of Presentation and Summary of Significant Accounting Policies - Disaggregation of Revenue by Each Payor Type (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 165,105 | $ 95,758 |
Commercial | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 24,710 | 26,761 |
Medicare | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 68,641 | 25,465 |
Medicaid | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 62,690 | 37,232 |
Other third parties | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 9,064 | $ 6,300 |
Intangible Assets, Net - Future Amortization Expense (Details) $ in Thousands |
Mar. 31, 2020
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 (excluding the three months ended March 31, 2020) | $ 11,856 |
2021 | 14,524 |
2022 | 12,673 |
2023 | 10,842 |
2024 | 9,830 |
Thereafter | 39,115 |
Total | $ 98,840 |
Accounts Payable and Accrued Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable and Accrued Expenses | The Company’s accounts payable and accrued expenses consisted of the following (in thousands):
|
Variable Interest Entities (VIEs) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities (VIEs) | Variable Interest Entities (VIEs) A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. See Note 2 – “Basis of Presentation and Summary of Significant Accounting Policies” to the accompanying consolidated financial statements for information on how the Company determines VIEs and its treatment. The following table includes assets that can only be used to settle the liabilities of APC, including Alpha Care and Accountable Health Care, and the creditors of APC, including Alpha Care and Accountable Health Care, have no recourse to the Company, nor do creditors of the Company have recourse against the assets of APC, including Alpha Care and Accountable Health Care. These assets and liabilities, with the exception of the investment in a privately held entity that does not report net asset value per share and amounts due to affiliates, which are eliminated upon consolidation with NMM, are included in the accompanying consolidated balance sheets (in thousands).
The assets of the Company’s other consolidated VIEs were not considered significant. |
Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregated Revenue by Each Payor Type | The following table presents disaggregated revenue generated by each payor type for the three months ended March 31, 2020 and 2019 (in thousands):
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Schedule of Contributions to Revenue and Receivables by Payor | The Company had major payors that contributed the following percentages of net revenue:
The Company had major payors that contributed to the following percentages of receivables and receivables – related parties before the allowance for doubtful accounts:
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Schedule of Carrying Amounts and Fair Values of Financial Instruments | The carrying amounts and fair values of the Company’s financial instruments as of March 31, 2020 are presented below (in thousands):
The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2019 are presented below (in thousands):
* Included in cash and cash equivalents |
Description of Business |
3 Months Ended | ||||||||||||||||||||
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
Description of Business | Description of Business Overview Apollo Medical Holdings, Inc. (“ApolloMed”), together with its affiliated physician groups and consolidated entities (collectively, the “Company”) is a physician-centric integrated population health management company working to provide coordinated, outcome-based medical care in a cost-effective manner to patients in California, the majority of whom are covered by private or public insurance such as Medicare, Medicaid and health maintenance organization (“HMO”) plans, with a portion of the Company’s revenue coming from non-insured patients. The Company provides care coordination services to each major constituent of the healthcare delivery system, including patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups and health plans. The Company’s physician network consists of primary care physicians, specialist physicians, and hospitalists. The Company operates primarily through the following subsidiaries of ApolloMed: Network Medical Management, Inc. (“NMM”), Apollo Medical Management, Inc. (“AMM”), APAACO, Apollo Care Connect, Inc. (“Apollo Care Connect”), and their consolidated entities. NMM was formed in 1994 as a management service organization (“MSO”) for the purposes of providing management services to medical companies and independent practice associations (“IPAs”). The management services primarily include billing, collection, accounting, administration, quality assurance, marketing, compliance, and education. Following a business combination, NMM became a wholly-owned subsidiary of ApolloMed in December 2017. Allied Physicians of California IPA, a Professional Medical Corporation d.b.a. Allied Pacific of California IPA (“APC”) was incorporated in 1992, for the purpose of arranging healthcare services as an IPA. APC has contracts with various HMOs and other licensed healthcare service plans as defined in the California Knox-Keene Health Care Service Plan Act of 1975. Each HMO negotiates a fixed amount per member per month (“PMPM”) that is to be paid to APC. In return, APC arranges for the delivery of healthcare services by contracting with physicians or professional medical corporations for primary care and specialty care services. APC assumes the financial risk of the cost of delivering healthcare services in excess of the fixed amounts received. Some of the risk is transferred to the contracted physicians or professional corporations. The risk is also minimized by stop-loss provisions in contracts with HMOs. In July 1999, APC entered into an amended and restated management and administrative services agreement with NMM (the initial management services agreement was entered into in 1997) for an initial fixed term of 30 years. In accordance with relevant accounting guidance, APC is determined to be a VIE of the Company as NMM is the primary beneficiary with the ability to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance through its majority representation on the APC Joint Planning Board; therefore APC is consolidated by NMM. AP-AMH Medical Corporation (“AP-AMH”) was formed in May 2019, as a designated shareholder professional corporation. Dr. Thomas Lam, a shareholder, and the Chief Executive Officer and Chief Financial Officer of APC and Co-Chief Executive Officer of ApolloMed, is the sole shareholder of AP-AMH. ApolloMed makes all the decisions on behalf of AP-AMH and funds and receives all the distributions from its operations. ApolloMed has the rights to receive benefits from the operations of AP-AMH and has the option, but not the obligation, to cover losses. Therefore, AP-AMH is controlled and consolidated by ApolloMed as the primary beneficiary of this VIE. In September 2019, ApolloMed completed the following series of transactions with its affiliates, AP-AMH and APC;
APC's ownership in ApolloMed was 32.44% at March 31, 2020 and 32.50% at December 31, 2019. Concourse Diagnostic Surgery Center, LLC (“CDSC”) was formed in March 2010, in the state of California. CDSC is an ambulatory surgery center in City of Industry, California, is organized by a group of highly qualified physicians, and the surgical center utilizes some of the most advanced equipment in the eastern part of Los Angeles County and the San Gabriel Valley. The facility is Medicare certified and accredited by the Accreditation Association for Ambulatory Healthcare, Inc. As of March 31, 2020, APC's owned 45.01% of CDSC's capital stock. CDSC is determined to be a VIE and APC is determined to be the primary beneficiary. APC has the ability to direct the activities that most significantly affect CDSC's economic performance and receives the most economic benefits; therefore CDSC is consolidated by APC. APC-LSMA Designated Shareholder Medical Corporation ("APC-LSMA") was formed in October 2012, as a designated shareholder professional corporation. Dr. Thomas Lam, a shareholder and the Chief Executive Officer and Chief Financial Officer of APC and Co-Chief Executive Officer of ApolloMed, is a nominee shareholder of APC. APC makes all investment decisions on behalf of APC-LSMA, funds all investments and receives all distributions from the investments. APC has the obligation to absorb losses and right to receive benefits from all investments made by APC-LSMA. APC-LSMA’s sole function is to act as the nominee shareholder for APC in other California medical professional corporations. Therefore, APC-LSMA is controlled and consolidated by APC as the primary beneficiary of this VIE. The only activity of APC-LSMA is to hold the investments in medical corporations, including the IPA lines of business of LaSalle Medical Associates (“LMA”), Pacific Medical Imaging and Oncology Center, Inc. (“PMIOC”), Diagnostic Medical Group (“DMG”) and AHMC International Cancer Center, a Medical Corporation (“ICC”). APC-LSMA also holds a 100% ownership interest in Maverick Medical Group, Inc. (“MMG”), Alpha Care Medical Group, Inc. (“Alpha Care”), Accountable Health Care IPA, a Professional Medical Corporation (“Accountable Health Care”), and AMG, a Professional Medical Corporation ("AMG"). Alpha Care, an IPA acquired by the Company in May 2019, has been operating in California since 1993 as a risk bearing organization engaged in providing professional services under capitation arrangements with its contracted health plans through a provider network consisting of primary care and specialty care physicians. Alpha Care specializes in delivering high-quality healthcare to over 170,000 enrollees, as of March 31, 2020, and focuses on Medi-Cal/Medicaid, Commercial and Medicare and Dual Eligible members in the Riverside and San Bernardino counties of Southern California. Accountable Health Care is a California-based IPA that has served the local community in the greater Los Angeles County area through a network of physicians and health care providers for more than 20 years. Accountable Health Care currently has a network of over 300 primary care physicians and 700 specialty care physicians, and four community and regional hospital medical centers that provide quality health care services to more than 80,000 members of three federally qualified health plans and multiple product lines, including Medi-Cal, Commercial, Medicare and the California Healthy Families program. In August 2019, APC and APC-LSMA acquired the remaining outstanding shares of Accountable Health Care's capital stock which they did not already own (comprising 75%) for $7.3 million in cash (see Note 3). AMG is a network of family practice clinics operating out of three main locations in Southern California. AMG provides professional and post-acute care services to Medicare, Medi-Cal/Medicaid, and Commercial patients through its network of doctors and nurse practitioners. In September 2019, APC-LSMA purchased 100% of the shares of capital stock of AMG for $1.2 million in cash and $0.4 million of APC common stock (see Note 3). Universal Care Acquisition Partners, LLC (“UCAP”), a 100% owned subsidiary of APC, was formed in June 2014, for the purpose of holding an investment in Universal Care, Inc. (“UCI”). On April 30, 2020, UCAP completed its disposition of its 48.9% ownership interest in UCI to Bright Health Company of California, Inc. ("Bright") for approximately $69.2 million in cash proceeds (including $16.5 million as repayment of indebtedness owed to APC), plus non-cash consideration consisting of shares of Bright Health, Inc.'s, a Delaware corporation (solely for purposes of section 13.22 thereto) ("Bright Health, Inc.") preferred stock having a stipulated value of approximately $33.3 million. In addition, pursuant to the terms of the stock purchase agreement (the "SPA"), upon release from escrow, APC is entitled to receive all or that portion of the following escrowed amounts that have not been offset or reserved for claims: (i) cash consideration of approximately $15.6 million, plus (ii) non-cash consideration consisting of shares of Bright Health, Inc.’s preferred stock having a stipulated value of approximately $5.9 million (see Note 17). As set forth in the Company’s definitive proxy statement filed with the SEC on July 31, 2019 (the “Proxy Statement”), the 48.9% interest in UCI is an “Excluded Asset” that remains solely for the benefit of APC and its shareholders. As such, any proceeds or gain on the sale of APC’s indirect ownership interest in Universal will have no impact on the Series A Dividend payable by APC to AP-AMH Medical Corporation as described in the Proxy Statement and consequently the sale will not affect net income attributable to the Company. APAACO, jointly owned by NMM and AMM, began participating in the Next Generation Accountable Care Organization Model (“NGACO Model”) of the Centers for Medicare & Medicaid Services ("CMS") in January 2017. The NGACO Model is a new CMS program that allows provider groups to assume higher levels of financial risk and potentially achieve a higher reward from participating in this new attribution-based risk sharing model. AMM, a wholly-owned subsidiary of ApolloMed, manages affiliated medical groups, which consist of ApolloMed Hospitalists, a Medical Corporation (“AMH”) and Southern California Heart Centers, a Medical Corporation (“SCHC”). AMH provides hospitalist, intensivist, and physician advisory services. SCHC is a specialty clinic that focuses on cardiac care and diagnostic testing. Apollo Care Connect, Inc., a wholly-owned subsidiary of ApolloMed, provides a cloud and mobile-based population health management platform that includes digital care plans, a case management module, connectivity with multiple healthcare tracking devices and the ability to integrate with multiple electronic health records to capture clinical data. |
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Common Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares outstanding (in shares) | 36,042,761 | 35,908,057 |
Treasury shares (in shares) | 17,475,707 | 17,458,810 |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 1,111,111 | 1,111,111 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Series B Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 555,555 | 555,555 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Earnings Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share Computations | Below is a summary of the earnings per share computations:
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Schedule of Shares Included in the Diluted Earnings Per Share Computations | Below is a summary of the shares included in the diluted earnings per share computations:
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Medical Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Medical Liabilities | The Company’s medical liabilities consisted of the following (in thousands):
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Accounts Payable and Accrued Expenses |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Expenses | Accounts Payable and Accrued Expenses The Company’s accounts payable and accrued expenses consisted of the following (in thousands):
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Regulatory Matters Laws and regulations governing the Medicare program and healthcare generally are complex and subject to interpretation. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action, including fines, penalties, and exclusion from the Medicare and Medi-Cal programs. As risk-bearing organizations, APC, Alpha Care and Accountable Health Care are required to comply with California DMHC regulations, including maintenance of minimum working capital, tangible net equity (“TNE”), cash-to-claims ratio and claims payment requirements prescribed by the California DMHC. TNE is defined as net equity less intangibles, less non-allowable assets (which include unsecured amounts due from affiliates), plus subordinated obligations. At March 31, 2020 and December 31, 2019, APC, Alpha Care and Accountable Health Care were in compliance with these regulations. Many of the Company’s payor and provider contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of medical services. Such differing interpretations may not come to light until a substantial period of time has passed following contract implementation. Liabilities for claims disputes are recorded when the loss is probable and can be estimated. Any adjustments to reserves are reflected in current operations. Standby Letters of Credit As part of the APAACO participation with CMS, the Company must provide a financial guarantee to CMS, the guarantee generally must be in an amount equal to 2% of the Company's benchmark Medicare Part A and Part B expenditures. The Company has established an irrevocable standby letter of credit with Preferred Bank of $8.2 million and $6.6 million for the 2019 and 2018 performance years (see Note 9). APC established irrevocable standby letters of credit with a financial institution for a total of $0.3 million for the benefit of certain health plans. The standby letters of credit are automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution in advance of the expiration date that the letter will be terminated (see Note 9). Alpha Care established irrevocable standby letters of credit with a financial institution for a total of $3.8 million for the benefit of certain health plans. The standby letters of credit are automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution in advance of the expiration date that the letter will be terminated. Litigation From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of its business. The resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Prospect Medical Systems On or about March 23, 2018 and April 3, 2018, a Demand for Arbitration and an Amended Demand for Arbitration were filed by Prospect Medical Group, Inc. and Prospect Medical Systems, Inc. (collectively, “Prospect”) against MMG, ApolloMed and AMM with Judicial Arbitration Mediation Services in California, arising out of MMG’s purported business plans, seeking damages in excess of $5.0 million, and alleging breach of contract, violation of unfair competition laws, and tortious interference with Prospect’s current and future economic relationships with its health plans and their members. By stipulation and order dated April 28, 2020, both ApolloMed and Apollo Medical Management, Inc. were dismissed without prejudice from the arbitration for lack of jurisdiction on the basis that neither of them were a party to any arbitration agreement with Prospect, subject, however, to Prospect reserving its rights against Apollo and tolling of applicable statute of limitation. MMG disputes the allegations and intends to vigorously defend against this matter. The resolution of this matter and any potential range of loss in excess of any current accrual cannot be reasonably determined or estimated at this time primarily because the matter has not been fully arbitrated and presents unique regulatory and contractual interpretation issues. Liability Insurance The Company believes that its insurance coverage is appropriate based upon the Company’s claims experience and the nature and risks of the Company’s business. In addition to the known incidents that have resulted in the assertion of claims, the Company cannot be certain that its insurance coverage will be adequate to cover liabilities arising out of claims asserted against the Company, the Company’s affiliated professional organizations or the Company’s affiliated hospitalists in the future where the outcomes of such claims are unfavorable. The Company believes that the ultimate resolution of all pending claims, including liabilities in excess of the Company’s insurance coverage, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows; however, there can be no assurance that future claims will not have such a material adverse effect on the Company’s business. Contracted physicians are required to obtain their own insurance coverage. Although the Company currently maintains liability insurance policies on a claims-made basis, which are intended to cover malpractice liability and certain other claims, the coverage must be renewed annually, and may not continue to be available to the Company in future years at acceptable costs, and on favorable terms. |
Leases - Other Information Related to Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 1,547 | $ 1,034 |
Operating cash flows from finance leases | 4 | 5 |
Financing cash flows from finance leases | 26 | 25 |
Right-of-use assets obtained in exchange for lease liabilities: | ||
Operating leases | $ 4,745 | $ 8,855 |
Weighted Average Remaining Lease Term | ||
Operating leases | 7 years 3 months 29 days | 4 years 3 months 18 days |
Finance leases | 4 years 5 months 1 day | 5 years 3 months 1 day |
Weighted Average Discount Rate | ||
Operating leases | 6.10% | 6.13% |
Finance leases | 3.00% | 3.00% |
Credit Facility, Bank Loan and Lines of Credit - Credit Facility (Details) $ in Thousands |
Mar. 31, 2020
USD ($)
|
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Line of Credit Facility [Line Items] | |
Total debt | $ 245,250 |
Less: Current portion of debt | (9,500) |
Less: Unamortized financing costs | (5,645) |
Total | 230,105 |
Term loan A | |
Line of Credit Facility [Line Items] | |
Total debt | 185,250 |
Revolver loan | |
Line of Credit Facility [Line Items] | |
Total debt | $ 60,000 |
Basis of Presentation and Summary of Significant Accounting Policies - Additional Information, Performance Obligation (Details) - Next Generation ACO Model Participation Agreement |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2017-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 2 years | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 2 years |
Variable Interest Entities (VIEs) (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities | The following table includes assets that can only be used to settle the liabilities of APC, including Alpha Care and Accountable Health Care, and the creditors of APC, including Alpha Care and Accountable Health Care, have no recourse to the Company, nor do creditors of the Company have recourse against the assets of APC, including Alpha Care and Accountable Health Care. These assets and liabilities, with the exception of the investment in a privately held entity that does not report net asset value per share and amounts due to affiliates, which are eliminated upon consolidation with NMM, are included in the accompanying consolidated balance sheets (in thousands).
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Credit Facility, Bank Loan and Lines of Credit (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Line of Credit Facilities | The Company's credit facility consisted of the following (in thousands):
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Schedule of Future Maturities of Credit Facility | Future maturities of the Company's credit facility is to be as follows for the years ending December 31 (in thousands):
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Loan Receivable and Loan Receivable - Related Parties |
3 Months Ended |
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Mar. 31, 2020 | |
Receivables [Abstract] | |
Loan Receivable and Loan Receivable - Related Parties | Loan Receivable and Loan Receivable – Related Parties Loan receivable Dr. Albert Arteaga On June 28, 2019, APC entered into a convertible secured promissory note with Dr. Albert H. Arteaga, M.D. ("Dr. Arteaga"), Chief Executive Officer of LMA, to loan $6.4 million to Dr. Arteaga. Interest on the loan accrues at a rate that is equal to the prime rate, plus 1% (4.25% as of March 31, 2020) and payable in monthly installments of interest only on the first day of each month until the maturity date of June 28, 2020, at which time, all outstanding principal and accrued interest thereon shall be due and payable in full. The note is secured by certain shares of LMA common stock held by Dr. Arteaga. At any time on or before June 28, 2020, and upon written notice by APC to Dr. Arteaga, APC has the right, but not the obligation, to convert the entire outstanding principal amount of this note into shares of LMA common stock, which equal 21.25% of the aggregate then-issued and outstanding shares of LMA common stock to be held by APC's designee, which may include APC-LSMA. If converted, APC-LSMA and APC's designee will collectively own 46.25% of the equity of LMA with the remaining 53.75% to be owned by Dr. Arteaga. The entire note receivable has been classified under loans receivable — related parties on the consolidated balance sheets in the amount of $6.4 million as of March 31, 2020. During the period ended March 31 2020, the Company entered into an agreement to advance Dr. Arteaga $2.2 million related to claims that were overpaid in the ordinary course of business. The advanced amount is repaid as the overpaid claims are recovered. As of March 31, 2020 the outstanding amount due was $1.6 million and included in the "Prepaid expenses and other current assets" in the accompanying consolidated balance sheets. Loan receivable - related parties Universal Care, Inc. In 2015, APC advanced $5.0 million on behalf of UCAP to UCI for working capital purposes. On June 29, 2018, November 28, 2018 and December 13, 2019 APC advanced an additional $2.5 million, $5.0 million and $4.0 million, respectively. The loans accrue interest at the prime rate, plus 1.00%, or 4.25%, as of March 31, 2020 and 5.75% as of December 31, 2019, with interest to be paid monthly. The notes receivable were classified under loans receivable — related parties on the consolidated balance sheets in the amount of $16.5 million as of March 31, 2020 and December 31, 2019, respectively. On April 30, 2020, UCAP completed its disposition of its 48.9% ownership interest in UCI to Bright for approximately $69.2 million in cash proceeds (including $16.5 million as repayment of indebtedness owed to APC), plus non-cash consideration consisting of shares of Bright Health, Inc.’s preferred stock having a stipulated value of approximately $33.3 million. In addition, pursuant to the terms of the SPA, upon release from escrow, APC is entitled to receive all or that portion of the following escrowed amounts that have not been offset or reserved for claims: (i) cash consideration of approximately $15.6 million, plus (ii) non-cash consideration consisting of shares of Bright Health, Inc.’s preferred stock having a stipulated value of approximately $5.9 million (see Note 17). The Company assessed the loan receivables under the CECL model by assessing the party's ability to pay by reviewing their, interest payment history quarterly, financial history annually and reassessing any insolvency risk that is identified. If a failure to pay occurs, the Company assesses the terms of the notes and estimate an expected credit loss based on the remittance schedule of the note. |
Mezzanine and Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mezzanine and Stockholders' Equity | Mezzanine and Stockholders’ Equity Mezzanine As the redemption feature (see Note 2) of the shares is not solely within the control of APC, the equity of APC does not qualify as permanent equity and has been classified as noncontrolling interest in APC as mezzanine or temporary equity. APC’s shares are not redeemable and it is not probable that the shares will become redeemable as of March 31, 2020 and December 31, 2019. Stockholders’ Equity As of March 31, 2020, 302,732 holdback shares have not been issued to certain former NMM shareholders who were NMM shareholders at the time of closing of the merger between NMM and ApolloMed in December 2017 (the "Merger"), as they have yet to submit properly completed letters of transmittal to ApolloMed in order to receive their pro rata portion of ApolloMed common stock and warrants as contemplated under the merger agreement. Pending such receipt, such former NMM shareholders have the right to receive, without interest, their pro rata share of dividends or distributions with a record date after the effectiveness of the Merger. The consolidated financial statements have treated such shares of common stock as outstanding, given the receipt of the letter of transmittal is considered perfunctory and the Company is legally obligated to issue these shares in connection with the Merger. See options and warrants section below for common stock issued upon exercise of stock options and stock purchase warrants. Options The Company’s outstanding stock options consisted of the following:
During the three months ended March 31, 2020 and 2019, stock options were exercised for 100,000 and 6,000 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $0.2 million and $27,000, respectively. The exercise price was $2.10 per share for the exercises during the three months ended March 31, 2020 and was $4.50 per share for the exercises during the three months ended March 31, 2019. During the three months ended March 31, 2020 and 2019, no stock options were exercised pursuant to the cashless exercise provision. During the three months ended March 31, 2020, the Company granted 11,742 five-year stock options to certain ApolloMed board members with an exercise price of $18.41, which were recognized at fair value, as determined using the Black-Scholes option pricing model and the following assumptions:
Restricted Stock Awards The Company grants restricted stock awards to employees which are earned based on service conditions. The grant date fair value of the restricted stock awards is that day's closing market price of the Company's common stock. During the three months ended March 31, 2020, the Company granted restricted stock awards totaling 97,447 shares with a weighted average grant date fair value of $17.58. The grant date fair value of the restricted stock was $1.6 million to be recognized on a straight-line basis over the awards' vesting period of three years. During the three months ended March 31, 2020, the Company recorded approximately $0.9 million of share-based compensation expense associated with the issuance of restricted shares of common stock and vesting of stock options which is included in general and administrative expenses in the accompanying consolidated statements of income, respectively. Unrecognized compensation expense related to total share-based payments outstanding as of March 31, 2020 was $4.6 million. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of common stock as of March 31, 2020. Warrants The Company’s outstanding warrants consisted of the following:
During the three months ended March 31, 2020 and 2019, common stock warrants were exercised for 51,601 and 11,516 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $0.5 million and $0.1 million, respectively. The exercise price ranged from $9.00 to $11.00 per share for the exercises during the three months ended March 31, 2020 and 2019, respectively. Treasury Stock APC owned 17,307,214 and 17,290,317 shares of ApolloMed’s common stock as of March 31, 2020 and December 31, 2019, which are legally issued and outstanding but excluded from shares of common stock outstanding in the consolidated financial statements, as such shares are treated as treasury shares for accounting purposes (see Note 1). During the year ended December 31, 2019, APC established a brokerage account to invest excess capital in the equity market. The brokerage account is managed directly by an independent investment committee of the APC board, of which Dr. Kenneth Sim and Dr. Thomas Lam have been excluded. As of March 31, 2020, the brokerage account only held shares of ApolloMed, as such the brokerage account totaling $7.6 million has been recorded as treasury shares. Dividends During the three months ended March 31, 2020 and 2019, APC declared dividends of $10.0 million, respectively. |
Leases - Future Minimum Payments Under Non-cancelable Leases (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Operating Leases | ||
2020 (excluding the three months ended March 31, 2020) | $ 3,227 | |
2021 | 3,745 | |
2022 | 2,970 | |
2023 | 2,724 | |
2024 | 2,340 | |
Thereafter | 8,484 | |
Total future minimum lease payments | 23,490 | |
Less: imputed interest | 4,788 | |
Total lease liabilities | 18,702 | |
Less: current portion | 3,119 | $ 2,990 |
Long-term lease liabilities | 15,583 | 11,373 |
Finance Leases | ||
2020 (excluding the three months ended March 31, 2020) | 89 | |
2021 | 119 | |
2022 | 119 | |
2023 | 119 | |
2024 | 79 | |
Thereafter | 0 | |
Total future minimum lease payments | 525 | |
Less: imputed interest | 33 | |
Total lease liabilities | 492 | |
Less: current portion | 102 | 102 |
Long-term lease liabilities | $ 390 | $ 416 |
Medical Liabilities - Schedule of Medical Liabilities (Details) - USD ($) $ in Thousands |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Medical Liabilities [Roll Forward] | ||
Medical liabilities, beginning of period | $ 58,725 | $ 33,642 |
Components of medical care costs related to claims incurred: | ||
Current period | 85,928 | 31,870 |
Prior periods | (602) | 3,105 |
Total medical care costs | 85,326 | 34,975 |
Payments for medical care costs related to claims incurred: | ||
Current period | (37,004) | (16,587) |
Prior periods | (43,247) | (28,850) |
Total paid | (80,251) | (45,437) |
Adjustments | (102) | 86 |
Medical liabilities, ending balance | $ 63,698 | $ 23,266 |
Earnings Per Share - Additional Information (Details) - shares |
3 Months Ended | 12 Months Ended |
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Mar. 31, 2020 |
Dec. 31, 2019 |
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APC | ||
Earnings Per Share [Line Items] | ||
Treasury shares not included in the calculation of earnings per share (in shares) | 17,307,214 | 17,290,317 |
Business Combination and Goodwill - Summary of Goodwill (Details) $ in Thousands |
3 Months Ended |
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Mar. 31, 2020
USD ($)
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Goodwill [Roll Forward] | |
Balance | $ 238,505 |
Adjustments | 34 |
Balance | $ 238,539 |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic earnings per share is calculated using the weighted average number of shares of the Company’s common stock issued and outstanding during a certain period, and is calculated by dividing net income attributable to Apollo Medical Holdings, Inc. by the weighted average number of shares of the Company’s common stock issued and outstanding during such period. Diluted earnings per share is calculated using the weighted average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period, using the as-if converted method for secured convertible notes, preferred stock, and the treasury stock method for options and common stock warrants. As of March 31, 2020 and December 31, 2019 APC held 17,307,214 and 17,290,317 shares of ApolloMed’s common stock, respectively, which are treated as treasury shares for accounting purposes and not included in the number of shares of common stock outstanding used to calculate earnings per share. Below is a summary of the earnings per share computations:
Below is a summary of the shares included in the diluted earnings per share computations:
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Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated balance sheet at December 31, 2019, has been derived from the Company's audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019, have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 16, 2020. In the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to make the consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. |
Principles of Consolidation | Principles of Consolidation The consolidated balance sheets as of March 31, 2020 and December 31, 2019, and the consolidated statements of income for the three months ended March 31, 2020 and 2019, include the accounts of ApolloMed, its consolidated subsidiaries NMM, AMM, APAACO, and Apollo Care Connect, including ApolloMed's consolidated VIE, AP-AMH, NMM’s subsidiaries, NMM’s consolidated VIE, APC, APC’s subsidiary, UCAP, and APC’s consolidated VIEs, CDSC, APC-LSMA, ICC, and APC-LSMA's consolidated subsidiaries Alpha Care and Accountable Health Care. All material intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment, accrual of medical liabilities (incurred, but not reported (“IBNR”) claims), determination of full-risk and shared-risk revenue and receivables (including constraints and completion factors, including historical medical loss ratios (“MLR”)), income taxes, valuation of share-based compensation and right-of-use ("ROU") assets and lease liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates and assumptions. |
Reportable Segments | Reportable Segments The Company operates as one reportable segment, the healthcare delivery segment, and implements and operates innovative health care models to create a patient-centered, physician-centric experience. The Company reports its consolidated financial statements in the aggregate, including all activities in one reportable segment. |
Reclassifications | Reclassifications Certain amounts disclosed in prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no material effect on the Company’s reported revenue, net income, cash flows or total assets. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company’s cash and cash equivalents primarily consist of money market funds and certificates of deposit. The Company considers all highly liquid investments that are both readily convertible into known amounts of cash and mature within ninety days from their date of purchase to be cash equivalents. The Company maintains its cash in deposit accounts with several banks, which at times may exceed the insured limits of the Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is not exposed to any significant credit risk with respect to its cash, cash equivalents and restricted cash. |
Restricted Cash | Restricted Cash Restricted cash consists of cash held as collateral to secure standby letters of credits as required by certain contracts. |
Investments in Marketable Securities | Investments in Marketable Securities The appropriate classification of investments is determined at the time of purchase and such designation is reevaluated at each balance sheet date. As of March 31, 2020 and December 31, 2019, short-term marketable securities in the amount of approximately $117.1 million and $116.5 million, respectively, consist of equity securities and certificates of deposit with various financial institutions, reported at par value, plus accrued interest, with maturity dates from 4 months to 24 months (see fair value measurements of financial instruments below). Investments in certificates of deposits are classified as Level 1 investments in the fair value hierarchy. |
Receivables and Receivables – Related Parties | Receivables and Receivables – Related Parties The Company’s receivables are comprised of accounts receivable, capitation and claims receivable, risk pool settlements and incentive receivables, management fee income and other receivables. Accounts receivable are recorded and stated at the amount expected to be collected. The Company’s receivables – related parties are comprised of risk pool settlements, management fee income and incentive receivables, and other receivables. Receivables – related parties are recorded and stated at the amount expected to be collected. Capitation and claims receivable relate to each health plan’s capitation, is received by the Company in the month following the month of service. Risk pool settlements and incentive receivables mainly consist of the Company’s full risk pool receivable that is recorded quarterly based on reports received from the Company's hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years. Settlement of risk pool surplus or deficits occurs approximately 18 months after the risk pool performance year is completed. During the three months ended March 31, 2020, recoverable claims paid related to the 2019 APAACO performance year to be administered following instructions from CMS, fee-for-services (“FFS”) reimbursement for patient care, certain expense reimbursements, transportation reimbursements from the hospitals, and stop loss insurance premium reimbursements are included in “Other receivables” in the accompanying consolidated balance sheets. The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. The Company also regularly analyzes the ultimate collectability of accounts receivable after certain stages of the collection cycle using a look-back analysis to determine the amount of receivables subsequently collected and adjustments are recorded when necessary. Reserves are recorded primarily on a specific identification basis. Receivables are recorded when the Company is able to determine amounts receivable under these contracts and/or agreements based on information provided and collection is reasonably likely to occur. In regards to the credit loss standard, the Company continuously monitors its collections of receivables and our expectation is that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses that would be estimated under the current expected credit losses (CECL) model. |
Concentrations of Risks | Concentrations of Risks The Company disaggregates revenue from contracts by service type and payor type. This level of detail provides useful information pertaining to how the Company generates revenue by significant revenue stream and by type of direct contracts. The consolidated statements of income present disaggregated revenue by service type. |
Fair Value Measurements of Financial Instruments | Fair Value Measurements of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, fiduciary cash, restricted cash, investment in marketable securities, receivables, loans receivable, accounts payable, certain accrued expenses, finance lease obligations, and long-term debt. The carrying values of the financial instruments classified as current in the accompanying consolidated balance sheets are considered to be at their fair values, due to the short maturity of these instruments. The carrying amounts of the finance lease obligations and long term debt approximate fair value as they bear interest at rates that approximate current market rates for debt with similar maturities and credit quality. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”), applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. ASC 820 establishes a fair value hierarchy for disclosure of the inputs to valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 —Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date. Level 2 —Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates and yield curves), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 —Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data. |
Intangible Assets and Long-Lived Assets | Intangible Assets and Long-Lived Assets Intangible assets with finite lives include network-payor relationships, management contracts and member relationships and are stated at cost, less accumulated amortization and impairment losses. These intangible assets are amortized on the accelerated method using the discounted cash flow rate. Intangible assets with finite lives also include a patient management platform, as well as trade names and trademarks, whose valuations were determined using the cost to recreate method and the relief from royalty method, respectively. These assets are stated at cost, less accumulated amortization and impairment losses, and are amortized using the straight-line method. Finite-lived intangibles and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, a write-down would be recorded to reduce the carrying value of the asset to its estimated fair value. Fair value is determined based on appropriate valuation techniques. |
Goodwill and Indefinite-Lived Intangible Assets | Goodwill and Indefinite-Lived Intangible Assets Under ASC 350, Intangibles – Goodwill and Other, goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment. At least annually, at the Company’s fiscal year-end, or sooner if events or changes in circumstances indicate that an impairment has occurred, the Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments for each of the Company’s three main reporting units (1) management services, (2) IPAs, and (3) ACOs. The Company is required to perform a quantitative goodwill impairment test only if the conclusion from the qualitative assessment is that it is more likely than not that a reporting unit’s fair value is less than the carrying value of its assets. Should this be the case, a quantitative analysis is performed to identify whether a potential impairment exists by comparing the estimated fair values of the reporting units with their respective carrying values, including goodwill. An impairment loss is recognized if the implied fair value of the asset being tested is less than its carrying value. In this event, the asset is written down accordingly. The fair values of goodwill are determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances. At least annually, indefinite-lived intangible assets are tested for impairment. Impairment for intangible assets with indefinite lives exists if the carrying value of the intangible asset exceeds its fair value. The fair values of indefinite-lived intangible assets are determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances. |
Investments in Other Entities - Equity Method | Investments in Other Entities — Equity Method The Company accounts for certain investments using the equity method of accounting when it is determined that the investment provides the Company with the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee and is recognized in the accompanying consolidated statements of income under “Income (loss) from equity method investments” and also is adjusted by contributions to and distributions from the investee. Equity method investments are subject to impairment evaluation. |
Medical Liabilities | Medical Liabilities APC, Alpha Care, Accountable Health Care, APAACO and MMG are responsible for integrated care that the associated physicians and contracted hospitals provide to their enrollees. APC, Alpha Care, Accountable Health Care, APAACO and MMG, provide integrated care to HMOs, Medicare and Medi-Cal enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements. Medical costs for professional and institutional services rendered by contracted providers are recorded as cost of services expenses in the accompanying consolidated statements of income. An estimate of amounts due to contracted physicians, hospitals, and other professional providers is included in medical liabilities in the accompanying consolidated balance sheets. Medical liabilities include claims reported as of the balance sheet date and estimates IBNR claims. Such estimates are developed using actuarial methods and are based on numerous variables, including the utilization of health care services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated. Many of the medical contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of various services. Such differing interpretations may not come to light until a substantial period of time has passed following the contract implementation. |
Revenue Recognition | Revenue Recognition The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) the federal government under the Medicare program administered by CMS; (iii) state governments under the Medicaid and other programs; (iv) other third party payors (e.g., hospitals and IPAs); and (v) individual patients and clients. Nature of Services and Revenue Streams Revenue primarily consists of capitation revenue, risk pool settlements and incentives, NGACO All-Inclusive Population-Based Payments (“AIPBP”), management fee income, and FFS revenue. Revenue is recorded in the period in which services are rendered or the period in which the Company is obligated to provide services. The form of billing and related risk of collection for such services may vary by type of revenue and the customer. The following is a summary of the principal forms of the Company’s billing arrangements and how revenue is recognized for each. Capitation, Net Managed care revenues of the Company consist primarily of capitated fees for medical services provided by the Company under a capitated arrangement directly made with various managed care providers including HMOs. Capitation revenue is typically prepaid monthly to the Company based on the number of enrollees selecting the Company as their healthcare provider. Capitation revenue is recognized in the month in which the Company is obligated to provide services to plan enrollees under contracts with various health plans. Minor ongoing adjustments to prior months’ capitation, primarily arising from contracted HMOs finalizing their monthly patient eligibility data for additions or subtractions of enrollees, are recognized in the month they are communicated to the Company. Additionally, Medicare pays capitation using a “Risk Adjustment” model, which compensates managed care organizations and providers based on the health status (acuity) of each individual enrollee. Health plans and providers with higher acuity enrollees will receive more and those with lower acuity enrollees will receive less. Under Risk Adjustment, capitation is determined based on health severity, measured using patient encounter data. Capitation is paid on a monthly basis based on data submitted for the enrollee for the preceding year and is adjusted in subsequent periods after the final data is compiled. Positive or negative capitation adjustments are made for Medicare enrollees with conditions requiring more or less healthcare services than assumed in the interim payments. Since the Company cannot reliably predict these adjustments, periodic changes in capitation amounts earned as a result of Risk Adjustment are recognized when those changes are communicated by the health plans to the Company. PMPM managed care contracts generally have a term of one year or longer. All managed care contracts have a single performance obligation that constitutes a series for the provision of managed healthcare services for a population of enrolled members for the duration of the contract. The transaction price for PMPM contracts is variable as it primarily includes PMPM fees associated with unspecified membership that fluctuates throughout the contract. In certain contracts, PMPM fees also include adjustments for items such as performance incentives, performance guarantees and risk shares. The Company generally estimates the transaction price using the most likely amount methodology and amounts are only included in the net transaction price to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The majority of the Company’s net PMPM transaction price relates specifically to the Company’s efforts to transfer the service for a distinct increment of the series (e.g., day or month) and is recognized as revenue in the month in which members are entitled to service. Risk Pool Settlements and Incentives APC enters into full risk capitation arrangements with certain health plans and local hospitals, which are administered by a third party, where the hospital is responsible for providing, arranging and paying for institutional risk and APC is responsible for providing, arranging and paying for professional risk. Under a full risk pool sharing agreement, APC generally receives a percentage of the net surplus from the affiliated hospital’s risk pools with HMOs after deductions for the affiliated hospitals costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus. The Company's risk pool settlements under arrangements with health plans and hospitals are recognized using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The assumptions for historical MLR, IBNR completion factors and constraint percentages were used by management in applying the most likely amount methodology. Under capitated arrangements with certain HMOs, APC participates in one or more shared risk arrangements relating to the provision of institutional services to enrollees (shared risk arrangements) and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services. Shared risk capitation arrangements are entered into with certain health plans, which are administered by the health plan, where APC is responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore the health plan retains the institutional risk. Shared risk deficits, if any, are not payable until and unless (and only to the extent of any) risk sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished. The Company's risk pool settlements under arrangements with HMOs are recognized, using the most likely methodology, and only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur. Given the lack of access to the health plans’ data and control over the members assigned to APC, the adjustments and/or the withheld amounts are unpredictable and as such APC’s risk share revenue is deemed to be fully constrained until APC is notified of the amount by the health plan. Risk pools for the prior contract years are generally final settled in the third or fourth quarter of the following year. In addition to risk-sharing revenues, the Company also receives incentives under “pay-for-performance” programs for quality medical care, based on various criteria. As an incentive to control enrollee utilization and to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate the Company for its efforts to improve the quality of services and efficient and effective use of pharmacy supplemental benefits provided to HMO members. The incentive programs track specific performance measures and calculate payments to the Company based on the performance measures. The Company's incentives under “pay-for-performance” programs are recognized using the most likely methodology. However, as the Company does not have sufficient insight from the health plans on the amount and timing of the shared risk pool and incentive payments these amounts are considered to be fully constrained and only recorded when such payments are known and/or received. Generally, for the foregoing arrangements, the final settlement is dependent on each distinct day’s performance within the annual measurement period but cannot be allocated to specific days until the full measurement period has occurred and performance can be assessed. As such, this is a form of variable consideration estimated at contract inception and updated through the measurement period (i.e., the contract year), to the extent the risk of reversal does not exist and the consideration is not constrained. NGACO AIPBP Revenue APAACO and CMS entered into a NGACO Model Participation Agreement (the “Participation Agreement”) with an initial term of two performance years through December 31, 2018, which term was extended for two additional renewal years. For each performance year, the Company must submit to CMS its selections for risk arrangement; the amount of the profit/loss cap; alternative payment mechanism; benefits enhancements, if any; and its decision regarding voluntary alignment under the NGACO Model. The Company must obtain CMS consent before voluntarily discontinuing any benefit enhancement during a performance year. Under the NGACO Model, CMS aligns beneficiaries to the Company to manage (direct care and pay providers) based on a budgetary benchmark established with CMS. The Company is responsible for managing medical costs for these beneficiaries. The beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network. The Company receives capitation from CMS on a monthly basis to pay claims from in-network providers. The Company records such capitation received from CMS as revenue as the Company is primarily responsible and liable for managing the patient care and for satisfying provider obligations, is assuming the credit risk for the services provided by in-network providers through its arrangement with CMS, and has control of the funds, the services provided and the process by which the providers are ultimately paid. Claims from out-of-network providers are processed and paid by CMS and the Company’s shared savings or losses in managing the services provided by out-of-network providers are generally determined on an annual basis after reconciliation with CMS. Pursuant to the Company’s risk share agreement with CMS, the Company will be eligible to receive the savings or be liable for the deficit according to the budget established by CMS based on the Company’s efficiency in managing how the beneficiaries aligned to the Company by CMS are served by in-network and out-of-network providers. The Company’s savings or losses on providing such services are both capped by CMS, and are subject to significant estimation risk, whereby payments can vary significantly depending upon certain patient characteristics and other variable factors. Accordingly, the Company recognizes such surplus or deficit upon substantial completion of reconciliation and determination of the amounts. The Company records NGACO capitation revenues monthly. Excess over claims paid, plus an estimate for the related IBNR (see Note 8), monthly capitation received are deferred and recorded as a liability until actual claims are paid or incurred. CMS will determine if there were any excess capitation paid for the performance year and the excess is refunded to CMS. For each performance year, CMS pays the Company in accordance with the alternative payment mechanism, if any, for which CMS has approved the Company; the risk arrangement for which the Company has been approved by CMS; and as otherwise provided in the Participation Agreement. Following the end of each performance year and at such other times as may be required under the Participation Agreement, CMS will issue a settlement report to the Company setting forth the amount of any shared savings or shared losses and the amount of other monies. If CMS owes the Company shared savings or other monies, CMS shall pay the Company in full within 30 days after the date on which the relevant settlement report is deemed final, except as provided in the Participation Agreement. If the Company owes CMS shared losses or other monies owed as a result of a final settlement, the Company shall pay CMS in full within 30 days after the relevant settlement report is deemed final. If the Company fails to pay the amounts due to CMS in full within 30 days after the date of a demand letter or settlement report, CMS shall assess simple interest on the unpaid balance at the rate applicable to other Medicare debts under current provisions of law and applicable regulations. In addition, CMS and the U.S. Department of the Treasury may use any applicable debt collection tools available to collect any amounts owed by the Company. The Company participates in the AIPBP track of the NGACO Model. Under the AIPBP track, CMS estimates the total annual expenditures for APAACO’s assigned patients and pays that projected amount to the Company in monthly installments, and the Company is responsible for all Part A and Part B costs for in-network participating providers and preferred providers contracted by the Company to provide services to the assigned patients. As APAACO does not have sufficient insight into the financial performance of the shared risk pool with CMS because of unknown factors related to IBNR, risk adjustment factors, stop loss provisions, among other factors, an estimate cannot be developed. Due to these limitations, APAACO cannot determine the amount of surplus or deficit that will likely be recognized in the future and therefore this shared risk pool revenue is considered fully constrained. For performance year 2020, the Company continues to receive monthly AIPBP payments at a rate of approximately $7.5 million per month from CMS, and will need to continue to comply with all terms and conditions in the Participation Agreement and various regulatory requirements to be eligible to participate in the AIPBP mechanism and/or NGACO Model. The Company has received approximately $22.6 million in total AIPBP payments for the three months ended March 31, 2020 of which $21.9 million has been recognized as revenue. The Company also recorded assets of approximately $8.5 million related to IBNR during the three months ended March 31, 2020 and $3.2 million related to final settlement of the 2018 performance year. These balances are included in “Other receivables” in the accompanying consolidated balance sheets. Management Fee Income Management fee income encompasses fees paid for management, physician advisory, healthcare staffing, administrative and other non-medical services provided by the Company to IPAs, hospitals and other healthcare providers. Such fees may be in the form of billings at agreed-upon hourly rates, percentages of revenue or fee collections, or amounts fixed on a monthly, quarterly or annual basis. The revenue may include variable arrangements measuring factors such as hours staffed, patient visits or collections per visit against benchmarks, and, in certain cases, may be subject to achieving quality metrics or fee collections. The Company recognizes such variable supplemental revenues in the period when such amounts are determined to be fixed and therefore contractually obligated as payable by the customer under the terms of the applicable agreement. The Company provides a significant service of integrating the services selected by the Company’s clients into one overall output for which the client has contracted. Therefore, such management contracts generally contain a single performance obligation. The nature of the Company’s performance obligation is to stand ready to provide services over the contractual period. Also, the Company’s performance obligation forms a series of distinct periods of time over which the Company stands ready to perform. The Company’s performance obligation is satisfied as the Company completes each period’s obligations. Consideration from management contracts is variable in nature because the majority of the fees are generally based on revenue or collections, which can vary from period to period. The Company has control over pricing. Contractual fees are invoiced to the Company’s clients generally monthly and payment terms are typically due within 30 days. The variable consideration in the Company’s management contracts meets the criteria to be allocated to the distinct period of time to which it relates because (i) it is due to the activities performed to satisfy the performance obligation during that period and (ii) it represents the consideration to which the Company expects to be entitled. The Company’s management contracts generally have long terms (e.g., 10 years), although they may be terminated earlier under the terms of the applicable contracts. Since the remaining variable consideration will be allocated to a wholly unsatisfied promise that forms part of a single performance obligation recognized under the series guidance, the Company has applied the optional exemption to exclude disclosure of the allocation of the transaction price to remaining performance obligations. Fee-for-Services Revenue FFS revenue represents revenue earned under contracts in which the Company bills and collects the professional component of charges for medical services rendered by the Company’s contracted physicians and employed physicians. Under the FFS arrangements, the Company bills the hospitals and third-party payors for the physician staffing and further bills patients or their third-party payors for patient care services provided and receives payment. FFS revenue related to the patient care services is reported net of contractual allowances and policy discounts and are recognized in the period in which the services are rendered to specific patients. All services provided are expected to result in cash flows and are therefore reflected as net revenue in the consolidated financial statements. The recognition of net revenue (gross charges less contractual allowances) from such services is dependent on such factors as proper completion of medical charts following a patient visit, the forwarding of such charts to the Company’s billing center for medical coding and entering into the Company’s billing system and the verification of each patient’s submission or representation at the time services are rendered as to the payor(s) responsible for payment of such services. Revenue is recorded based on the information known at the time of entering of such information into the Company’s billing systems, as well as an estimate of the revenue associated with medical services. The Company is responsible for confirming member eligibility, performing program utilization review, potentially directing payment to the provider and accepting the financial risk of loss associated with services rendered, as specified within the Company’s client contracts. The Company has the ability to adjust contractual fees with clients and possess the financial risk of loss in certain contractual obligations. These factors indicate the Company is the principal and, as such, the Company records gross fees contracted with clients in revenues. Consideration from FFS arrangements is variable in nature because fees are based on patient encounters, credits due to clients and reimbursement of provider costs, all of which can vary from period to period. Patient encounters and related episodes of care and procedures qualify as distinct goods and services, provided simultaneously together with other readily available resources, in a single instance of service, and thereby constitute a single performance obligation for each patient encounter and, in most instances, occur at readily determinable transaction prices. As a practical expedient, the Company adopted a portfolio approach for the FFS revenue stream to group together contracts with similar characteristics and analyze historical cash collections trends. The contracts within the portfolio share the characteristics conducive to ensuring that the results do not materially differ under the new standard if it were to be applied to individual patient contracts related to each patient encounter. Accordingly, there was no change in the Company's method to recognize revenue under ASC 606 Revenue from Contracts with Customers (“ASC 606”) from the previous accounting guidance. Estimating net FFS revenue is a complex process, largely due to the volume of transactions, the number and complexity of contracts with payors, the limited availability at times of certain patient and payor information at the time services are provided, and the length of time it takes for collections to fully mature. These expected collections are based on fees and negotiated payment rates in the case of third-party payors, the specific benefits provided for under each patient's healthcare plans, mandated payment rates in the case of Medicare and Medicaid programs, and historical cash collections (net of recoveries) in combination with expected collections from third party payors. The relationship between gross charges and the transaction price recognized is significantly influenced by payor mix, as collections on gross charges may vary significantly, depending on whether and with whom the patients the Company provides services to in the period are insured and the Company's contractual relationships with those payors. Payor mix is subject to change as additional patient and payor information is obtained after the period services are provided. The Company periodically assesses the estimates of unbilled revenue, contractual adjustments and discounts, and payor mix by analyzing actual results, including cash collections, against estimates. Changes in these estimates are charged or credited to the consolidated statements of income in the period that the assessment is made. Significant changes in payor mix, contractual arrangements with payors, specialty mix, acuity, general economic conditions and health care coverage provided by federal or state governments or private insurers may have a significant impact on estimates and significantly affect the results of operations and cash flows. Contract Assets Typically, revenues and receivables are recognized once the Company has satisfied its performance obligation. Accordingly, the Company’s contract assets are comprised of receivables and receivables – related parties. The Company's billing and accounting systems provide historical trends of cash collections and contractual write-offs, accounts receivable agings and established fee adjustments from third-party payors. These estimates are recorded and monitored monthly as revenues are recognized. The principal exposure for uncollectible fee for service visits is from self-pay patients and, to a lesser extent, for co-payments and deductibles from patients with insurance. Contract Liabilities (Deferred Revenue) Contract liabilities are recorded when cash payments are received in advance of the Company’s performance, or in the case of the Company’s NGACO, the excess of AIPBP capitation received and the actual claims paid or incurred. |
Income Taxes | Income Taxes Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in the recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the consolidated financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the consolidated financial statements. |
Share-Based Compensation | Share-Based Compensation The Company maintains a stock-based compensation program for employees, non-employees, directors and consultants. The value of share-based awards such as options is recognized as compensation expense on a cumulative straight-line basis over the vesting period of the awards, adjusted for expected forfeitures. From time to time, the Company issues shares of its common stock to its employees, directors and consultants, which shares may be subject to the Company’s repurchase right (but not obligation) that lapses based on time-based and performance-based vesting schedules. The Company accounts for share-based awards granted to persons other than employees and directors under ASC 505-50 Equity-Based Payments to Non-Employees. As such the fair value of such shares of stock is periodically remeasured using an appropriate valuation model and income or expense is recognized over the vesting period. |
Basic and Diluted Earnings Per Share | Basic and Diluted Earnings Per Share Basic earnings per share is computed by dividing net income attributable to holders of the Company’s common stock by the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of shares of common stock outstanding, plus the effect of dilutive securities outstanding during the periods presented, using the treasury stock method. Refer to Note 14 for a discussion of shares treated as treasury shares for accounting purposes. |
Noncontrolling Interests | Noncontrolling Interests The Company consolidates entities in which the Company has a controlling financial interest. The Company consolidates subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting rights, and VIEs in which the Company is the primary beneficiary. Noncontrolling interests represent third-party equity ownership interests (including certain VIEs) in the Company’s consolidated entities. The amount of net income attributable to noncontrolling interests is disclosed in the consolidated statements of income. |
Mezzanine Equity | Mezzanine Equity Pursuant to APC’s shareholder agreements, in the event of a disqualifying event, as defined in the agreements, APC could be required to repurchase the shares from the respective shareholders based on certain triggers outlined in the shareholder agreements. As the redemption feature of the shares is not solely within the control of APC, the equity of APC does not qualify as permanent equity and has been classified as mezzanine or temporary equity. Accordingly, the Company recognizes noncontrolling interests in APC as mezzanine equity in the consolidated financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 became effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements. In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). This ASU reduces the cost and complexity of financial reporting associated with consolidation of VIEs. A VIE is an organization in which consolidation is not based on a majority of voting rights. The new guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements. The amendments in this ASU became effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-17 on January 1, 2020. The adoption of ASU 2018-17 did not have a material impact on the consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 Income Taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact that the adoption of ASU 2019-12 will have on the Company's consolidated financial statements. In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”). This ASU clarifies the interaction between accounting for equity securities, equity method investments and certain derivative instruments. This amendment in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact that the adoption of ASU 2020-01 will have on the Company's consolidation financial statements. Other than the standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows. |
Investments in Other Entities - Equity Method (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments | UCI’s balance sheets at March 31, 2020 and December 31, 2019 and statements of income for the three months ended March 31, 2020 and 2019 are as follows (in thousands): Balance Sheets
Statements of Income
531 W. College LLC’s balance sheets at March 31, 2020 and December 31, 2019 and statements of operations for the three months ended March 31, 2020 and 2019 are as follows (in thousands): Balance Sheets
Statements of Operation
LMA’s summarized balance sheets at March 31, 2020 and December 31, 2019 and summarized statements of operations for the three months ended March 31, 2020 and 2019 with respect to its IPA line of business are as follows (in thousands): Balance Sheets
Statements of Operations
Rollforward of Equity Method Investment (in thousands)
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Related-Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related-Party Transactions | Related-Party Transactions On November 16, 2015, UCAP entered into a subordinated note receivable agreement with UCI, a 48.9% owned equity method investee (see Note 5), in the amount of $5.0 million. On June 28, 2018 and November 28, 2018, UCAP entered into two additional subordinated note receivable agreements with UCI in the amount of $2.5 million and $5.0 million, respectively (see Note 6). During the three months ended March 31, 2020 and 2019, NMM earned approximately $4.2 million and $3.2 million, respectively, in management fees from LMA, which is accounted for under the equity method based on 25% equity ownership interest held by APC in LMA’s IPA line of business (see Note 5). During the three months ended March 31, 2020 and 2019, APC paid approximately $0.6 million and $0.7 million, respectively, to PMIOC for provider services, which is accounted for under the equity method based on 40% equity ownership interest held by APC (see Note 5). During the three months ended March 31, 2020 and 2019, APC paid approximately $1.8 million and $2.0 million, respectively, to DMG for provider services, which is accounted for under the equity method based on 40% equity ownership interest held by APC (see Note 5). During the three months ended March 31, 2020 and 2019, APC paid approximately $39,800 and $92,000, respectively, to Advanced Diagnostic Surgery Center for services as a provider. Advanced Diagnostic Surgery Center shares common ownership with certain board members of APC. During the three months ended March 31, 2020 and 2019, APC paid an aggregate of approximately $7.3 million and $9.3 million, respectively, to shareholders of APC for provider services, which include approximately $1.7 million and $3.3 million, respectively, to shareholders who are also officers of APC. During the three months ended March 31, 2020 and 2019, NMM paid approximately $0.3 million, respectively, to Medical Property Partners (“MPP”) for an office lease. MPP shares common ownership with certain board members of NMM. During the three months ended March 31, 2020, NMM paid approximately $0.4 million, respectively, to One MSO, Inc. ("One MSO") for an office lease. One MSO shares common ownership with certain board members of NMM. As of March 31, 2020, the Company had $10.8 million of ROU assets and lease liabilities, respectively, related to its office lease with One MSO to be amortized over the remaining life of the lease. During the three months ended March 31, 2020 and 2019, the Company paid approximately $0.1 million, respectively, to Critical Quality Management Corporation (“CQMC”) for an office lease. CQMC shares common ownership with certain board members of APC. During the three months ended March 31, 2020 and 2019, SCHC paid approximately $0.1 million, respectively, to Numen, LLC (“Numen”) for an office lease. Numen is owned by a shareholder of APC. The Company has agreements with HSMSO, Aurion Corporation (“Aurion”), and AHMC Healthcare (“AHMC”) for services provided to the Company. One of the Company’s board members is an officer of AHMC, HSMSO and Aurion. Aurion is also partially owned by one of the Company’s board members. The following table sets forth fees incurred and income earned related to AHMC, HSMSO and Aurion (in thousands):
The Company and AHMC have a risk sharing agreement with certain AHMC hospitals to share the surplus and deficits of each of the hospital pools. During the three months ended March 31, 2020 and 2019, the Company has recognized risk pool revenue under this agreement of $12.0 million and $10.1 million, respectively, for which $47.2 million and $40.4 million remain outstanding as of March 31, 2020 and December 31, 2019, respectively. During the quarter ended March 31, 2020, NMM paid approximately $26,600 to an Apollo board member for consulting services. In addition, affiliates wholly owned by the Company’s officers, including the Company's Co-CEOs, Dr. Sim and Dr. Lam, are reported in the accompanying consolidated statements of income on a consolidated basis, together with the Company’s subsidiaries, and therefore, the Company does not separately disclose transactions between such affiliates and the Company’s subsidiaries as related-party transactions. For equity method investments, loans receivable and line of credits from related parties, see Notes 5, 6 and 9, respectively. |
Intangible Assets, Net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net | Intangible Assets, Net At March 31, 2020, the Company’s intangible assets, net, consisted of the following (in thousands):
At December 31, 2019, the Company’s intangible assets, net, consisted of the following (in thousands):
Amortization expense was $4.2 million and $3.9 million for the three months ended March 31, 2020 and 2019, respectively. Future amortization expense is estimated to be as follows for the years ending December 31 (in thousands):
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Medical Liabilities |
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Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Medical Liabilities | Medical Liabilities The Company’s medical liabilities consisted of the following (in thousands):
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Related-Party Transactions (Tables) |
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Schedule of Fees Incurred and Income Received from Related Party Transactions | The following table sets forth fees incurred and income earned related to AHMC, HSMSO and Aurion (in thousands):
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Credit Facility, Bank Loan and Lines of Credit - Schedule of Maturities (Details) $ in Thousands |
Mar. 31, 2020
USD ($)
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Debt Disclosure [Abstract] | |
2020 (excluding the three months ended March 31, 2020) | $ 7,125 |
2021 | 10,688 |
2022 | 14,250 |
2023 | 15,437 |
2024 | 197,750 |
Total | $ 245,250 |
Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands |
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Dec. 31, 2019 |
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Leases [Abstract] | ||||
Operating lease cost | $ 1,942 | $ 1,102 | ||
Finance lease cost | ||||
Amortization of lease expense | $ 300 | $ 300 | 26 | 25 |
Interest on lease liabilities | 4 | 5 | ||
Sublease income | (134) | (100) | ||
Total finance lease cost, net | $ 1,838 | $ 1,032 |
Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 4.2 | $ 3.9 |
Business Combination and Goodwill - Additional Information (Details) - USD ($) $ in Thousands |
1 Months Ended | ||
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Aug. 30, 2019 |
May 31, 2019 |
Sep. 30, 2019 |
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Accountable Health Care | |||
Business Acquisition [Line Items] | |||
Consideration transferred | $ 25,100 | ||
Liabilities assumed | 15,400 | ||
Accountable Health Care | Dr. Jay | |||
Business Acquisition [Line Items] | |||
Cash paid | $ 7,250 | ||
AMG, Inc | |||
Business Acquisition [Line Items] | |||
Consideration transferred | $ 1,600 | ||
APC and APC-LSMA | Alpha Care Medical Group, Inc. | |||
Business Acquisition [Line Items] | |||
Interest acquired | 100.00% | ||
Cash paid | $ 45,056 | ||
Escrow deposit for potential post-closing adjustments | $ 2,000 | ||
APC and APC-LSMA | Accountable Health Care | Dr. Jay | |||
Business Acquisition [Line Items] | |||
Interest acquired | 75.00% | ||
Consideration transferred | $ 7,300 | ||
APC | Accountable Health Care | |||
Business Acquisition [Line Items] | |||
Interest acquired | 25.00% | ||
Payments to acquire investments | $ 2,400 | ||
APC | AMG, Inc | |||
Business Acquisition [Line Items] | |||
Value of shares transferred in acquisition | $ 400 |
Earnings Per Share - Shares Included in Diluted Earnings Per Share Computations (Details) - shares |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Earnings Per Share [Line Items] | ||
Weighted average shares of common stock outstanding – basic (in shares) | 36,010,268 | 34,496,622 |
Weighted average shares of common stock outstanding – diluted (in shares) | 37,439,099 | 38,074,174 |
Stock options | ||
Earnings Per Share [Line Items] | ||
Adjustments to weighted average shares of common stock (in shares) | 185,830 | 455,381 |
Restricted Stock Units (RSUs) | ||
Earnings Per Share [Line Items] | ||
Adjustments to weighted average shares of common stock (in shares) | 35,556 | 0 |
10% shares held back pursuant to indemnification clause | ||
Earnings Per Share [Line Items] | ||
Adjustments to weighted average shares of common stock (in shares) | 0 | 1,519,805 |
Warrants | ||
Earnings Per Share [Line Items] | ||
Adjustments to weighted average shares of common stock (in shares) | 1,207,445 | 1,602,366 |
Mezzanine and Stockholders' Equity - Stock Option Activity Under Black-Scholes Option (Details) - Board Members |
3 Months Ended |
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Mar. 31, 2020
$ / shares
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected term | 3 years |
Expected volatility | 90.01% |
Risk-free interest rate | 1.43% |
Market value of common stock (in dollars per share) | $ 10.56 |
Annual dividend yield | 0.00% |
Forfeiture rate | 0.00% |
Basis of Presentation and Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated balance sheet at December 31, 2019, has been derived from the Company's audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019, have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 16, 2020. In the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to make the consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any future periods. Principles of Consolidation The consolidated balance sheets as of March 31, 2020 and December 31, 2019, and the consolidated statements of income for the three months ended March 31, 2020 and 2019, include the accounts of ApolloMed, its consolidated subsidiaries NMM, AMM, APAACO, and Apollo Care Connect, including ApolloMed's consolidated VIE, AP-AMH, NMM’s subsidiaries, NMM’s consolidated VIE, APC, APC’s subsidiary, UCAP, and APC’s consolidated VIEs, CDSC, APC-LSMA, ICC, and APC-LSMA's consolidated subsidiaries Alpha Care and Accountable Health Care. All material intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment, accrual of medical liabilities (incurred, but not reported (“IBNR”) claims), determination of full-risk and shared-risk revenue and receivables (including constraints and completion factors, including historical medical loss ratios (“MLR”)), income taxes, valuation of share-based compensation and right-of-use ("ROU") assets and lease liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates and assumptions. Reportable Segments The Company operates as one reportable segment, the healthcare delivery segment, and implements and operates innovative health care models to create a patient-centered, physician-centric experience. The Company reports its consolidated financial statements in the aggregate, including all activities in one reportable segment. Reclassifications Certain amounts disclosed in prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no material effect on the Company’s reported revenue, net income, cash flows or total assets. Cash and Cash Equivalents The Company’s cash and cash equivalents primarily consist of money market funds and certificates of deposit. The Company considers all highly liquid investments that are both readily convertible into known amounts of cash and mature within ninety days from their date of purchase to be cash equivalents. The Company maintains its cash in deposit accounts with several banks, which at times may exceed the insured limits of the Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is not exposed to any significant credit risk with respect to its cash, cash equivalents and restricted cash. As of March 31, 2020, the Company’s deposit accounts with banks exceeded the FDIC’s insured limit by approximately $209.3 million, including approximately $117.0 million in certificates of deposit that were recognized as investments in marketable securities. The Company has not experienced any losses to date and performs ongoing evaluations of these financial institutions to limit the Company’s concentration of risk exposure. Restricted Cash Restricted cash consists of cash held as collateral to secure standby letters of credits as required by certain contracts. Investments in Marketable Securities The appropriate classification of investments is determined at the time of purchase and such designation is reevaluated at each balance sheet date. As of March 31, 2020 and December 31, 2019, short-term marketable securities in the amount of approximately $117.1 million and $116.5 million, respectively, consist of equity securities and certificates of deposit with various financial institutions, reported at par value, plus accrued interest, with maturity dates from 4 months to 24 months (see fair value measurements of financial instruments below). Investments in certificates of deposits are classified as Level 1 investments in the fair value hierarchy. Receivables and Receivables – Related Parties The Company’s receivables are comprised of accounts receivable, capitation and claims receivable, risk pool settlements and incentive receivables, management fee income and other receivables. Accounts receivable are recorded and stated at the amount expected to be collected. The Company’s receivables – related parties are comprised of risk pool settlements, management fee income and incentive receivables, and other receivables. Receivables – related parties are recorded and stated at the amount expected to be collected. Capitation and claims receivable relate to each health plan’s capitation, is received by the Company in the month following the month of service. Risk pool settlements and incentive receivables mainly consist of the Company’s full risk pool receivable that is recorded quarterly based on reports received from the Company's hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years. Settlement of risk pool surplus or deficits occurs approximately 18 months after the risk pool performance year is completed. During the three months ended March 31, 2020, recoverable claims paid related to the 2019 APAACO performance year to be administered following instructions from CMS, fee-for-services (“FFS”) reimbursement for patient care, certain expense reimbursements, transportation reimbursements from the hospitals, and stop loss insurance premium reimbursements are included in “Other receivables” in the accompanying consolidated balance sheets. The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. The Company also regularly analyzes the ultimate collectability of accounts receivable after certain stages of the collection cycle using a look-back analysis to determine the amount of receivables subsequently collected and adjustments are recorded when necessary. Reserves are recorded primarily on a specific identification basis. Receivables are recorded when the Company is able to determine amounts receivable under these contracts and/or agreements based on information provided and collection is reasonably likely to occur. In regards to the credit loss standard, the Company continuously monitors its collections of receivables and our expectation is that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses that would be estimated under the current expected credit losses (CECL) model. At both March 31, 2020 and December 31, 2019, the Company’s allowance for doubtful accounts was approximately $2.9 million. Concentrations of Risks The Company disaggregates revenue from contracts by service type and payor type. This level of detail provides useful information pertaining to how the Company generates revenue by significant revenue stream and by type of direct contracts. The consolidated statements of income present disaggregated revenue by service type. The following table presents disaggregated revenue generated by each payor type for the three months ended March 31, 2020 and 2019 (in thousands):
The Company had major payors that contributed the following percentages of net revenue:
The Company had major payors that contributed to the following percentages of receivables and receivables – related parties before the allowance for doubtful accounts:
Fair Value Measurements of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, fiduciary cash, restricted cash, investment in marketable securities, receivables, loans receivable, accounts payable, certain accrued expenses, finance lease obligations, and long-term debt. The carrying values of the financial instruments classified as current in the accompanying consolidated balance sheets are considered to be at their fair values, due to the short maturity of these instruments. The carrying amounts of the finance lease obligations and long term debt approximate fair value as they bear interest at rates that approximate current market rates for debt with similar maturities and credit quality. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”), applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. ASC 820 establishes a fair value hierarchy for disclosure of the inputs to valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 —Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date. Level 2 —Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates and yield curves), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 —Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data. The carrying amounts and fair values of the Company’s financial instruments as of March 31, 2020 are presented below (in thousands):
The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2019 are presented below (in thousands):
* Included in cash and cash equivalents There were no Level 2 or Level 3 inputs measured on a recurring basis for the three months ended March 31, 2020. There have been no changes in Level 1, Level 2, or Level 3 classification and no changes in valuation techniques for these assets for the three months ended March 31, 2020. Intangible Assets and Long-Lived Assets Intangible assets with finite lives include network-payor relationships, management contracts and member relationships and are stated at cost, less accumulated amortization and impairment losses. These intangible assets are amortized on the accelerated method using the discounted cash flow rate. Intangible assets with finite lives also include a patient management platform, as well as trade names and trademarks, whose valuations were determined using the cost to recreate method and the relief from royalty method, respectively. These assets are stated at cost, less accumulated amortization and impairment losses, and are amortized using the straight-line method. Finite-lived intangibles and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, a write-down would be recorded to reduce the carrying value of the asset to its estimated fair value. Fair value is determined based on appropriate valuation techniques. The Company determined that there was no impairment of its finite-lived intangible or long-lived assets during the three months ended March 31, 2020 and 2019. Goodwill and Indefinite-Lived Intangible Assets Under ASC 350, Intangibles – Goodwill and Other, goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment. At least annually, at the Company’s fiscal year-end, or sooner if events or changes in circumstances indicate that an impairment has occurred, the Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments for each of the Company’s three main reporting units (1) management services, (2) IPAs, and (3) ACOs. The Company is required to perform a quantitative goodwill impairment test only if the conclusion from the qualitative assessment is that it is more likely than not that a reporting unit’s fair value is less than the carrying value of its assets. Should this be the case, a quantitative analysis is performed to identify whether a potential impairment exists by comparing the estimated fair values of the reporting units with their respective carrying values, including goodwill. An impairment loss is recognized if the implied fair value of the asset being tested is less than its carrying value. In this event, the asset is written down accordingly. The fair values of goodwill are determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances. At least annually, indefinite-lived intangible assets are tested for impairment. Impairment for intangible assets with indefinite lives exists if the carrying value of the intangible asset exceeds its fair value. The fair values of indefinite-lived intangible assets are determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances. The Company had no impairment of its goodwill or indefinite-lived intangible assets during the three months ended March 31, 2020 and 2019. Investments in Other Entities — Equity Method The Company accounts for certain investments using the equity method of accounting when it is determined that the investment provides the Company with the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee and is recognized in the accompanying consolidated statements of income under “Income (loss) from equity method investments” and also is adjusted by contributions to and distributions from the investee. Equity method investments are subject to impairment evaluation. Medical Liabilities APC, Alpha Care, Accountable Health Care, APAACO and MMG are responsible for integrated care that the associated physicians and contracted hospitals provide to their enrollees. APC, Alpha Care, Accountable Health Care, APAACO and MMG, provide integrated care to HMOs, Medicare and Medi-Cal enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements. Medical costs for professional and institutional services rendered by contracted providers are recorded as cost of services expenses in the accompanying consolidated statements of income. An estimate of amounts due to contracted physicians, hospitals, and other professional providers is included in medical liabilities in the accompanying consolidated balance sheets. Medical liabilities include claims reported as of the balance sheet date and estimates IBNR claims. Such estimates are developed using actuarial methods and are based on numerous variables, including the utilization of health care services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated. Many of the medical contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of various services. Such differing interpretations may not come to light until a substantial period of time has passed following the contract implementation. Revenue Recognition The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) the federal government under the Medicare program administered by CMS; (iii) state governments under the Medicaid and other programs; (iv) other third party payors (e.g., hospitals and IPAs); and (v) individual patients and clients. Nature of Services and Revenue Streams Revenue primarily consists of capitation revenue, risk pool settlements and incentives, NGACO All-Inclusive Population-Based Payments (“AIPBP”), management fee income, and FFS revenue. Revenue is recorded in the period in which services are rendered or the period in which the Company is obligated to provide services. The form of billing and related risk of collection for such services may vary by type of revenue and the customer. The following is a summary of the principal forms of the Company’s billing arrangements and how revenue is recognized for each. Capitation, Net Managed care revenues of the Company consist primarily of capitated fees for medical services provided by the Company under a capitated arrangement directly made with various managed care providers including HMOs. Capitation revenue is typically prepaid monthly to the Company based on the number of enrollees selecting the Company as their healthcare provider. Capitation revenue is recognized in the month in which the Company is obligated to provide services to plan enrollees under contracts with various health plans. Minor ongoing adjustments to prior months’ capitation, primarily arising from contracted HMOs finalizing their monthly patient eligibility data for additions or subtractions of enrollees, are recognized in the month they are communicated to the Company. Additionally, Medicare pays capitation using a “Risk Adjustment” model, which compensates managed care organizations and providers based on the health status (acuity) of each individual enrollee. Health plans and providers with higher acuity enrollees will receive more and those with lower acuity enrollees will receive less. Under Risk Adjustment, capitation is determined based on health severity, measured using patient encounter data. Capitation is paid on a monthly basis based on data submitted for the enrollee for the preceding year and is adjusted in subsequent periods after the final data is compiled. Positive or negative capitation adjustments are made for Medicare enrollees with conditions requiring more or less healthcare services than assumed in the interim payments. Since the Company cannot reliably predict these adjustments, periodic changes in capitation amounts earned as a result of Risk Adjustment are recognized when those changes are communicated by the health plans to the Company. PMPM managed care contracts generally have a term of one year or longer. All managed care contracts have a single performance obligation that constitutes a series for the provision of managed healthcare services for a population of enrolled members for the duration of the contract. The transaction price for PMPM contracts is variable as it primarily includes PMPM fees associated with unspecified membership that fluctuates throughout the contract. In certain contracts, PMPM fees also include adjustments for items such as performance incentives, performance guarantees and risk shares. The Company generally estimates the transaction price using the most likely amount methodology and amounts are only included in the net transaction price to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The majority of the Company’s net PMPM transaction price relates specifically to the Company’s efforts to transfer the service for a distinct increment of the series (e.g., day or month) and is recognized as revenue in the month in which members are entitled to service. Risk Pool Settlements and Incentives APC enters into full risk capitation arrangements with certain health plans and local hospitals, which are administered by a third party, where the hospital is responsible for providing, arranging and paying for institutional risk and APC is responsible for providing, arranging and paying for professional risk. Under a full risk pool sharing agreement, APC generally receives a percentage of the net surplus from the affiliated hospital’s risk pools with HMOs after deductions for the affiliated hospitals costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus. The Company's risk pool settlements under arrangements with health plans and hospitals are recognized using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The assumptions for historical MLR, IBNR completion factors and constraint percentages were used by management in applying the most likely amount methodology. Under capitated arrangements with certain HMOs, APC participates in one or more shared risk arrangements relating to the provision of institutional services to enrollees (shared risk arrangements) and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services. Shared risk capitation arrangements are entered into with certain health plans, which are administered by the health plan, where APC is responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore the health plan retains the institutional risk. Shared risk deficits, if any, are not payable until and unless (and only to the extent of any) risk sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished. The Company's risk pool settlements under arrangements with HMOs are recognized, using the most likely methodology, and only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur. Given the lack of access to the health plans’ data and control over the members assigned to APC, the adjustments and/or the withheld amounts are unpredictable and as such APC’s risk share revenue is deemed to be fully constrained until APC is notified of the amount by the health plan. Risk pools for the prior contract years are generally final settled in the third or fourth quarter of the following year. In addition to risk-sharing revenues, the Company also receives incentives under “pay-for-performance” programs for quality medical care, based on various criteria. As an incentive to control enrollee utilization and to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate the Company for its efforts to improve the quality of services and efficient and effective use of pharmacy supplemental benefits provided to HMO members. The incentive programs track specific performance measures and calculate payments to the Company based on the performance measures. The Company's incentives under “pay-for-performance” programs are recognized using the most likely methodology. However, as the Company does not have sufficient insight from the health plans on the amount and timing of the shared risk pool and incentive payments these amounts are considered to be fully constrained and only recorded when such payments are known and/or received. Generally, for the foregoing arrangements, the final settlement is dependent on each distinct day’s performance within the annual measurement period but cannot be allocated to specific days until the full measurement period has occurred and performance can be assessed. As such, this is a form of variable consideration estimated at contract inception and updated through the measurement period (i.e., the contract year), to the extent the risk of reversal does not exist and the consideration is not constrained. NGACO AIPBP Revenue APAACO and CMS entered into a NGACO Model Participation Agreement (the “Participation Agreement”) with an initial term of two performance years through December 31, 2018, which term was extended for two additional renewal years. For each performance year, the Company must submit to CMS its selections for risk arrangement; the amount of the profit/loss cap; alternative payment mechanism; benefits enhancements, if any; and its decision regarding voluntary alignment under the NGACO Model. The Company must obtain CMS consent before voluntarily discontinuing any benefit enhancement during a performance year. Under the NGACO Model, CMS aligns beneficiaries to the Company to manage (direct care and pay providers) based on a budgetary benchmark established with CMS. The Company is responsible for managing medical costs for these beneficiaries. The beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network. The Company receives capitation from CMS on a monthly basis to pay claims from in-network providers. The Company records such capitation received from CMS as revenue as the Company is primarily responsible and liable for managing the patient care and for satisfying provider obligations, is assuming the credit risk for the services provided by in-network providers through its arrangement with CMS, and has control of the funds, the services provided and the process by which the providers are ultimately paid. Claims from out-of-network providers are processed and paid by CMS and the Company’s shared savings or losses in managing the services provided by out-of-network providers are generally determined on an annual basis after reconciliation with CMS. Pursuant to the Company’s risk share agreement with CMS, the Company will be eligible to receive the savings or be liable for the deficit according to the budget established by CMS based on the Company’s efficiency in managing how the beneficiaries aligned to the Company by CMS are served by in-network and out-of-network providers. The Company’s savings or losses on providing such services are both capped by CMS, and are subject to significant estimation risk, whereby payments can vary significantly depending upon certain patient characteristics and other variable factors. Accordingly, the Company recognizes such surplus or deficit upon substantial completion of reconciliation and determination of the amounts. The Company records NGACO capitation revenues monthly. Excess over claims paid, plus an estimate for the related IBNR (see Note 8), monthly capitation received are deferred and recorded as a liability until actual claims are paid or incurred. CMS will determine if there were any excess capitation paid for the performance year and the excess is refunded to CMS. For each performance year, CMS pays the Company in accordance with the alternative payment mechanism, if any, for which CMS has approved the Company; the risk arrangement for which the Company has been approved by CMS; and as otherwise provided in the Participation Agreement. Following the end of each performance year and at such other times as may be required under the Participation Agreement, CMS will issue a settlement report to the Company setting forth the amount of any shared savings or shared losses and the amount of other monies. If CMS owes the Company shared savings or other monies, CMS shall pay the Company in full within 30 days after the date on which the relevant settlement report is deemed final, except as provided in the Participation Agreement. If the Company owes CMS shared losses or other monies owed as a result of a final settlement, the Company shall pay CMS in full within 30 days after the relevant settlement report is deemed final. If the Company fails to pay the amounts due to CMS in full within 30 days after the date of a demand letter or settlement report, CMS shall assess simple interest on the unpaid balance at the rate applicable to other Medicare debts under current provisions of law and applicable regulations. In addition, CMS and the U.S. Department of the Treasury may use any applicable debt collection tools available to collect any amounts owed by the Company. The Company participates in the AIPBP track of the NGACO Model. Under the AIPBP track, CMS estimates the total annual expenditures for APAACO’s assigned patients and pays that projected amount to the Company in monthly installments, and the Company is responsible for all Part A and Part B costs for in-network participating providers and preferred providers contracted by the Company to provide services to the assigned patients. As APAACO does not have sufficient insight into the financial performance of the shared risk pool with CMS because of unknown factors related to IBNR, risk adjustment factors, stop loss provisions, among other factors, an estimate cannot be developed. Due to these limitations, APAACO cannot determine the amount of surplus or deficit that will likely be recognized in the future and therefore this shared risk pool revenue is considered fully constrained. For performance year 2020, the Company continues to receive monthly AIPBP payments at a rate of approximately $7.5 million per month from CMS, and will need to continue to comply with all terms and conditions in the Participation Agreement and various regulatory requirements to be eligible to participate in the AIPBP mechanism and/or NGACO Model. The Company has received approximately $22.6 million in total AIPBP payments for the three months ended March 31, 2020 of which $21.9 million has been recognized as revenue. The Company also recorded assets of approximately $8.5 million related to IBNR during the three months ended March 31, 2020 and $3.2 million related to final settlement of the 2018 performance year. These balances are included in “Other receivables” in the accompanying consolidated balance sheets. Management Fee Income Management fee income encompasses fees paid for management, physician advisory, healthcare staffing, administrative and other non-medical services provided by the Company to IPAs, hospitals and other healthcare providers. Such fees may be in the form of billings at agreed-upon hourly rates, percentages of revenue or fee collections, or amounts fixed on a monthly, quarterly or annual basis. The revenue may include variable arrangements measuring factors such as hours staffed, patient visits or collections per visit against benchmarks, and, in certain cases, may be subject to achieving quality metrics or fee collections. The Company recognizes such variable supplemental revenues in the period when such amounts are determined to be fixed and therefore contractually obligated as payable by the customer under the terms of the applicable agreement. The Company provides a significant service of integrating the services selected by the Company’s clients into one overall output for which the client has contracted. Therefore, such management contracts generally contain a single performance obligation. The nature of the Company’s performance obligation is to stand ready to provide services over the contractual period. Also, the Company’s performance obligation forms a series of distinct periods of time over which the Company stands ready to perform. The Company’s performance obligation is satisfied as the Company completes each period’s obligations. Consideration from management contracts is variable in nature because the majority of the fees are generally based on revenue or collections, which can vary from period to period. The Company has control over pricing. Contractual fees are invoiced to the Company’s clients generally monthly and payment terms are typically due within 30 days. The variable consideration in the Company’s management contracts meets the criteria to be allocated to the distinct period of time to which it relates because (i) it is due to the activities performed to satisfy the performance obligation during that period and (ii) it represents the consideration to which the Company expects to be entitled. The Company’s management contracts generally have long terms (e.g., 10 years), although they may be terminated earlier under the terms of the applicable contracts. Since the remaining variable consideration will be allocated to a wholly unsatisfied promise that forms part of a single performance obligation recognized under the series guidance, the Company has applied the optional exemption to exclude disclosure of the allocation of the transaction price to remaining performance obligations. Fee-for-Services Revenue FFS revenue represents revenue earned under contracts in which the Company bills and collects the professional component of charges for medical services rendered by the Company’s contracted physicians and employed physicians. Under the FFS arrangements, the Company bills the hospitals and third-party payors for the physician staffing and further bills patients or their third-party payors for patient care services provided and receives payment. FFS revenue related to the patient care services is reported net of contractual allowances and policy discounts and are recognized in the period in which the services are rendered to specific patients. All services provided are expected to result in cash flows and are therefore reflected as net revenue in the consolidated financial statements. The recognition of net revenue (gross charges less contractual allowances) from such services is dependent on such factors as proper completion of medical charts following a patient visit, the forwarding of such charts to the Company’s billing center for medical coding and entering into the Company’s billing system and the verification of each patient’s submission or representation at the time services are rendered as to the payor(s) responsible for payment of such services. Revenue is recorded based on the information known at the time of entering of such information into the Company’s billing systems, as well as an estimate of the revenue associated with medical services. The Company is responsible for confirming member eligibility, performing program utilization review, potentially directing payment to the provider and accepting the financial risk of loss associated with services rendered, as specified within the Company’s client contracts. The Company has the ability to adjust contractual fees with clients and possess the financial risk of loss in certain contractual obligations. These factors indicate the Company is the principal and, as such, the Company records gross fees contracted with clients in revenues. Consideration from FFS arrangements is variable in nature because fees are based on patient encounters, credits due to clients and reimbursement of provider costs, all of which can vary from period to period. Patient encounters and related episodes of care and procedures qualify as distinct goods and services, provided simultaneously together with other readily available resources, in a single instance of service, and thereby constitute a single performance obligation for each patient encounter and, in most instances, occur at readily determinable transaction prices. As a practical expedient, the Company adopted a portfolio approach for the FFS revenue stream to group together contracts with similar characteristics and analyze historical cash collections trends. The contracts within the portfolio share the characteristics conducive to ensuring that the results do not materially differ under the new standard if it were to be applied to individual patient contracts related to each patient encounter. Accordingly, there was no change in the Company's method to recognize revenue under ASC 606 Revenue from Contracts with Customers (“ASC 606”) from the previous accounting guidance. Estimating net FFS revenue is a complex process, largely due to the volume of transactions, the number and complexity of contracts with payors, the limited availability at times of certain patient and payor information at the time services are provided, and the length of time it takes for collections to fully mature. These expected collections are based on fees and negotiated payment rates in the case of third-party payors, the specific benefits provided for under each patient's healthcare plans, mandated payment rates in the case of Medicare and Medicaid programs, and historical cash collections (net of recoveries) in combination with expected collections from third party payors. The relationship between gross charges and the transaction price recognized is significantly influenced by payor mix, as collections on gross charges may vary significantly, depending on whether and with whom the patients the Company provides services to in the period are insured and the Company's contractual relationships with those payors. Payor mix is subject to change as additional patient and payor information is obtained after the period services are provided. The Company periodically assesses the estimates of unbilled revenue, contractual adjustments and discounts, and payor mix by analyzing actual results, including cash collections, against estimates. Changes in these estimates are charged or credited to the consolidated statements of income in the period that the assessment is made. Significant changes in payor mix, contractual arrangements with payors, specialty mix, acuity, general economic conditions and health care coverage provided by federal or state governments or private insurers may have a significant impact on estimates and significantly affect the results of operations and cash flows. Contract Assets Typically, revenues and receivables are recognized once the Company has satisfied its performance obligation. Accordingly, the Company’s contract assets are comprised of receivables and receivables – related parties. The Company's billing and accounting systems provide historical trends of cash collections and contractual write-offs, accounts receivable agings and established fee adjustments from third-party payors. These estimates are recorded and monitored monthly as revenues are recognized. The principal exposure for uncollectible fee for service visits is from self-pay patients and, to a lesser extent, for co-payments and deductibles from patients with insurance. Contract Liabilities (Deferred Revenue) Contract liabilities are recorded when cash payments are received in advance of the Company’s performance, or in the case of the Company’s NGACO, the excess of AIPBP capitation received and the actual claims paid or incurred. The Company’s contract liability balance was $0.7 million and $8.9 million as of March 31, 2020 and December 31, 2019, respectively, and is presented within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets. During the three months ended March 31, 2020, $0.4 million of the Company’s contract liability accrued in 2019 has been recognized as revenue and $8.5 million was repaid back to CMS for AIPBP capitation received and not earned. Other Financial Information In March 2020, the Company made a deposit of $4.0 million for future investment opportunities. The investment was made with cash strictly related to the APC excluded assets that was generated from the series of transactions with AP-AMH. The deposit is included in “Other assets” in the accompanying consolidated balance sheets. Income Taxes Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in the recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the consolidated financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the consolidated financial statements. Share-Based Compensation The Company maintains a stock-based compensation program for employees, non-employees, directors and consultants. The value of share-based awards such as options is recognized as compensation expense on a cumulative straight-line basis over the vesting period of the awards, adjusted for expected forfeitures. From time to time, the Company issues shares of its common stock to its employees, directors and consultants, which shares may be subject to the Company’s repurchase right (but not obligation) that lapses based on time-based and performance-based vesting schedules. The Company accounts for share-based awards granted to persons other than employees and directors under ASC 505-50 Equity-Based Payments to Non-Employees. As such the fair value of such shares of stock is periodically remeasured using an appropriate valuation model and income or expense is recognized over the vesting period. Basic and Diluted Earnings Per Share Basic earnings per share is computed by dividing net income attributable to holders of the Company’s common stock by the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of shares of common stock outstanding, plus the effect of dilutive securities outstanding during the periods presented, using the treasury stock method. Refer to Note 14 for a discussion of shares treated as treasury shares for accounting purposes. Noncontrolling Interests The Company consolidates entities in which the Company has a controlling financial interest. The Company consolidates subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting rights, and VIEs in which the Company is the primary beneficiary. Noncontrolling interests represent third-party equity ownership interests (including certain VIEs) in the Company’s consolidated entities. The amount of net income attributable to noncontrolling interests is disclosed in the consolidated statements of income. Mezzanine Equity Pursuant to APC’s shareholder agreements, in the event of a disqualifying event, as defined in the agreements, APC could be required to repurchase the shares from the respective shareholders based on certain triggers outlined in the shareholder agreements. As the redemption feature of the shares is not solely within the control of APC, the equity of APC does not qualify as permanent equity and has been classified as mezzanine or temporary equity. Accordingly, the Company recognizes noncontrolling interests in APC as mezzanine equity in the consolidated financial statements. As of March 31, 2020 and December 31, 2019, APC's shares were not redeemable, nor was it probable the shares would become redeemable. Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 became effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements. In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). This ASU reduces the cost and complexity of financial reporting associated with consolidation of VIEs. A VIE is an organization in which consolidation is not based on a majority of voting rights. The new guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements. The amendments in this ASU became effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-17 on January 1, 2020. The adoption of ASU 2018-17 did not have a material impact on the consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 Income Taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact that the adoption of ASU 2019-12 will have on the Company's consolidated financial statements. In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”). This ASU clarifies the interaction between accounting for equity securities, equity method investments and certain derivative instruments. This amendment in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact that the adoption of ASU 2020-01 will have on the Company's consolidation financial statements. Other than the standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows. |
Leases |
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company has operating and finance leases for corporate offices, doctors’ offices, and certain equipment. These leases have remaining lease terms of 1 month to 5 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within one year. As of March 31, 2020 and December 31, 2019, assets recorded under finance leases were $0.5 million, respectively, and accumulated depreciation associated with finance leases was $0.3 million, respectively. Also, the Company rents or subleases certain real estate to third parties, which are accounted for as operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The components of lease expense were as follows (in thousands):
Other information related to leases was as follows (in thousands):
Future minimum lease payments under non-cancellable leases as of March 31, 2020 is as follows (in thousands):
As of March 31, 2020, the Company does not have additional operating and finance leases that have not yet commenced. |
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Leases | Leases The Company has operating and finance leases for corporate offices, doctors’ offices, and certain equipment. These leases have remaining lease terms of 1 month to 5 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within one year. As of March 31, 2020 and December 31, 2019, assets recorded under finance leases were $0.5 million, respectively, and accumulated depreciation associated with finance leases was $0.3 million, respectively. Also, the Company rents or subleases certain real estate to third parties, which are accounted for as operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The components of lease expense were as follows (in thousands):
Other information related to leases was as follows (in thousands):
Future minimum lease payments under non-cancellable leases as of March 31, 2020 is as follows (in thousands):
As of March 31, 2020, the Company does not have additional operating and finance leases that have not yet commenced. |
Business Combination and Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Estimated Fair Values of Assets Acquired and Liabilities Assumed | The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date (in thousands):
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date (in thousands):
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Schedule of Carrying Value of Goodwill | The change in the carrying value of goodwill for the three months ended March 31, 2020 was as follows (in thousands);
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Basis of Presentation and Summary of Significant Accounting Policies - Carrying Amounts and Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets | ||
Money market funds | $ 41,675 | $ 50,731 |
Marketable securities – certificates of deposit | 117,036 | 116,469 |
Marketable securities – equity securities | 39 | 70 |
Total | 158,750 | 167,270 |
Level 1 | ||
Assets | ||
Money market funds | 41,675 | 50,731 |
Marketable securities – certificates of deposit | 117,036 | 116,469 |
Marketable securities – equity securities | 39 | 70 |
Total | 158,750 | 167,270 |
Level 2 | ||
Assets | ||
Money market funds | 0 | 0 |
Marketable securities – certificates of deposit | 0 | 0 |
Marketable securities – equity securities | 0 | 0 |
Total | 0 | 0 |
Level 3 | ||
Assets | ||
Money market funds | 0 | 0 |
Marketable securities – certificates of deposit | 0 | 0 |
Marketable securities – equity securities | 0 | 0 |
Total | $ 0 | $ 0 |
Related-Party Transactions - Fees Incurred and Income Received (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
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Related Party Transaction [Line Items] | ||
Net total | $ 11,792 | $ 10,850 |
AHMC | ||
Related Party Transaction [Line Items] | ||
AHMC – Risk pool and capitation | 11,999 | 11,600 |
HSMSO | ||
Related Party Transaction [Line Items] | ||
Management fees | (132) | (650) |
Aurion | ||
Related Party Transaction [Line Items] | ||
Management fees | $ (75) | $ (100) |
Business Combination and Goodwill |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination and Goodwill | Business Combination and Goodwill Alpha Care Medical Group On May 31, 2019, APC and APC-LSMA completed their acquisition of 100% of the capital stock of Alpha Care from Dr. Kevin Tyson for an aggregate purchase price of approximately $45.1 million in cash, subject to post-closing adjustments. As part of the transaction the Company deposited $2.0 million into an escrow account for potential post-closing adjustments. As of March 31, 2020 no post-closing adjustment is expected to be paid to Dr. Tyson and the full amount of the escrow account is expected to be returned to the Company. As such, the escrow amount is presented within prepaid expenses and other current assets in the accompanying consolidated balance sheets. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date (in thousands):
Accountable Health Care, IPA On August 30, 2019, APC and APC-LSMA, acquired the remaining outstanding shares of capital stock (comprising 75%) in Accountable Health Care in exchange for $7.3 million. In addition to the payment of $7.3 million APC assumed all assets and liabilities of Accountable Health Care, including loans payable to NMM and APC of $15.4 million, which have been eliminated upon consolidation and contributed the 25% investment totaling $2.4 million, total purchase price was $25.1 million (see Note 5). The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date (in thousands):
The Company acquired AMG in September 2019 for total consideration of $1.6 million, of which $0.4 million was in the form of APC common stock. The business combination did not meet the quantitative thresholds to require separate disclosures based on the Company's consolidated net assets, investments and net income. The acquisitions were accounted for under the acquisition method of accounting. The fair value of the consideration for the acquired company was allocated to acquired tangible and intangible assets and liabilities based upon their fair values. The excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The determination of the fair value of assets and liabilities acquired requires the Company to make estimates and use valuation techniques when market value is not readily available. The results of operations of the company acquired have been included in the Company's financial statements from the date of acquisition. Transaction costs associated with business acquisitions are expensed as they are incurred. At the time of acquisition, the Company estimates the amount of the identifiable intangible assets based on a valuation and the facts and circumstances available at the time. The Company determines the final value of the identifiable intangible assets as soon as information is available, but not more than 12 months from the date of acquisition. Goodwill is not deductible for tax purposes. The change in the carrying value of goodwill for the three months ended March 31, 2020 was as follows (in thousands);
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