10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  ___ to ___.

Commission File No. 001-37392

Apollo Medical Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	95-4472349
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation)	Identification Number)

1668 S. Garfield Avenue, 2^nd Floor, Alhambra, California 91801

(Address of principal executive offices and zip code)

(626) 282-0288

(Registrant’s telephone number, including area code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   ☒ Yes     ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒   Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  ☐ Yes   ☒  No

Securities registered pursuant to Section 12(b) of the Act:

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

As of August 3, 2020, there were 53,513,655 shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.

APOLLO MEDICAL HOLDINGS, INC.

INDEX TO FORM 10-Q FILING

TABLE OF CONTENTS

		PAGE
	Introductory Note	4
	Note About Forward-Looking Statements	4
	PART I FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements – Unaudited	4
	Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	5
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and 2019	7
	Consolidated Statements of Mezzanine and Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019	8
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	9
	Notes to Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	62
	PART II OTHER INFORMATION
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	66

2

Glossary

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:

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, a Medical Corporation
AMM	Apollo Medical Management, Inc.
AP-AMH	AP-AMH Medical Corporation
APAACO	APA ACO, Inc.
APC	Allied Pacific of California IPA
APC-LSMA	APC-LSMA Designated Shareholder Medical Corporation
Apollo Care Connect	Apollo Care Connect, Inc.
BAHA	Bay Area Hospitalist Associates
Bright	Bright Health Company of California, Inc.
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

3

INTRODUCTORY NOTE

Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Apollo Medical Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “ApolloMed” refers to Apollo Medical Holdings, Inc.

The Centers for Medicare & Medicaid Services (“CMS”) have not reviewed any statements contained in this Quarterly Report on Form 10-Q describing the participation of APA ACO, Inc. (“APAACO”) in the Next Generation Accountable Care Organization (“NGACO”) Model.

Trade names and trademarks of the Company and its subsidiaries referred to herein and their respective logos, are our property. This Quarterly Report on Form 10-Q may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

        This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about the Company's guidance for the year ending December 31, 2020, any statements about our business (including the impact of the 2019 Novel Coronavirus (COVID-19) pandemic on our business), financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, such as our projected capitation from CMS for the year ending December 31, 2020 or otherwise, and our future liquidity, including cash flows and any payments under the $545.0 million loan we made to our VIE, AP-AMH; any statements of any plans, strategies and objectives of management for future operations such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; any statements regarding the outlook on our NGACO Model or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.

        Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations and certain assumptions of management. Some or all of such beliefs, expectations and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC on March 16, 2020, including, the risk factors discussed under the heading “Risk Factors” in Part I, Item IA thereof. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes and results to differ materially from those indicated by such statements.

PART I FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

4

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	152,441	$	103,189
Restricted cash	—		75
Investment in marketable securities	117,656		116,539
Receivables, net	17,588		11,004
Receivables, net – related parties	59,328		48,136
Other receivables	15,919		16,885
Prepaid expenses and other current assets	11,188		10,315
Loans receivable	6,425		6,425
Loans receivable – related parties	—		16,500
Total current assets	380,545		329,068
Noncurrent assets
Restricted cash	746		746
Land, property and equipment, net	11,485		12,130
Intangible assets, net	94,790		103,012
Goodwill	239,053		238,505
Investment in other entities – equity method	26,817		28,427
Investments in privately held entities	37,075		896
Operating lease right-of-use assets	20,219		14,248
Other assets	22,487		1,681
Total noncurrent assets	452,672		399,645
Total assets	$	833,217	$	728,713
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	24,788	$	27,279
Fiduciary accounts payable	1,853		2,027
Medical liabilities	70,273		58,725
Income taxes payable	42,210		4,529
Dividend payable	431		271
Finance lease liabilities	102		102
Operating lease liabilities	3,350		2,990

5

	June 30, 2020		December 31, 2019
Current portion of long-term debt	9,500		9,500
Total current liabilities	152,507		105,423
Noncurrent liabilities
Deferred tax liability	13,654		18,269
Finance lease liabilities, net of current portion	355		416
Operating lease liabilities, net of current portion	17,418		11,373
Long-term debt, net of current portion and deferred financing costs	230,455		232,172
Total noncurrent liabilities	261,882		262,230
Total liabilities	414,389		367,653
Commitments and contingencies (Note 11)
Mezzanine equity
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation	210,980		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, 36,309,513 and 35,908,057 shares outstanding, excluding 17,475,707 and 17,458,810 treasury shares, at June 30, 2020, and December 31, 2019, respectively	36		36
Additional paid-in capital	163,986		159,608
Retained earnings	43,001		31,905
	207,023		191,549
Noncontrolling interest	825		786
Total stockholders’ equity	207,848		192,335
Total liabilities, mezzanine equity and stockholders’ equity	$	833,217	$	728,713

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenue
Capitation, net	$	140,949	$	103,224	$	281,370	$	174,740
Risk pool settlements and incentives	12,003		11,191		23,239		21,285
Management fee income	8,690		10,353		17,505		19,349
Fee-for-service, net	2,270		3,878		5,697		7,959
Other income	1,257		1,404		2,463		2,473
Total revenue	165,169		130,050		330,274		225,806
Operating expenses
Cost of services	136,079		101,363		280,283		184,795
General and administrative expenses	11,556		11,818		23,390		22,081
Depreciation and amortization	4,628		4,455		9,330		8,872
Provision for doubtful accounts	—		(2,314)		—		(1,363)
Total expenses	152,263		115,322		313,003		214,385
Income from operations	12,906		14,728		17,271		11,421
Other income (expense)
Income (loss) from equity method investments	834		(42)		2,888		(892)
Gain on sale of equity method investment	99,647		—		99,647		—
Interest expense	(2,673)		(311)		(5,541)		(522)
Interest income	863		474		1,792		797
Other income	1,282		24		1,384		211
Total other income (expense), net	99,953		145		100,170		(406)
Income before provision for income taxes	112,859		14,873		117,441		11,015
Provision for income taxes	31,858		4,209		33,453		2,801
Net income	81,001		10,664		83,988		8,214
Net income attributable to noncontrolling interests	73,957		7,119		72,892		4,529
Net income attributable to Apollo Medical Holdings, Inc.	$	7,044	$	3,545	$	11,096	$	3,685
Earnings per share – basic	$	0.20	$	0.10	$	0.31	$	0.11
Earnings per share – diluted	$	0.19	$	0.09	$	0.30	$	0.10

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

(UNAUDITED)

	Mezzanine Equity – Noncontrolling Interest in APC							Retained Earnings
			Common Stock Outstanding			Additional Paid-in Capital				Noncontrolling Interest		Shareholders’ Equity
			Shares	Amount
Balance at 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
Net income	73,667		—	—		—		7,044		291		7,335
Purchase of noncontrolling interest	(126)		—	—		—		—		—		—
Shares issued for vesting of restricted stock awards	—		24,453	—		—		—		—		—
Shares issued for exercise of options and warrants	—		242,299	—		2,283		—		—		2,283
Share-based compensation	—		—	—		852		—		—		852
Cancellation of restricted stock awards	—		—	—		(236)		—		—		(236)
Dividends	(20,000)		—	—		—		—		(347)		(347)
Balance at June 30, 2020	$	210,980	36,309,513	$	36	$	163,986	$	43,001	$	825	$	207,848

	Mezzanine Equity – Noncontrolling Interest in APC							Retained Earnings
			Common Stock Outstanding			Additional Paid-in Capital				Noncontrolling Interest		Shareholders’ Equity
			Shares	Amount
Balance at 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
Net income	6,896		—	—		$	—	3,545		223		3,768
Shares issued for exercise of options and warrants	50		135,108	—		$	758	—		—		758
Share-based compensation	203		—	—		$	128	—		—		128
Dividends	—		—	—		$	—	—		(942)		(942)
Balance at June 30, 2019	$	219,583	34,638,812	$	35	$	163,892	$	21,473	$	689	$	186,089

The accompanying notes are an integral part of these unaudited consolidated financial statements.

8

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities
Net income	$	83,988	$	8,214
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	9,330		8,872
Amortization of debt issuance costs	658		—
Provision for doubtful accounts	—		(1,363)
Share-based compensation	1,910		676
Unrealized loss (gain) from investment in equity securities	25		(15)
(Income) loss from equity method investments	(2,888)		892
Gain on sale of equity method investments	(99,647)		—
Deferred tax	(4,473)		(549)
Changes in operating assets and liabilities, net of business combinations:
Receivables, net	(6,284)		588
Receivables, net – related parties	(11,191)		(12,665)
Other receivables	966		(11,897)
Prepaid expenses and other current assets	(873)		(2,740)
Right-of-use assets	1,680		1,098
Other assets	(5,095)		(243)
Accounts payable and accrued expenses	(3,043)		3,340
Fiduciary accounts payable	(174)		260
Medical liabilities	11,252		(3,819)
Income taxes payable	37,681		(11,622)
Operating lease liabilities	(1,247)		(1,044)
Net cash provided by (used in) operating activities	12,575		(22,017)
Cash flows from investing activities
Payments for business acquisition, net of cash acquired	—		(41,518)
Proceeds from repayment of loans receivable – related parties	16,500		—
Advances on loans receivable	—		(6,425)
Purchases of marketable securities	(1,142)		(8)
Purchases of investment – equity method	(500)		(2,158)
Proceeds from sale of equity method investment	52,743		—
Purchases of property and equipment	(451)		(378)
Dividend received	—		240
Net cash provided by (used in) investing activities	67,150		(50,247)
Cash flows from financing activities
Repayment of bank loan and lines of credit	—		(8,040)
Dividends paid	(30,187)		(10,942)
Repayment of term loan	(2,375)		—

9

Payment of finance lease obligations	(61)		(50)
Proceeds from the exercise of stock options and warrants	2,863		898
Repurchase of shares	(788)		(40)
Borrowings on line of credit	—		39,600
Proceeds from common stock offering	—		205
Net cash (used in) provided by financing activities	(30,548)		21,631
Net increase (decrease) in cash, cash equivalents and restricted cash	49,177		(50,633)
Cash, cash equivalents and restricted cash, beginning of period	104,010		107,637
Cash, cash equivalents and restricted cash, end of period	$	153,187	$	57,004
Supplementary disclosures of cash flow information:
Cash paid for income taxes	$	—	$	16,700
Cash paid for interest	2,623		439
Supplemental disclosures of non-cash investing and financing activities
Dividend declared included in dividend payable	$	160	$	—
Deferred tax liability adjustment to goodwill	—		8,355
Preferred shares received from sale of equity method investment	36,179		—

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total amounts of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows (in thousands):

	June 30,
	2020		2019
Cash and cash equivalents	$	152,441	$	52,726
Restricted cash – non-current	746		4,278
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	153,187	$	57,004

The accompanying notes are an integral part of these unaudited consolidated financial statements.

10

APOLLO MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. 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”), APA ACO, Inc. ("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 variable interest entity ("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;

1.ApolloMed loaned AP-AMH $545.0 million pursuant to a 10-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 purchased by AP-AMH, as described below. 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

11

Stock (the “Certificate of Determination”), AP-AMH is entitled to receive preferential, cumulative dividends that accrue on a daily basis and that are equal to the sum of (i) APC’s net income from healthcare services (as defined in the Certificate of Determination), plus (ii) any dividends received by APC from certain of APC’s affiliated entities, less (iii) any Retained Amounts (as defined in the Certificate of Determination).

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 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 ApolloMed’s stockholders.

4.ApolloMed licensed to AP-AMH the right to use certain trade names 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.

APC's ownership in ApolloMed was 32.28% at June 30, 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 organized by a group of highly qualified physicians, which 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 June 30, 2020, APC 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 stockholder 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 approximately 170,000 enrollees, as of June 30, 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 400 primary care physicians and 700 specialty care physicians, and four community and regional hospital medical centers that provide quality health care services to approximately 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 that 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

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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 the sale 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 preferred stock having an estimated fair value of approximately $36.2 million on the date of sale. In addition, pursuant to the terms of the stock purchase agreement, APC has a beneficial interest in the equity method investment sold. The estimated fair value of such interest on April 30, 2020 was $15.7 million (see Note 5). 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 UCI has 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 did not affect net income attributable to ApolloMed.

APAACO, jointly owned by NMM and AMM, began participating in the Next Generation Accountable Care Organization (“NGACO") Model of the Centers for Medicare & Medicaid Services (“CMS”) in January 2017. The NGACO Model is a 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, 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. ("Apollo Care Connect"), 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.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated balance sheets 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 June 30, 2020, and for the three and six months ended June 30, 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 and six months ended June 30, 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 June 30, 2020 and December 31, 2019, and the consolidated statements of income for the three and six months ended June 30, 2020 and 2019,  include the accounts of ApolloMed, its consolidated subsidiaries, NMM, AMM, APAACO, and Apollo Care Connect, its consolidated VIE, AP-AMH, NMM's consolidated subsidiaries, and 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.

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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.

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 90 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 June 30, 2020, the Company’s deposit accounts with banks exceeded the FDIC’s insured limit by approximately $290.9 million, including approximately $117.6 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 June 30, 2020 and December 31, 2019, investments in marketable securities amounted to approximately $117.7 million and $116.5 million, respectively, and consisted of equity securities and certificates of deposit with various financial institutions, reported at par value, plus accrued interest, with maturity dates from four 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 and 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. Other receivables consists of recoverable claims paid related to the 2019 APAACO performance year to be administered following instructions from CMS, fee-for-

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services (“FFS”) reimbursement for patient care, certain expense reimbursements, transportation reimbursements from the hospitals, and stop loss insurance premium reimbursements.

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 applicable contracts and 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. As of June 30, 2020 and December 31, 2019 the Company had $1.3 million and $2.9 million of allowance for doubtful accounts, respectively.

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 payor type for the three and six months ended June 30, 2020 and 2019 (in thousands):

	For the Three Months Ended June 30,
	2020		2019
Commercial	$	25,479	$	25,365
Medicare	62,038		57,965
Medicaid	68,450		36,277
Other third parties	9,202		10,443
Revenue	$	165,169	$	130,050

	For the Six Months Ended June 30,
	2020		2019
Commercial	$	50,192	$	50,383
Medicare	126,918		95,063
Medicaid	134,897		61,647
Other third parties	18,267		18,713
Revenue	$	330,274	$	225,806

The Company had major payors that contributed the following percentages of net revenue:

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	For the Three Months Ended June 30,
	2020		2019
Payor A	11.9	%	13.7	%
Payor B	10.3	%	12.6	%
Payor C	*		10.5	%
Payor D	17.5	%	13.7	%
Payor E	12.4	%	*
Payor F	10.1	%	*

	For the Six Months Ended June 30,
	2020		2019
Payor A	11.9	%	15.8	%
Payor B	10.3	%	14.3	%
Payor C	*		11.7	%
Payor D	17.5	%	*
Payor E	12.9	%	*
Payor F	10.3	%	*

* Less than 10% of total net revenues

The Company had major payors that contributed to the following percentages of receivables and receivables – related parties:

	As of June 30, 2020		As of December 31, 2019
Payor D	12.4	%	*
Payor G	33.5	%	30.4	%
Payor H	35.1	%	36.0	%

* Less than 10% of total receivables and receivables — related parties, net

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 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

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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 June 30, 2020, are presented below (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market funds*	$	108,195	$	—	$	—	$	108,195
Marketable securities – certificates of deposit	117,611		—		—		117,611
Marketable securities – equity securities	45		—				45
Total	$	225,851	$	—	$	—	$	225,851

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2019, are presented below (in thousands):

	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

* Included in cash and cash equivalents

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 six months ended June 30, 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 six months ended June 30, 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.

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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 six months ended June 30, 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.

Investments in Privately Held Entities

The Company accounts for certain investments using the cost method of accounting when it is determined that the investment provides the Company with little or no influence over the investee. Under the cost method of accounting, the investment is measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. The investments in privately held entities that do not report NAV are subject to qualitative assessment for indicators of impairments.

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.

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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

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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 claims (see Note 8), and 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 will 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 will pay CMS in full within 30 days after the relevant settlement report is deemed final. If the

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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 will 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 claims, risk adjustment factors, and 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 $7.6 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 $22.9 million and $45.5 million in total AIPBP payments for the three and six months ended June 30, 2020, respectively, of which $20.5 million and $42.4 million has been recognized as revenue for the three and six months ended June 30, 2020, respectively. The Company also recorded assets of approximately $8.5 million related to IBNR claims as of June 30, 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-Service 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

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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 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.

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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 $3.1 million and $8.9 million as of June 30, 2020, and December 31, 2019, respectively, and is presented within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets. During the six months ended June 30, 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.

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 equity ownership interests held by certain VIEs) in the Company’s consolidated entities. 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

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noncontrolling interests in APC as mezzanine equity in the consolidated financial statements. As of June 30, 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. 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 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.

3. Business Combinations and Goodwill

Alpha Care Medical Group, Inc.

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 June 30, 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):

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	Balance Sheet
Assets acquired
Cash and cash equivalents	$	3,569
Accounts receivable, net	10,336
Other current assets	4,675
Network relationship intangible assets	22,636
Goodwill	28,585
Accounts payable	(2,795)
Deferred tax liabilities	(6,334)
Medical liabilities	(15,616)
Net assets acquired	$	45,056
Cash paid	$	45,056

Accountable Health Care, IPA, a Professional Medical Corporation

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):

	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	23,566
Accounts payable	(3,759)
Medical liabilities	(12,154)
Subordinated loan	(15,327)
Net asset acquired	$	9,667
Equity investment contributed	$	2,417
Cash paid	$	7,250

AMG, a Professional Medical Corporation

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

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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 one year from the date of acquisition.

Goodwill is not deductible for tax purposes.

The change in the carrying value of goodwill for the six months ended June 30, 2020, was as follows (in thousands);

Balance, January 1, 2020	$	238,505
Adjustments	548
Balance, June 30, 2020	$	239,053

4. Intangible Assets, Net

At June 30, 2020, the Company’s intangible assets, net, consisted of the following (in thousands):

	Useful Life (Years)	Gross June 30, 2020		Accumulated Amortization		Net June 30, 2020
Amortized intangible assets:
Network relationships	11-15	$	143,930	$	(67,015)	$	76,915
Management contracts	15	22,832		(10,736)		12,096
Member relationships	12	6,696		(2,793)		3,903
Patient management platform	5	2,060		(1,064)		996
Trade names/trademarks	20	1,011		(131)		880
		$	176,529	$	(81,739)	$	94,790

At December 31, 2019, the Company’s intangible assets, net, consisted of the following (in thousands):

	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 names/trademarks	20	1,011		(105)		906
		$	176,529	$	(73,517)	$	103,012

Included in depreciation and amortization on the accompanying consolidated statements of income is amortization expense of $4.1 million and $3.9 million for the three months ended June 30, 2020 and 2019, respectively, and $8.2 million and $7.7 million for the six months ended June 30, 2020 and 2019, respectively.

Future amortization expense is estimated to be as follows for the following years ending December 31 (in thousands):

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	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,807
2021	14,524
2022	12,673
2023	10,842
2024	9,830
Thereafter	39,114
Total	$	94,790

5. Investments in Other Entities — Equity Method

Rollforward of Equity Method Investment (in thousands)

	December 31, 2019		Allocation of Income (Loss)		Contribution		Sale		June 30, 2020
LaSalle Medical Associates – IPA Line of Business	$	6,397	$	(428)	$	—	$	—	$	5,969
Pacific Medical Imaging & Oncology Center, Inc.	1,396		77		—		—		1,473
Universal Care, Inc.	1,438		3,560		—		(4,998)		—
Diagnostic Medical Group	2,334		(102)		—		—		2,232
531 W. College, LLC – related party	16,698		(231)		500		—		16,967
MWN, LLC – related party	164		12		—		—		176
	$	28,427	$	2,888	$	500	$	(4,998)	$	26,817

LaSalle Medical Associates — IPA Line of Business

LMA was founded by Dr. Albert Arteaga in 1996 and currently operates six neighborhood medical centers through its network of approximately 2,300 PCP and Specialists providers, treating children, adults and seniors in San Bernardino County, California. LMA’s patients are primarily served by Medi-Cal. LMA also accepts Blue Cross, Blue Shield, Molina, Care 1st, Health Net and Inland Empire Health Plan. LMA is also an IPA of independently contracted doctors, hospitals and clinics, delivering high-quality care to approximately 290,000 patients in Fresno, Kings, Los Angeles, Madera, Riverside, San Bernardino and Tulare Counties. During 2012, APC-LSMA and LMA entered into a share purchase agreement whereby APC-LSMA invested $5.0 million for a 25% interest in LMA’s IPA line of business. NMM has a management services agreement with LMA. APC accounts for its investment in LMA under the equity method as APC has the ability to exercise significant influence, but not control over LMA’s operations. For the three months ended June 30, 2020, APC recognized income from this investment of $0.2 million. For the three months ended June 30, 2019, APC recognized a loss from this investment of $1.3 million. For the six months ended June 30, 2020 and 2019, APC recognized losses of $0.4 million and $2.4 million, respectively, in the accompanying consolidated statements of income. The accompanying consolidated balance sheets include the related investment balance of $6.0 million and $6.4 million at June 30, 2020 and December 31, 2019, respectively.

LMA’s summarized balance sheets at June 30, 2020 and December 31, 2019, and summarized statements of operations for the six months ended June 30, 2020 and 2019, with respect to its IPA line of business are as follows (in thousands):

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Balance Sheets

	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	2,852	$	6,345
Receivables, net	6,751		5,124
Other current assets	880		3,526
Loan receivable	2,250		2,250
Restricted cash	688		683
Total assets	$	13,421	$	17,928
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	$	20,735	$	23,530
Stockholders’ deficit	(7,314)		(5,602)
Total liabilities and stockholders’ deficit	$	13,421	$	17,928

Statements of Operations

	Six Months Ended June 30,
	2020		2019
Revenues	$	92,113	$	93,434
Expenses	93,680		102,845
Net loss	$	(1,567)	$	(9,411)

Pacific Medical Imaging and Oncology Center, Inc.

Incorporated in California in 2004, PMIOC provides comprehensive diagnostic imaging services using state-of-the-art technology. PMIOC offers high-quality diagnostic services, such as MRI/MRA, PET/CT, CT, nuclear medicine, ultrasound, digital x-rays, bone densitometry and digital mammography, at its facilities.

In July 2015, APC-LSMA and PMIOC entered into a share purchase agreement whereby APC-LSMA invested $1.2 million for a 40% ownership interest in PMIOC.

APC and PMIOC have an Ancillary Service Contract together whereby PMIOC provides covered services on behalf of APC to enrollees of the plans of APC. Under the Ancillary Service Contract, APC paid PMIOC fees of approximately $0.4 million and $0.6 million, for the three months ended June 30, 2020 and 2019, respectively, and fees of approximately $1.0 million and $1.4 million for the six months ended June 30, 2020 and 2019. APC accounts for its investment in PMIOC under the equity method of accounting as APC has the ability to exercise significant influence, but not control over PMIOC’s operations. For the three months ended June 30, 2020, APC recognized a loss from this investment of $10,200. For the three months ended June 30, 2019, APC recognized income from this investment of $0.1 million. For the six months ended June 30, 2020 and 2019, APC recognized income of $0.1 million and $0.2 million, respectively, in the accompanying consolidated statements of income. The accompanying consolidated balance sheets include the related investment balance of $1.5 million and $1.4 million at June 30, 2020 and December 31, 2019, respectively.

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Universal Care, Inc.

UCI is a privately held health plan that has been in operation since 1985. UCI holds a license under the California Knox-Keene Health Care Services Plan Act to operate as a full-service health plan. UCI contracts with CMS under the Medicare Advantage Prescription Drug Program.

In August 2015, UCAP purchased 100,000 shares of UCI class A-2 voting common stock from UCI for $10.0 million, which shares comprise 48.9% of UCI’s total outstanding shares and 50% of UCI’s voting common stock.

On April 30, 2020, UCAP completed the sale 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 an estimated fair value of approximately $36.2 million on the date of sale, included in investments in privately held entities. The fair value of the preferred shares was determined utilizing a market approach which includes significant unobservable inputs (Level 3) including forecasted revenue along with estimates of revenue multiples, volatility and time-to-liquidity. In addition, pursuant to the terms of the stock purchase agreement, APC has a beneficial interest in the equity method investment sold. The estimated fair value of such interest on April 30, 2020 was $15.7 million and is included in "Other assets" in the accompanying consolidated balance sheets. The beneficial interest is the result of a gross margin provision in the stock purchase agreement which entitles UCAP to potentially receive additional cash and preferred shares (currently held in an escrow account with cash of $15.6 million and preferred shares with an estimated fair value of $6.4 million, total estimated fair value of $22.0 million on the date of sale) based on the gross margin of UCI for calendar year 2020 as measured against a target. The amount to be received varies dependent upon the gross margin as compared to the target but cannot exceed the amounts that are in the escrow account. Additionally, the stock purchase agreement includes a tangible net equity provision that may result in the receipt or payment of additional amounts based on a comparison of final tangible net equity of UCI on the date of sale (determined with the benefit of one year of hindsight) as compared to the estimated tangible net equity at the time of sale. It is expected that settlement of the beneficial interest will begin in the second half of 2021. The Company determined the fair value of the beneficial interest using an income approach which includes significant unobservable inputs (Level 3). Specifically, the Company utilized a probability weighted discounted cash flow model using a risk-free treasury rate to estimate fair value which considered various scenarios of gross margin adjustment and the impact of each adjustment to the expected proceeds from the escrow account and assigned probabilities to each such scenario in determining fair value. The gross margin adjustment is defined as three times any deficit in actual gross margin of UCI for the year ended December 31, 2020 below a target gross margin unless such deficit is within a specific collar amount.

The gain on sale of equity method investment recognized in connection with this transaction was determined as follows:

	Amount (in '000s)
Cash proceeds (excludes proceeds to settle indebtedness owed to APC from UCI)	$	52,743
Preferred shares in Bright Health, Inc.	$	36,179
Beneficial interest in UCI	$	15,723
Less: Carrying value of equity method investment on date of sale	$	(4,998)
Gain on sale of equity method investment	$	99,647

For the three months ended June 30, 2020 and June 30, 2019 APC recorded income from this investment of approximately $0.9 million and $4.5 million. For the six months ended June 30, 2020 and June 30, 2019 APC recorded income from this investment of approximately $3.6 million and $5.5 million in the accompanying consolidated statements of income, respectively. As a result of the sale, there was no investment balance as of June 30, 2020 as compared to an investment balance of $1.4 million as of December 31, 2019.

UCI's balance sheet at December 31, 2019 and statements of income for the four months ended April 30, 2020 and six months ended June 30, 2019 are as follows (in thousands):

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Balance Sheets

	December 31, 2019
Assets
Cash and cash equivalents	$	33,890
Receivables, net	63,843
Other current assets	38,280
Loan receivable	882
Restricted cash	4,021
Total assets	$	140,916
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	$	128,330
Other liabilities	33,133
Stockholders’ deficit	(20,547)
Total liabilities and stockholders’ deficit	$	140,916

Statements of Operations

	Four Months Ended		Six Months Ended
	April 30, 2020		June 30, 2019
Revenues	$	195,308	$	247,517
Expenses	189,028		239,389
Income before benefit from income taxes	6,280		8,128
Benefit from income taxes	—		(3,167)
Net income	$	6,280	$	11,295

Diagnostic Medical Group

In May 2016, David C.P. Chen M.D., individually, and APC-LSMA, entered into a share purchase agreement whereby APC-LSMA acquired a 40% ownership interest in DMG.

APC accounts for its investment in DMG under the equity method of accounting as APC has the ability to exercise significant influence, but not control over DMG’s operations. For the three months ended June 30, 2020 and 2019, APC recognized loss and income from this investment of $0.1 million and $0.2 million, respectively, in the consolidated statements of income. For the six months ended June 30, 2020 and 2019, APC recognized loss and income from investment of $0.1 million and $0.4 million, respectively, in the consolidated statements of income. The accompanying consolidated balance sheets include the related investment balances of $2.2 million and $2.3 million as of June 30, 2020 and December 31, 2019, respectively.

531 W. College LLC – Related Party

In June 2018, College Street Investment LP, a California limited partnership (“CSI”), APC and NMM entered into an operating agreement to govern the limited liability company, 531 W. College, LLC and the conduct of its business, and to specify their relative rights and obligations. CSI, APC and NMM, each owns 50%, 25% and 25%, respectively, of member units based on initial capital contributions of $16.7 million, $8.3 million, and $8.3 million, respectively.

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In June 2018, 531 W. College, LLC closed its purchase of a non-operational hospital located in Los Angeles from Societe Francaise De Bienfaisance Mutuelle De Los Angeles, a California nonprofit corporation, for a total purchase price of $33.3 million. On April 23, 2019, NMM and APC entered into an agreement whereby NMM assigned and APC assumed NMM’s 25% membership interest in 531 W. College, LLC for approximately $8.3 million. Subsequently, APC has a 50% ownership in 531 W. College LLC with a total investment balance of approximately $17.0 million.

APC accounts for its investment in 531 W. College, LLC under the equity method of accounting as APC has the ability to exercise significant influence, but not control over the operations of this joint venture. For the three months ended June 30, 2020 and 2019, APC recognized loss and income of $0.1 million and $12,649, respectively. For the six months ended June 30, 2020 and 2019, APC recorded losses of $0.2 million and $34,319 in the accompanying consolidated statements of income, respectively. During the period ended June 30, 2020, the Company contributed $0.5 million to 531 W. College LLC as part of its 50% interest and had investment balances of $17.0 million and $16.7 million, respectively, at June 30, 2020 and December 31, 2019.

531 W. College LLC’s balance sheets at June 30, 2020 and December 31, 2019, and statements of operations for the six months ended June 30, 2020 and 2019, are as follows (in thousands):

Balance sheets

	June 30, 2020		December 31, 2019
Assets
Cash	$	126	$	139
Other current assets	—		17
Other assets	70		70
Property and equipment, net	33,697		33,581
Total assets	$	33,893	$	33,807
Liabilities and Members’ Equity
Current liabilities	$	1,109	$	1,062
Stockholders’ equity	32,784		32,745
Total liabilities and members’ equity	$	33,893	$	33,807

Statements of Operation

	Six Months Ended June 30,
	2020		2019
Revenues	—		—
Expenses	579		538
Loss from operations	(579)		(538)
Other income	$	21	$	385
Net loss	$	(558)	$	(153)

MWN LLC – Related Party

In December 2018, NMM, 6 Founders LLC, a California limited liability company doing business as Pacific6 Enterprises (“Pacific6”), and Health Source MSO Inc., a California corporation (“HSMSO”) entered into an operating agreement to govern

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MWN Community Hospital, LLC and the conduct of its business and to specify their relative rights and obligations. NMM, Pacific6, and HSMSO each own 33.3% of the membership shares based on each member’s initial capital contributions of $3,000 and working capital contributions of $30,000. NMM invested an additional $0.3 million for working capital purposes in August 2019. For the three and six months ended June 30, 2020, NMM recorded loss and income from its investment in MWN LLC of $43,000 and $12,000, respectively, in the accompanying consolidated statements of income and had an investment balance of $0.2 million as of June 30, 2020 and December 31, 2019.

Investments in privately held entities that do not report net asset value

MediPortal, LLC

In May 2018, APC purchased 270,000 membership interests of MediPortal LLC, a New York limited liability company, for $0.4 million or $1.50 per membership interest, which represented an approximately 2.8% ownership interest. In connection with the initial purchase, APC received a five-year warrant to purchase an additional 270,000 membership interests. Additionally, APC received a five-year option to purchase an additional 380,000 membership interests and a five-year warrant to purchase 480,000 membership interests, which MediPortal LLC will grant APC upon completion of its health portal. As of June 30, 2020, the health portal has not been completed. As APC does not have the ability to exercise significant influence, and lacks control, over the investee, this investment is accounted for using a measurement alternative which allows the investment to be measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

AchievaMed

On July 1, 2019, NMM and AchievaMed, Inc., a California corporation (“AchievaMed”), entered into an agreement in which NMM would purchase 50% of the aggregate shares of capital stock of AchievaMed over a period of time not to exceed five years. As a result of this transaction NMM invested $0.5 million for a 10% interest. The related investment balance of $0.5 million is included in “Investment in privately held entities” in the accompanying consolidated balance sheets as of June 30, 2020.

Bright Health, Inc.

In April 2020, UCAP completed the sale 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 an estimated fair value of approximately $36.2 million on the date of sale. The related investment balance of $36.2 million is included in “Investment in privately held entities” in the accompanying consolidated balance sheets as of June 30, 2020.

6. 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 June 30, 2020) and payable in monthly installments of interest only on the first day of each month until the maturity date of December 31, 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 December 31, 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 on the consolidated balance sheets in the amount of $6.4 million as of June 30, 2020.

On February 28, 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 June 30, 2020, the outstanding amount due was $0.9 million and included in the “Prepaid expenses and other current assets” in the accompanying consolidated balance sheets.

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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 estimates an expected credit loss based on the remittance schedule of the note.

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. On April 30, 2020, the outstanding balance was fully repaid as part of UCAP's disposition of its 48.9% ownership interest in UCI to Bright.

7. Accounts Payable and Accrued Expenses

The Company’s accounts payable and accrued expenses consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Accounts payable	$	10,425	$	6,914
Capitation payable	2,754		2,813
Subcontractor IPA payable	3,083		3,360
Professional fees	2,325		1,837
Due to related parties	80		225
Accrued compensation	3,060		3,238
Contract liabilities	3,061		8,892
Total accounts payable and accrued expenses	$	24,788	$	27,279

8. Medical Liabilities

The Company’s medical liabilities consisted of the following (in thousands):

	June 30, 2020		June 30, 2019
Medical liabilities, beginning of period	$	58,725	$	33,642
Components of medical care costs related to claims incurred:
Current period	165,571		93,833
Prior periods	233		2,688
Total medical care costs	165,804		96,521
Payments for medical care costs related to claims incurred:
Current period	(97,112)		(60,440)
Prior periods	(57,470)		(39,744)
Total paid	(154,582)		(100,184)
Acquired from Alpha Care	—		13,120
Adjustments	326		(156)
Medical liabilities, end of period	$	70,273	$	42,943

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9. Credit Facility, Bank Loan and Lines of Credit

Credit Facility

The Company’s credit facility consisted of the following (in thousands):

	June 30, 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	(5,295)
Long-term debt	$	230,455

Future commitments of the Company’s credit facility is to be as follows for the years ending December 31 (in thousands):

	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,125
2021	10,688
2022	14,250
2023	15,437
2024	197,750
Total	$	245,250

Credit Agreement

In September 2019, the Company entered into a secured credit agreement (the “Credit Agreement,” and the credit facility thereunder, the "Credit Facility") with Truist Bank (formerly known as SunTrust Bank), in its capacity as administrative agent for the lenders (in such capacity, the “Agent”), as a lender, an issuer of letters of credit and as swingline lender, and Preferred Bank, JPMorgan Chase Bank, N.A., MUFG Union Bank, N.A., Royal Bank of Canada, Fifth Third Bank and City National Bank, as lenders (the “Lenders”). In connection with the closing of the Credit Agreement, the Company, its subsidiary, NMM, and the Agent entered into a Guaranty and Security Agreement (the “Guaranty and Security Agreement”), pursuant to which, among other things, NMM guaranteed the obligations of the Company under the Credit Agreement.

The Credit Agreement provides for a five-year revolving credit facility to the Company of $100.0 million (“Revolver Loan”), which includes a letter of credit subfacility of up to $25.0 million. The Credit Agreement also provides for a term loan of $190.0 million, (“Term Loan A”). The unpaid principal amount of the term loan is payable in quarterly installments on the last day of each fiscal quarter commencing on December 31, 2019. The principal payment for each of the first eight fiscal quarters is $2.4 million, for the following eight fiscal quarters thereafter is $3.6 million and for the following three fiscal quarters thereafter is $4.8 million. The remaining principal payment on the term loan is due on September 11, 2024.

The proceeds of the term loan and up to $60.0 million of the revolving credit facility were used to (i) finance a portion of the AP-AMH Loan, (ii) refinance certain indebtedness of the Company and its subsidiaries and, indirectly, APC, (iii) pay transaction costs and expenses arising in connection with the Credit Agreement, the AP-AMH Loan and certain other related transactions and (iv) provide for working capital, capital expenditures and other general corporate purposes. The remainder of the revolving credit facility will be used to finance future acquisitions and investments and to provide for working capital needs, capital expenditures and other general corporate purposes.

The Company is required to pay an annual facility fee of 0.20% to 0.35% on the available commitments under the Credit Agreement, regardless of usage, with the applicable fee determined on a quarterly basis based on the Company’s leverage ratio. The Company is also required to pay customary fees as specified in a separate fee agreement between the Company and SunTrust Robinson Humphrey, Inc., the lead arranger of the Credit Agreement.

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Amounts borrowed under the Credit Agreement will bear interest at an annual rate equal to either, at the Company’s option, (a) the rate for Eurocurrency deposits for the corresponding deposits of U.S. dollars appearing on Reuters Screen LIBOR01 Page (“LIBOR”), adjusted for any reserve requirement in effect, plus a spread of between 2.00% and 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread between 1.00% and 2.00%, as determined on a quarterly basis based on the Company’s leverage ratio. As of June 30, 2020, the interest rate on Term Loan A and Revolver Loan was 3.57% and 3.24%, respectively. The base rate is defined in a manner such that it will not be less than LIBOR. The Company will pay fees for standby letters of credit at an annual rate of between 2.00% and 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, plus facing fees and standard fees payable to the issuing bank on the respective letter of credit. Loans outstanding under the Credit Agreement may be prepaid at any time without penalty, except for LIBOR breakage costs and expenses. If LIBOR ceases to be reported, the Credit Agreement requires the Company and the Agent to endeavor to establish a commercially reasonable alternative rate of interest and until they are able to do so, all borrowings must be at the base rate.

The Credit Agreement requires the Company and its subsidiaries to comply with various affirmative covenants, including, without limitation, furnishing updated financial and other information, preserving existence and entitlements, maintaining properties and insurance, complying with laws, maintaining books and records, requiring any new domestic subsidiary meeting a materiality threshold specified in the Credit Agreement to become a guarantor thereunder and paying obligations. The Credit Agreement requires the Company and its subsidiaries to comply with, and to use commercially reasonable efforts to the extent permitted by law to cause certain material associated practices of the Company, including APC, to comply with, restrictions on liens, indebtedness and investments (including restrictions on acquisitions by the Company), subject to specified exceptions. The Credit Agreement also contains various other negative covenants binding the Company and its subsidiaries, including, without limitation, restrictions on fundamental changes, dividends and distributions, sales and leasebacks, transactions with affiliates, burdensome agreements, use of proceeds, maintenance of business, amendments of organizational documents, accounting changes and prepayments and modifications of subordinated debt.

The Credit Agreement requires the Company to comply with two key financial ratios, each calculated on a consolidated basis. The Company must maintain a maximum consolidated leverage ratio of not greater than 3.75 to 1.00 as of the last day of each fiscal quarter. The maximum consolidated leverage ratio decreases by 0.25 each year, until it is reduced to 3.00 to 1.00 for each fiscal quarter ending after September 30, 2022. The Company must maintain a minimum consolidated interest coverage ratio of not less than 3.25 to 1.00 as of the last day of each fiscal quarter. As of June 30, 2020, the Company was in compliance with the covenants relating to its credit facility.

Pursuant to the Guaranty and Security Agreement, the Company and NMM have granted the Lenders a security interest in all of their assets, including, without limitation, all stock and other equity issued by their subsidiaries (including NMM) and all rights with respect to the AP-AMH Loan. The Guaranty and Security Agreement requires the Company and NMM to comply with various affirmative and negative covenants, including, without limitation, covenants relating to maintaining perfected security interests, providing information and documentation to the Agent, complying with contractual obligations relating to the collateral, restricting the sale and issuance of securities by their respective subsidiaries and providing the Agent access to the collateral.

The Credit Agreement contains events of default, including, without limitation, failure to make a payment when due, default on various covenants in the Credit Agreement, breach of representations or warranties, cross-default on other material indebtedness, bankruptcy or insolvency, occurrence of certain judgments and certain events under the Employee Retirement Income Security Act of 1974 aggregating more than $10.0 million, invalidity of the loan documents, any lien under the Guaranty and Security Agreement ceasing to be valid and perfected, any change in control, as defined in the Credit Agreement, an event of default under the AP-AMH Loan, failure by APC to pay dividends in cash for any period of two consecutive fiscal quarters, failure by AP-AMH to pay cash interest to the Company, or if any modification is made to the Certificate of Determination or the Special Purpose Shareholder Agreement that directly or indirectly restricts, conditions, impairs, reduces or otherwise limits the payment of the Series A Preferred dividend by APC to AP-AMH. In addition, it will constitute an event of default under the Credit Agreement if APC uses all or any portion of the consideration received by APC from AP-AMH on account of AP-AMH’s purchase of Series A Preferred Stock for any purpose other than certain specific approved uses described in the following sentence, unless not less than 50.01% of all holders of common stock of APC at such time approve such use; provided that APC may use up to $50.0 million in the aggregate of such consideration for any purpose without any requirement to obtain such approval of the holders of common stock of APC. The approved uses include (i) any permitted investment, (ii) any dividend or distribution to the holders of the common stock of APC, (iii) any repurchase of common stock of APC, (iv) paying taxes relating to or arising from certain assets and transactions, or (v) funding losses, deficits or working capital support on account of certain non-healthcare assets in an amount not to exceed $125.0 million. If any event of default occurs and is continuing under the Credit Agreement, the Lenders may terminate their commitments, and may require the Company and its guarantors to repay outstanding debt and/or to provide a cash deposit as additional security for outstanding letters of credit. In

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addition, the Agent, on behalf of the Lenders, may pursue remedies under the Guaranty and Security Agreement, including, without limitation, transferring pledged securities of the Company’s subsidiaries in the name of the Agent and exercising all rights with respect thereto (including the right to vote and to receive dividends), collect on pledged accounts, instruments and other receivables (including the AP-AMH Loan), and all other rights provided by law or under the loan documents and the AP-AMH Loan.

In the ordinary course of business, certain of the Lenders under the Credit Agreement and their affiliates have provided to the Company and its subsidiaries and the associated practices, and may in the future provide, (i) investment banking, commercial banking (including pursuant to certain existing business loan and credit agreements being terminated in connection with entering into the Credit Agreement), cash management, foreign exchange or other financial services, and (ii) services as a bond trustee and other trust and fiduciary services, for which they have received compensation and may receive compensation in the future.

Deferred Financing Costs

In September 2019, the Company recorded deferred financing costs of $6.5 million related to the issuance of the Credit Facility. This amount was recorded as a direct reduction of the carrying amount of the related debt liability. The deferred financing costs will be amortized over the life of the Credit Facility using the effective interest rate method.

Effective Interest Rate

The Company’s average effective interest rate on its total debt during the six months ended June 30, 2020 and 2019, was 3.93% and 4.71%, respectively. Interest expense in the consolidated statements of income included amortization of deferred debt issuance costs for the three and six months ended June 30, 2020 and 2019, of $0.3 million and $0, respectively, and $0.7 million and $0, respectively.

Lines of Credit – Related Party

NMM Business Loan

On June 14, 2018, NMM amended its promissory note agreement with Preferred Bank (“NMM Business Loan Agreement”), which provides for loan availability of up to $20.0 million with a maturity date of June 22, 2020. One of the Company’s board members is the chairman and CEO of Preferred Bank. The NMM Business Loan Agreement was subsequently amended on September 1, 2018, to temporarily increase the loan availability from $20.0 million to $27.0 million for the period from September 1, 2018 through January 31, 2019, further extended to October 31, 2019, to facilitate the issuance of an additional standby letter of credit for the benefit of CMS. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 5.625% as of December 31, 2018. The loan was guaranteed by Apollo Medical Holdings, Inc. and is collateralized by substantially all of the assets of NMM. The amounts outstanding as of June 30, 2019, of $5.0 million was fully repaid on September 11, 2019.

On September 5, 2018, NMM entered into a non-revolving line of credit agreement with Preferred Bank, which provides for loan availability of up to $20.0 million with a maturity date of September 5, 2019. This credit facility was subsequently amended on April 17, 2019, and July 29, 2019, to reduce the loan availability from $20.0 million to $16.0 million and from $16.0 million to $2.2 million, respectively. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 3.375% as of June 30, 2020, and 4.875% as of December 31, 2019. The line of credit is guaranteed by Apollo Medical Holdings, Inc. and is collateralized by substantially all assets of NMM. NMM obtained this line of credit to finance potential acquisitions. Each drawdown from the line of credit is converted into a five-year term loan with monthly principal payments, plus interest based on a five-year amortization schedule.

On September 11, 2019, the NMM Business Loan Agreement, dated as of June 14, 2018, between NMM and Preferred Bank, as amended, and the Line of Credit Agreement, dated as of September 5, 2018, between NMM and Preferred Bank, as amended, were terminated in connection with the closing of the credit facility. Certain letters of credit issued by Preferred Bank under the Line of Credit Agreement were terminated and reissued under the Credit Agreement. As of June 30, 2020, outstanding letters of credit totaled $14.8 million and the Company has $10.2 million available under the revolving credit facility for letters of credit.

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APC Business Loan

On June 14, 2018, APC amended its promissory note agreement with Preferred Bank, which provides for loan availability of up to $10.0 million with a maturity date of June 22, 2020. This credit facility was subsequently amended on April 17, 2019, and June 11, 2019, to increase the loan availability from $10.0 million to $40.0 million and extend the maturity date through December 31, 2020. On August 1, 2019, and September 10, 2019, this credit facility was further amended to increase loan availability from $40.0 million to $43.8 million, and decrease loan availability from $43.8 million to $4.1 million, respectively. This decrease further limited the purpose of the indebtedness under APC Business Loan Agreement to the issuance of standby letters of credit, and added as a permitted lien the security interest in all of its assets granted by APC in favor of NMM under a Security Agreement dated on or about September 11, 2019, securing APC’s obligations to NMM under, and as required pursuant to, the APC management services agreement dated as of July 1, 1999, as amended. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 3.375% and 4.875% as of June 30, 2020, and December 31, 2019, respectively.

As of June 30, 2020 and December 31, 2019, there was no availability under this line of credit.

Standby Letters of Credit

On October 2, 2018, APAACO established a second irrevocable standby letter of credit with Preferred Bank (through the NMM Business Loan Agreement) for $6.6 million for the benefit of CMS. The letter of credit expires on December 31, 2020, and is automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution to terminate prior to 90 days from any expiration date. APAACO may continue to draw from the letter of credit for one year following the bank’s notification of non-renewal. This standby letter of credit was subsequently amended on August 14, 2019, to increase amount from $6.6 million to $14.8 million and extended expiration date on December 31, 2020, with all other terms and conditions remain unchanged. In connection with the closing of the Credit Facility, this letter of credit was terminated and reissued under the Credit Agreement.

APC established irrevocable standby letters of credit with Preferred Bank under the APC Business Loan Agreement 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.

Alpha Care established irrevocable standby letters of credit with Preferred Bank under the APC Business Loan Agreement 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.

10. 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 June 30, 2020 and December 31, 2019.

Stockholders’ Equity

As of June 30, 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.

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Options

The Company’s outstanding stock options consisted of the following:

	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	(120,000)	2.58		—	1,800
Options forfeited	(12,228)	17.57		—	—
Options outstanding at June 30, 2020	486,860	$	10.86	3.70	$	2,900
Options exercisable at June 30, 2020	380,894	$	7.11	2.74	$	3,000

During the six months ended June 30, 2020 and 2019, stock options were exercised for 120,000 and 111,000 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $0.3 million and $0.5 million, respectively. The exercise price ranged from $2.10 to $5.00 per share for the exercises during the six months ended June 30, 2020, and ranged from $1.50 to $5.79 per share for the exercises during the six months ended June 30, 2019.

During the six months ended June 30, 2020 and 2019, no stock options were exercised pursuant to the cashless exercise provision.

During the six months ended June 30, 2020, the Company granted 11,742 stock options with a vesting period of five-years 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:

June 30, 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	—		%

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 six months ended June 30, 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 and six months ended June 30, 2020, the Company recorded approximately $0.9 million and $1.6 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 June 30, 2020, was $3.8 million.

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Warrants

The Company’s outstanding warrants consisted of the following:

	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	(273,900)	9.32		—	2,000
Warrants expired/forfeited	—	—		—	—
Warrants outstanding at June 30, 2020	2,880,690	$	10.02	1.61	$	18,700

Exercise Price Per Share		Warrants Outstanding	Weighted Average Remaining Contractual Life	Warrants Exercisable	Weighted Average Exercise Price Per Share
$	9.00	754,870	0.29	754,870	$	9.00
10.00		1,313,345	1.85	1,313,345	10.00
11.00		812,475	2.44	812,475	11.00
$ $ 9.00 –11.00		2,880,690	1.61	2,880,690	$	10.02

During the six months ended June 30, 2020 and 2019, common stock warrants were exercised for 273,900 and 41,624 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $2.6 million and $0.4 million, respectively. The exercise price ranged from $9.00 to $11.00 per share for the exercises during the six months ended June 30, 2020 and 2019, respectively.

Treasury Stock

APC owned 17,307,214 and 17,290,317 shares of ApolloMed’s common stock as of June 30, 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 directors, from which Dr. Kenneth Sim and Dr. Thomas Lam have been excluded. As of June 30, 2020, the brokerage account only held shares of ApolloMed totaling $7.6 million, and as such the ApolloMed shares in the brokerage account have been recorded as treasury shares.

Dividends

During the six months ended June 30, 2020 and 2019, APC paid dividends of $29.6 million and $10.0 million, respectively.

During the six months ended June 30, 2020 and 2019, CDSC paid dividends of $0.6 million and $1.2 million, respectively.

11. 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

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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 June 30, 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 (see Note 9).

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, ApolloMed and AMM 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 ApolloMed and AMM 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

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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.

12. 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. On April 30, 2020, the outstanding balance was fully repaid as part of UCAP's disposition of its 48.9% ownership interest in UCI to Bright (see Note 6).

During the three and six months ended June 30, 2020 and 2019, NMM earned approximately $4.2 million and $5.2 million, respectively, and $8.4 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 and six months ended June 30, 2020 and 2019, APC paid approximately $0.4 million and $0.6 million, respectively, and $1.0 million and $1.4 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 and six months ended June 30, 2020 and 2019, APC paid approximately $0.9 million and $1.8 million, respectively, and $2.6 million and $3.8 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 and six months ended June 30, 2020 and 2019, APC paid approximately $0.1 million, respectively, and $0.1 million, 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 June 30, 2020 and 2019, APC paid an aggregate of approximately $9.0 million and $7.1 million, respectively, which include approximately $3.0 million and $1.9 million, respectively, to shareholders who are also officers of APC. During the six months ended June 30, 2020 and 2019, APC paid an aggregate of approximately of $16.3 million and $16.4 million, respectively, to shareholders of APC for provider services, which include approximately $4.8 million and $5.1 million, respectively, to shareholders who are also officers of APC.

During the three and six months ended June 30, 2020 and 2019, NMM paid approximately $0.3 million, respectively and $0.5 million, respectively, to Medical Property Partners (“MPP”) for an office lease. MPP shares common ownership with certain board members of NMM.

During the three and six months ended June 30, 2020, NMM paid approximately $0.4 million and $0.7 million, respectively, to One MSO, Inc. ("One MSO") for an office lease. One MSO is indirectly 50% owned by Drs. Sim and Lam. As of June 30, 2020, the Company had $10.6 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 and six months ended June 30, 2020 and 2019, the Company paid approximately $0.1 million, respectively, and $0.2 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 and six months ended June 30, 2020 and 2019, SCHC paid approximately $0.1 million, respectively, and $0.2 million, respectively, to Numen, LLC (“Numen”) for an office lease. Numen is owned by a shareholder of APC. As of June 30, 2020, the Company had $1.4 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.

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):

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	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
AHMC – Risk pool, capitation, claims payment, net	$	6,057	$	16,350	$	18,056	$	27,950
HSMSO – Management fees, net	(189)		(265)		(321)		(915)
Aurion – Management fees	(53)		(100)		(128)		(200)
Net total	$	5,815	$	15,985	$	17,607	$	26,835

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 and six months ended June 30, 2020 and 2019, the Company has recognized risk pool revenue under this agreement of $10.2 million and $10.2 million, respectively, and $21.0 million and $25.0 million, respectively, for which $53.7 million and $40.4 million remain outstanding as of June 30, 2020 and December 31, 2019, respectively.

During the three and six months ended June 30, 2020 and 2019, NMM paid approximately $0 and $0.1 million, respectively, and $27,000 and $0.1 million, respectively, to ApolloMed board member, Matthew Mazdyasni, 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.

13. Income Taxes

The Company uses the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates.

On an interim basis, the Company estimates what its anticipated annual effective tax rate will be and records a quarterly income tax provision (benefit) in accordance with the estimated annual rate, plus the tax effect of certain discrete items that arise during the quarter. As the fiscal year progresses, the Company refines its estimates based on actual events and financial results during the quarter. This process can result in significant changes to the Company’s estimated effective tax rate. When this occurs, the income tax provision (benefit) is adjusted during the quarter in which the estimates are refined so that the year-to-date provision reflects the estimated annual effective tax rate. These changes, along with adjustments to the Company’s deferred taxes and related valuation allowance, may create fluctuations in the overall effective tax rate from quarter to quarter.

As of June 30, 2020, due to the overall cumulative losses incurred in recent years, the Company maintained a full valuation allowance against its deferred tax assets related to loss entities the Company cannot consolidate under the federal consolidation rules, as realization of these assets is uncertain.

The Company’s effective tax rate for the six months ended June 30, 2020, differed from the U.S. federal statutory rate primarily due to state income taxes, income from flow through entities, nondeductible permanent items, and change in valuation allowance.

As of June 30, 2020, the Company does not have any unrecognized tax benefits related to various federal and state income tax matters. The Company will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company is subject to U.S. federal income tax as well as income tax in California. The Company and its subsidiaries’ state and Federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2015 through December 31, 2018, and for the years ended December 31, 2016 through December 31, 2018, respectively. The Company does not anticipate material unrecognized tax benefits within the next 12 months.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes various income and payroll tax provisions that we are in the process of analyzing to determine the tax impacts.

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However, we do not expect the benefits of the CARES Act to impact the Company’s annual estimated tax rate for the period June 30, 2020.

14. 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 ApolloMed 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 June 30, 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:

Three Months Ended June 30,	2020		2019
Earnings per share – basic	$	0.20	$	0.10
Earnings per share – diluted	$	0.19	$	0.09
Weighted average shares of common stock outstanding – basic	36,071,604		34,540,059
Weighted average shares of common stock outstanding – diluted	37,285,585		37,962,555

Six Months Ended June 30,	2020		2019
Earnings per share – basic	$	0.31	$	0.11
Earnings per share – diluted	$	0.30	$	0.10
Weighted average shares of common stock outstanding – basic	36,040,936		34,518,461
Weighted average shares of common stock outstanding – diluted	37,296,913		37,896,837

Below is a summary of the shares included in the diluted earnings per share computations:

Three Months Ended June 30,	2020	2019
Weighted average shares of common stock outstanding – basic	36,071,604	34,540,059
10% shares held back pursuant to indemnification clause	—	1,519,805
Stock options	169,402	363,593
Warrants	1,041,784	1,539,098
Restricted stock awards	2,795	—
Weighted average shares of common stock outstanding – diluted	37,285,585	37,962,555

Six Months Ended June 30,	2020	2019
Weighted average shares of common stock outstanding – basic	36,040,936	34,518,461
10% shares held back pursuant to indemnification clause	—	1,519,805
Stock options	173,299	368,273
Warrants	1,076,802	1,490,298
Restricted stock awards	5,876	—
Weighted average shares of common stock outstanding – diluted	37,296,913	37,896,837

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15. 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 and its VIEs, including Alpha Care and Accountable Health Care, and to which 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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	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	113,790	$	87,110
Restricted cash	—		75
Investment in marketable securities	117,611		123,948
Receivables, net	15,687		9,300
Receivables, net – related party	55,889		42,976
Other receivables	734		744
Prepaid expenses and other current assets	7,752		7,403
Loan receivable	6,425		6,425
Loan receivable – related parties	—		16,500
Total current assets	317,888		294,481
Noncurrent assets
Land, property and equipment, net	9,085		9,547
Intangible assets, net	75,177		81,439
Goodwill	109,460		108,913
Investment in affiliates	285,569		318,315
Investment in privately held entities	36,584		1,615
Investments in other entities – equity method	26,864		28,427
Restricted cash	746		746
Operating lease right-of-use assets	7,017		4,751
Other assets	20,750		1,057
Total noncurrent assets	571,252		554,810
Total assets	$	889,140	$	849,291
Current liabilities
Accounts payable and accrued expenses	$	11,822	$	11,187
Fiduciary accounts payable	1,853		2,027
Medical liabilities	47,304		49,019
Income taxes payable	42,211		4,530
Amount due to affiliate	21,533		28,058
Dividends payable	431		271
Finance lease liabilities	102		102
Operating lease liabilities	1,319		1,088
Total current liabilities	126,575		96,282
Noncurrent liabilities
Deferred tax liability	9,490		14,059
Finance lease liabilities, net of current portion	355		416
Operating lease liabilities, net of current portion	5,833		3,742
Total noncurrent liabilities	15,678		18,217

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Total liabilities $ 142,253  $ 114,499 

The assets of the Company’s other consolidated VIEs were not considered significant.

16. 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 June 30, 2020 and December 31, 2019, assets recorded under finance leases were $0.4 million and $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):

	Three Months Ended June 30,
	2020		2019
Operating lease cost	$	1,446	$	1,240
Finance lease cost
Amortization of lease expense	$	35	$	25
Interest on lease liabilities	4		4
Sublease income	$	(226)	$	(106)
Total finance lease cost, net	$	1,259	$	1,163

	Six Months Ended June 30,
	2020		2019
Operating lease cost	$	3,388	$	2,343
Finance lease cost
Amortization of lease expense	$	61	$	50
Interest on lease liabilities	7		9
Sublease income	$	(360)	$	(206)
Total finance lease cost, net	$	3,096	$	2,196

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Other information related to leases was as follows (in thousands):

	Three Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,333		$	1,239
Operating cash flows from finance leases	4			4
Financing cash flows from finance leases	35			25
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	2,907			6,441
	Six Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,880		$	2,273
Operating cash flows from finance leases	7			9
Financing cash flows from finance leases	61			50
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	7,652			15,417
	Six Months Ended June 30,
	2020			2019
Weighted Average Remaining Lease Term
Operating leases	7.06 years			6.87 years
Finance leases	4.17 years			5.00 years
Weighted Average Discount Rate
Operating leases	6.10		%	6.18		%
Finance leases	3.00		%	3.00		%

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Future minimum lease payments under non-cancellable leases as of June 30, 2020 is as follows (in thousands):

June 30, 2020	Operating Leases		Finance Leases
2020 (excluding the six months ended June 30, 2020)	$	2,337	$	59
2021	4,297		119
2022	3,529		119
2023	3,303		119
2024	2,940		79
Thereafter	9,459		—
Total future minimum lease payments	25,865		495
Less: imputed interest	5,097		38
Total lease liabilities	20,768		457
Less: current portion	3,350		102
Long-term lease liabilities	$	17,418	$	355

As of June 30, 2020, the Company does not have additional operating and finance leases that have not yet commenced.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. In addition, reference is made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020.

Overview

We, together with our affiliated physician groups and consolidated entities, are a physician-centric integrated population health management company providing coordinated, outcomes-based medical care in a cost-effective manner and serving patients in California, the majority of whom are covered by private or public insurance provided through Medicare, Medicaid and HMOs, with a small portion of our revenues coming from non-insured patients. We provide 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. Our physician network consists of primary care physicians, specialist physicians and hospitalists. We operate primarily through ApolloMed and the following subsidiaries: NMM, AMM, APAACO and Apollo Care Connect, and their consolidated entities.

Through our NGACO model and a network of IPAs with more than 7,000 contracted physicians, which physician groups have agreements with various health plans, hospitals and other HMOs, we are, as of June 30, 2020, currently responsible for coordinating the care for approximately 1.1 million patients in California as of June 30, 2020. These covered patients are comprised of managed care members whose health coverage is provided through their employers or who have acquired health coverage directly from a health plan or as a result of their eligibility for Medicaid or Medicare benefits. Our managed patients benefit from an integrated approach that places physicians at the center of patient care and utilizes sophisticated risk management techniques and clinical protocols to provide high-quality, cost effective care. To implement a patient-centered, physician-centric experience, we also have other integrated and synergistic operations, including (i) MSOs that provide management and other services to our affiliated IPAs, (ii) outpatient clinics and (iii) hospitalists that coordinate the care of patients in hospitals.

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Key Financial Measures and Indicators

Operating Revenues

Our revenue primarily consists of capitation revenue, risk pool settlements and incentives, NGACO AIPBP revenue, management fee income and FFS revenue. The form of billing and related risk of collection for such services may vary by type of revenue and the customer.

Operating Expenses

Our largest expense is the patient care cost paid to contracted physicians, and the cost of providing management and administrative support services to our affiliated physician groups. These services include providing utilization and case management, physician practice billing, revenue cycle services, physician practice management, administrative oversight, coding services, and other consulting services.

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Results of Operations

Apollo Medical Holdings, Inc.

Consolidated Statements of Income

(In thousands)

(Unaudited)

	For the Three Months Ended
	June 30, 2020		June 30, 2019		$ Change		% Change
Revenue
Capitation, net	$	140,949	$	103,224	$	37,725	37	%
Risk pool settlements and incentives	12,003		11,191		812		7	%
Management fee income	8,690		10,353		(1,663)		(16)	%
Fee-for-services, net	2,270		3,878		(1,608)		(41)	%
Other income	1,257		1,404		(147)		(10)	%
Total revenue	165,169		130,050		35,119		27	%
Operating expenses
Cost of services	136,079		101,363		34,716		34	%
General and administrative expenses	11,556		11,818		(262)		(2)	%
Depreciation and amortization	4,628		4,455		173		4	%
Provision for doubtful accounts	—		(2,314)		2,314		(100)	%
Total expenses	152,263		115,322		36,941		32	%
Income from operations	12,906		14,728		(1,822)		(12)	%
Other income
Income (loss) from equity method investments	834		(42)		876		*
Gain on sale of equity method investments	99,647		—		99,647		100	%
Interest expense	(2,673)		(311)		(2,362)		*
Interest income	863		474		389		82	%
Other income	1,282		24		1,258		*
Total other income, net	99,953		145		99,808		*
Income before provision for income taxes	112,859		14,873		97,986		*
Provision for income taxes	31,858		4,209		27,649		*
Net income	$	81,001	$	10,664	$	70,337	*
Net income attributable to noncontrolling interests	73,957		7,119		66,838		*
Net income attributable to ApolloMed	$	7,044	$	3,545	$	3,499	99	%

* Percentage change of over 500%

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	For the Six Months Ended
	June 30, 2020		June 30, 2019		$ Change		% Change
Revenue
Capitation, net	$	281,370	$	174,740	$	106,630	61	%
Risk pool settlements and incentives	23,239		21,285		1,954		9	%
Management fee income	17,505		19,349		(1,844)		(10)	%
Fee-for-services, net	5,697		7,959		(2,262)		(28)	%
Other income	2,463		2,473		(10)		—	%
Total revenue	330,274		225,806		104,468		46	%
Operating expenses
Cost of services	280,283		184,795		95,488		52	%
General and administrative expenses	23,390		22,081		1,309		6	%
Depreciation and amortization	9,330		8,872		458		5	%
Provision for doubtful accounts	—		(1,363)		1,363		(100)	%
Total expenses	313,003		214,385		98,618		46	%
Income from operations	17,271		11,421		5,850		51	%
Other income (expense)
Income (loss) from equity method investments	2,888		(892)		3,780		*
Gain on sale of equity method investments	99,647		—		99,647		100	%
Interest expense	(5,541)		(522)		(5,019)		*
Interest income	1,792		797		995		125	%
Other income	1,384		211		1,173		*
Total other income (expense), net	100,170		(406)		100,576		*
Income before provision for income taxes	117,441		11,015		106,426		*
Provision for income taxes	33,453		2,801		30,652		*
Net income	$	83,988	$	8,214	$	75,774	*
Net income attributable to noncontrolling interests	72,892		4,529		68,363		*
Net income attributable to ApolloMed	$	11,096	$	3,685	$	7,411	201	%

* Percentage change of over 500%

Net Income Attributable to ApolloMed

Our net income attributable to ApolloMed for the three months ended June 30, 2020 was $7.0 million, as compared to net income attributable to ApolloMed of $3.5 million for the same period in 2019, an increase of $3.5 million.

Our net income attributable to ApolloMed for the six months ended June 30, 2020 was $11.1 million, as compared to net income attributable to ApolloMed of $3.7 million for the same period in 2019, an increase of $7.4 million.

The increase in net income attributable to ApolloMed for the three and six months ended June 30, 2020 was primarily driven by the completion of a series of transactions with APC as further described in Note 1 to our financial statements above, which resulted in preferred, cumulative dividends from APC being allocated to AP-AMH.

Physician Groups and Patients

As of June 30, 2020 and 2019, we managed a total of 13 and 11 groups of affiliated physicians, respectively, and the total number of patients for whom we managed the delivery of healthcare services was approximately 1.1 million and 1.0 million, respectively. The increase was attributable to a management services agreement we entered with an independent practice association, Community Family Care Medical Group IPA, Inc. ("CFC"), which contributed 0.1 million new members and increased membership at the other physician groups we manage.

Revenue

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Our revenue for the three months ended June 30, 2020, was $165.2 million, as compared to $130.1 million for the three months ended June 30, 2019, an increase of $35.1 million, or 27%. The increase in revenue was primarily attributable to the following:

(i) Capitation revenue increased by approximately $37.7 million primarily due to our acquisitions of Alpha Care on May 31, 2019 and Accountable Health Care on August 30, 2019, which contributed additional revenue of approximately $20.7 million and $11.8 million, respectively, in addition to organic capitation revenue growth at APC of $2.5 million, for the three months ended June 30, 2020. Further, APA ACO generated additional capitation revenue of approximately $2.7 million for the three months ended June 30, 2020 as compared to June 30, 2019 due to the delayed start of 2019 APA ACO performance year.

(ii) Risk pool revenue increased by $0.8 million due to the refinement of the assumptions used to estimate the amount of net surplus expected to be received from the affiliated hospitals’ risk pools. Our estimated risk pool receivable is calculated based on reports received from our hospital partners and on management’s estimate of the Company’s portion of any estimated risk pool surpluses for which payments have not been received. The actual risk pool surpluses are settled approximately 18 months later.

(iii) Management fee income decreased by $1.7 million mainly due to acquisition of Accountable Health Care, which reduced management fee income by $2.2 million and a decrease in LMA's management fee of $1.0 million. This decrease was offset by management fee income of $1.7 million for the three months ended June 30, 2020 generated from the management services agreement we entered into with CFC, which became effective on January 1, 2020.

(iv) Fee-for-service revenue decreased by $1.6 million due to reduced demand at our surgery centers and heart center as a result of the COVID-19 outbreak.

(v) Other income decreased by $0.1 million as a result of decreased revenue related to maternity supplemental payments.

Our revenue for the six months ended June 30, 2020 was $330.3 million, as compared to $225.8 million for the six months ended June 30, 2019, an increase of $104.5 million, or 46%. The increase in revenue was primarily attributable to the following:

(i) Capitation revenue increased by approximately $106.6 million primarily due to our acquisitions of Alpha Care on May 31, 2019 and Accountable Health Care on August 30, 2019, which contributed additional revenue of approximately $53.2 million and $24.3 million, respectively, in addition to organic capitation revenue growth at APC of $4.5 million, for the six months ended June 30, 2020. Further, APA ACO generated additional capitation revenue of approximately $24.6 million for the six months ended June 30, 2020 as compared June 30, 2019 due to the delayed start of the 2019 APA ACO performance year.

(ii) Risk pool revenue increased by $2.0 million due to the refinement of the assumptions used to estimate the amount of net surplus expected to be received from the affiliated hospitals’ risk pools. Our estimated risk pool receivable is calculated based on reports received from our hospital partners and on management’s estimate of the Company’s portion of any estimated risk pool surpluses for which payments have not been received. The actual risk pool surpluses are settled approximately 18 months later.

(iii) Management fee income decreased by $1.8 million mainly due to the acquisition of Accountable Health Care, which reduced management fee income by $4.2 million and a reduction in hospitalist stipend of $1.0 million. This decrease was offset by management fee income of $3.4 million for the six months ended June 30, 2020 generated from the management services agreement we entered into with CFC, which became effective on January 1, 2020.

(iv) Fee-for-service revenue decreased by $2.3 million due to reduced procedures performed at our surgery centers and heart center as a result of the COVID-19 outbreak.

Cost of Services

Expenses related to cost of services for the three months ended June 30, 2020, were $136.1 million, as compared to $101.4 million for the same period in 2019, an increase of $34.7 million, or 34%. The overall increase was due to a $32.8 million increase in medical claims, capitation and other health services expenses, primarily driven by the acquisitions of Alpha Care, Accountable Health Care and AMG and a $1.9 million increase in payroll costs to support the continued growth of the business.

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Expenses related to cost of services for the six months ended June 30, 2020, were $280.3 million, as compared to $184.8 million for the same period in 2019, an increase of $95.5 million, or 52%. The overall increase was due to a $99.3 million increase in medical claims, capitation and other health services expenses, primarily driven by the acquisition of Alpha Care, Accountable Health Care and AMG, in addition to increased costs at APA ACO for the six month period ended June 30, 2020 as compared to the same period in 2019 due to the delayed start of the 2019 APA ACO performance year and a $4.2 million increase in payroll costs to support the continued growth of the business. The increased costs were offset by a net decrease of $8.0 million in bonus payments made to providers for the six months ended June 30, 2020 as compared to the bonus payments made to providers during the same period in 2019.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2020, were $11.6 million, as compared to $11.8 million for the same period in 2019, a decrease of $0.2 million, or 2%. The decrease is primarily due to fewer supplies required as COVID-19 outbreak caused a reduction of procedures performed on site at the surgery centers and heart centers.

General and administrative expenses for the six months ended June 30, 2020 were $23.4 million, as compared to $22.1 million for the same period in 2019, an increase of $1.3 million, or 6%. The increase is primarily due to increased rent expense to support the continued growth in depth and breadth of our operations.

Depreciation and Amortization

Depreciation and amortization expenses for the three months ended June 30, 2020 were $4.6 million as compared to $4.5 million for the same period in 2019. This amount includes depreciation of property and equipment and the amortization of intangible assets.

Depreciation and amortization expenses for the six months ended June 30, 2020 were $9.3 million as compared to $8.9 million for the same period in 2019. This amount includes depreciation of property and equipment and the amortization of intangible assets.

Provision for Doubtful Accounts

For the three and six months ended June 30, 2019, we released reserves related to certain management fees in the amount of approximately $2.3 million and $1.4 million, respectively, as collectability of the outstanding amount was no longer in doubt. These reserves were related to various preacquisition obligations of Accountable Health Care and were no longer necessary as a result of our acquisition of Accountable Health Care.

Income (Loss) from Equity Method Investments

Income from equity method investments for the three months ended June 30, 2020, was $0.8 million, as compared to loss from equity method investments of $42,000 for the same period in 2019, an increase of $0.9 million. The increase was primarily due to equity earnings from UCI of $0.9 million.

Income from equity method investments for the six months ended June 30, 2020, was $2.9 million, as compared to loss from equity method investments of $0.9 million for the same period in 2019, an increase of $3.8 million. The increase was primarily due to equity earnings from our investments in UCI and PMIOC of $3.5 million and $0.1 million, respectively, offset by equity losses from our investments in LMA's IPA line of business, 531 W. College, and DMG of $0.4 million, $0.2 million, and $0.1 million, respectively, for the six months ended June 30, 2020, as compared with losses from our investments in LMA's IPA line of business and Accountable Health Care of $2.4 million and $4.3 million, respectively, in the six months ended June 30, 2019. In addition to the recognition of an impairment loss of $0.3 million related to our investment in PASC. These losses were offset with earnings from our investments in UCI, DMG, and PMIOC of $5.5 million, $0.4 million, and $0.2 million, respectively.

Gain on Sale of Equity Method Investments

Gain from equity method investments for the three and six months ended June 30, 2020, was $99.6 million primarily due to the sale of UCI which closed on April 30, 2020.

Interest Expense

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Interest expense for the three months ended June 30, 2020, was $2.7 million, as compared to $0.3 million for the same period in 2019, an increase of $2.4 million. The increase was primarily due to the new credit facility we secured in September 2019 to fund growth, primarily through acquisitions.

Interest expense for the six months ended June 30, 2020, was $5.5 million, as compared to $0.5 million for the same period in 2019, an increase of $5.0 million. The increase was primarily due to the new credit facility we secured in September 2019 to fund growth, primarily through acquisitions.

        Interest Income

Interest income for the three and six months ended June 30, 2020, was $0.9 million and $1.8 million, respectively, as compared to $0.5 million and $0.8 million, respectively, for the three and six months ended June 30, 2019. Interest income reflects interest earned on cash held in money market and certificate of deposit accounts and the interest from notes receivable.

Other Income

Other income for the three and six months ended June 30, 2020, was $1.3 million and $1.4 million as compared to other income of $24,000 and $0.2 million, respectively, for the same periods in 2019. The increase in other income was primarily due to government grants received during the three and six months ended June 30, 2020 of $0.9 million.

Provision for Income Tax

Income tax expense was $31.9 million for the three months ended June 30, 2020, as compared to a tax provision of $4.2 million for the same period in 2019. The increase in tax expense was due to increased income in the three months ended June 30, 2020, period as compared to the same period in 2019, as described above.

Income tax expense was $33.5 million for the six months ended June 30, 2020, as compared to a tax provision of $2.8 million for the same period in 2019. The increase in tax expense was due to increased income in the six months ended June 30, 2020 period as compared to the same period in 2019, as described above.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $74.0 million for the three months ended June 30, 2020, compared to $7.1 million for the same period in 2019, an increase of $66.9 million. The increase was primarily due to our sale of equity interests in UCI in April 2020, the gain from which constitutes an excluded asset of APC.

Net income attributable to noncontrolling interests was $72.9 million for the six months ended June 30, 2020, compared to $4.5 million for the same period in 2019, an increase of $68.4 million. The increase was primarily due to of sale of an excluded asset, UCI in April 2020 where the gain remains strictly with APC.

2020 Guidance

        Our stable, subscription-based revenue model allows us to maintain our previously disclosed 2020 guidance for total revenue and adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”).

        Our guidance for the year ending December 31, 2020, is as follows:

•Maintain total revenue of between $665.0 million and $675.0 million,

•Maintain net income of between $100.0 million and $110.0 million,

•Maintain EBITDA of between $155.0 million and $167.0 million, and

•Maintain adjusted EBITDA of between $75.0 million and $90.0 million.

        Refer to the "Guidance Reconciliation of Net Income to EBITDA and adjusted EBITDA" and "Use of Non-GAAP Financial Measures" for additional information. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Refer to our discussion of "Forward-Looking Statements" within this Quarterly Report on Form 10-Q.

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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

⁽¹⁾ Net income and EBITDA includes the gain on sale of UCAP's 48.9% investment in UCI to Bright, which closed on April 30, 2020. UCAP is a 100% owned subsidiary of APC and its 48.9% investment in UCI is an excluded asset and as such remained solely for the benefit of APC and its shareholders. As such, any proceeds or gain on sale has not affected the net income and adjusted EBITDA attributable to ApolloMed.

⁽²⁾ Income from equity method investments is mainly attributed to the sale of UCAP's 48.9% investment in UCI to Bright, which closed on April 30, 2020. UCAP is a 100% owned subsidiary of APC and its 48.9% investment in UCI is an excluded asset and as such remained solely for the benefit of APC and its shareholders. As such, any proceeds or gain on sale has not affected the net income and adjusted EBITDA attributable to ApolloMed.

Use of Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q contains the non-GAAP financial measures EBITDA and adjusted EBITDA, of which the most directly comparable financial measure presented in accordance with GAAP is net (loss) income. These measures are not in accordance with, or an alternative to, U.S. generally accepted accounting principles, (“GAAP”), and may be different from other non-GAAP financial measures used by other companies. The Company uses adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization, excluding income from equity method investments and other income earned that is not related to the Company's normal operations. Adjusted EBITDA also excludes the effect on EBITDA of certain IPAs we recently acquired.

The Company believes the presentation of these non-GAAP financial measures provides investors with relevant and useful information as it allows investors to evaluate the operating performance of the business activities without having to account for differences recognized because of non-core and non-recurring financial information. When GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of ApolloMed's ongoing operating performance. In addition, these non-GAAP financial measures are among those indicators the Company uses as a basis for evaluating operational performance, allocating resources and planning and forecasting future periods. Non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for, GAAP financial measures. To the extent this release contains historical or future non-GAAP financial measures, the Company has provided corresponding GAAP financial measures for comparative purposes. The reconciliation between certain GAAP and non-GAAP measures is provided above.

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Liquidity and Capital Resources

Cash, cash equivalents and investment in marketable securities at June 30, 2020, totaled $270.1 million. Working capital totaled $228.0 million at June 30, 2020, as compared to $223.7 million at December 31, 2019, an increase of $4.3 million, or 1.9%.

We have historically financed our operations primarily through internally generated funds. We generate cash primarily from capitation contracts, risk pool settlements and incentives, fees for medical management services provided to our affiliated physician groups, as well as fee-for-service reimbursements. We generally invest cash in money market accounts, which are classified as cash and cash equivalents. We believe we have sufficient liquidity to fund our operations at least through the next 12 months.

Our cash, cash equivalents and restricted cash increased by $49.2 million from $104.0 million at December 31, 2019, to $153.2 million at June 30, 2020. Cash generated by operating activities during the six months ended June 30, 2020, was $12.6 million, as compared cash used of $22.0 million for the six months ended June 30, 2019. The cash provided by operations during the six months ended June 30, 2020, is a function of net income of $84.0 million, adjusted for the following non-cash operating items: depreciation and amortization of $9.3 million, share-based compensation of $1.9 million, which were offset by a change in deferred tax liability of $4.5 million, gain on sale of equity method investment of $99.3 million and earnings from equity method investments of approximately $2.9 million. Our cash provided by operating activities included a net decrease in operating assets and liabilities of $23.7 million.

Cash generated from investing activities during the six months ended June 30, 2020, was $67.2 million due primarily to the proceeds received related to the sale of UCI totaling $52.7 million and loan receivables of $16.5 million offset with cash outflow related to the purchase of marketable securities of $1.1 million, funding for an equity method investment of $0.5 million, and capital expenditures (mainly purchases of property and equipment) of $0.4 million. This is compared to cash used of $50.2 million for the six months ended June 30, 2019 due to payments for business acquisition of $41.5 million, advances on loans receivable of $6.4 million, funding for an equity method investment of $2.2 million, and capital expenditures of $0.4 million offset with dividends received of $0.3 million.

Cash used in financing activities during the six months ended June 30, 2020, was $30.5 million as compared to cash provided by financing activities of $21.6 million for the six months ended June 30, 2019. Cash used for the six months ended June 30, 2020 was due to the payments of dividends totaling $30.2 million, repayment on our term loan totaling $2.4 million and repurchase of shares of $0.8 million, offset with proceeds from exercise of stock options and warrants of $2.9 million. This is compared to cash generated for the six months period ended June 30, 2019 due to proceeds from borrowings on our line of credit of $39.6 million, proceeds from the exercise of stock options and warrants of $0.9 million and proceeds from common stock offering of $0.2 million offset with payments of dividends and repayments on our bank loan and lines of credit totaling $10.9 million and $8.0 million, respectively.

Credit Facilities

The Company’s credit facility consisted of the following (in thousands):

	June 30, 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	(5,295)
Long-term debt	$	230,455

The following table presents scheduled commitments of the Company’s credit facility is to be as follows for the years ending December 31 (in thousands):

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	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,125
2021	10,688
2022	14,250
2023	15,437
2024	197,750
Total	$	245,250

Credit Agreement

        In September 2019, the Company entered into a secured credit agreement (the “Credit Agreement,” and the credit facility thereunder, the "Credit Facility") with Truist Bank (formerly known as SunTrust Bank), in its capacity as administrative agent for the lenders (in such capacity, the “Agent”), as a lender, an issuer of letters of credit and as swingline lender, and Preferred Bank, JPMorgan Chase Bank, N.A., MUFG Union Bank, N.A., Royal Bank of Canada, Fifth Third Bank and City National Bank, as lenders (the “Lenders”). In connection with the closing of the Credit Agreement, the Company, its subsidiary, NMM, and the Agent entered into a Guaranty and Security Agreement (the “Guaranty and Security Agreement”), pursuant to which, among other things, NMM guaranteed the obligations of the Company under the Credit Agreement.

The Credit Agreement provides for a five-year revolving credit facility to the Company of $100.0 million (“Revolver Loan”), which includes a letter of credit subfacility of up to $25.0 million. The Credit Agreement also provides for a term loan of $190.0 million, (“Term Loan A”). The unpaid principal amount of the term loan is payable in quarterly installments on the last day of each fiscal quarter commencing on December 31, 2019. The principal payment for each of the first eight fiscal quarters is $2.4 million, for the following eight fiscal quarters thereafter is $3.6 million and for the following three fiscal quarters thereafter is $4.8 million. The remaining principal payment on the term loan is due on September 11, 2024.

The proceeds of the term loan and up to $60.0 million of the revolving credit facility were used to (i) finance a portion of the AP-AMH Loan, (ii) refinance certain indebtedness of the Company and its subsidiaries and, indirectly, APC, (iii) pay transaction costs and expenses arising in connection with the Credit Agreement, the AP-AMH Loan and certain other related transactions and (iv) provide for working capital, capital expenditures and other general corporate purposes. The remainder of the revolving credit facility will be used to finance future acquisitions and investments and to provide for working capital needs, capital expenditures and other general corporate purposes.

The Company is required to pay an annual facility fee of 0.20% to 0.35% on the available commitments under the Credit Agreement, regardless of usage, with the applicable fee determined on a quarterly basis based on the Company’s leverage ratio. The Company is also required to pay customary fees as specified in a separate fee agreement between the Company and SunTrust Robinson Humphrey, Inc., the lead arranger of the Credit Agreement.

Amounts borrowed under the Credit Agreement will bear interest at an annual rate equal to either, at the Company’s option, (a) the rate for Eurocurrency deposits for the corresponding deposits of U.S. dollars appearing on Reuters Screen LIBOR01 Page (“LIBOR”), adjusted for any reserve requirement in effect, plus a spread of between 2.00% and 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread between 1.00% and 2.00%, as determined on a quarterly basis based on the Company’s leverage ratio. As of June 30, 2020, the interest rate on Term Loan A and Revolver Loan was 3.57% and 3.24%, respectively. The base rate is defined in a manner such that it will not be less than LIBOR. The Company will pay fees for standby letters of credit at an annual rate of between 2.00% and 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, plus facing fees and standard fees payable to the issuing bank on the respective letter of credit. Loans outstanding under the Credit Agreement may be prepaid at any time without penalty, except for LIBOR breakage costs and expenses. If LIBOR ceases to be reported, the Credit Agreement requires the Company and the Agent to endeavor to establish a commercially reasonable alternative rate of interest and until they are able to do so, all borrowings must be at the base rate.

The Credit Agreement requires the Company and its subsidiaries to comply with various affirmative covenants, including, without limitation, furnishing updated financial and other information, preserving existence and entitlements, maintaining properties and insurance, complying with laws, maintaining books and records, requiring any new domestic subsidiary meeting a materiality threshold specified in the Credit Agreement to become a guarantor thereunder and paying obligations. The Credit Agreement requires the Company and its subsidiaries to comply with, and to use commercially reasonable efforts to the extent permitted by law to cause certain material associated practices of the Company, including APC, to comply with, restrictions on liens, indebtedness and investments (including restrictions on acquisitions by the Company), subject to specified exceptions.

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The Credit Agreement also contains various other negative covenants binding the Company and its subsidiaries, including, without limitation, restrictions on fundamental changes, dividends and distributions, sales and leasebacks, transactions with affiliates, burdensome agreements, use of proceeds, maintenance of business, amendments of organizational documents, accounting changes and prepayments and modifications of subordinated debt.

The Credit Agreement requires the Company to comply with two key financial ratios, each calculated on a consolidated basis. The Company must maintain a maximum consolidated leverage ratio of not greater than 3.75 to 1.00 as of the last day of each fiscal quarter. The maximum consolidated leverage ratio decreases by 0.25 each year, until it is reduced to 3.00 to 1.00 for each fiscal quarter ending after September 30, 2022. The Company must maintain a minimum consolidated interest coverage ratio of not less than 3.25 to 1.00 as of the last day of each fiscal quarter. As of June 30, 2020, the Company was in compliance with the covenants relating to its credit facility.

Pursuant to the Guaranty and Security Agreement, the Company and NMM have granted the Lenders a security interest in all of their assets, including, without limitation, all stock and other equity issued by their subsidiaries (including NMM) and all rights with respect to the AP-AMH Loan. The Guaranty and Security Agreement requires the Company and NMM to comply with various affirmative and negative covenants, including, without limitation, covenants relating to maintaining perfected security interests, providing information and documentation to the Agent, complying with contractual obligations relating to the collateral, restricting the sale and issuance of securities by their respective subsidiaries and providing the Agent access to the collateral.

The Credit Agreement contains events of default, including, without limitation, failure to make a payment when due, default on various covenants in the Credit Agreement, breach of representations or warranties, cross-default on other material indebtedness, bankruptcy or insolvency, occurrence of certain judgments and certain events under the Employee Retirement Income Security Act of 1974 aggregating more than $10.0 million, invalidity of the loan documents, any lien under the Guaranty and Security Agreement ceasing to be valid and perfected, any change in control, as defined in the Credit Agreement, an event of default under the AP-AMH Loan, failure by APC to pay dividends in cash for any period of two consecutive fiscal quarters, failure by AP-AMH to pay cash interest to the Company, or if any modification is made to the Certificate of Determination or the Special Purpose Shareholder Agreement that directly or indirectly restricts, conditions, impairs, reduces or otherwise limits the payment of the Series A Preferred dividend by APC to AP-AMH. In addition, it will constitute an event of default under the Credit Agreement if APC uses all or any portion of the consideration received by APC from AP-AMH on account of AP-AMH’s purchase of Series A Preferred Stock for any purpose other than certain specific approved uses described in the following sentence, unless not less than 50.01% of all holders of common stock of APC at such time approve such use; provided that APC may use up to $50.0 million in the aggregate of such consideration for any purpose without any requirement to obtain such approval of the holders of common stock of APC. The approved uses include (i) any permitted investment, (ii) any dividend or distribution to the holders of the common stock of APC, (iii) any repurchase of common stock of APC, (iv) paying taxes relating to or arising from certain assets and transactions, or (v) funding losses, deficits or working capital support on account of certain non-healthcare assets in an amount not to exceed $125.0 million. If any event of default occurs and is continuing under the Credit Agreement, the Lenders may terminate their commitments, and may require the Company and its guarantors to repay outstanding debt and/or to provide a cash deposit as additional security for outstanding letters of credit. In addition, the Agent, on behalf of the Lenders, may pursue remedies under the Guaranty and Security Agreement, including, without limitation, transferring pledged securities of the Company’s subsidiaries in the name of the Agent and exercising all rights with respect thereto (including the right to vote and to receive dividends), collect on pledged accounts, instruments and other receivables (including the AP-AMH Loan), and all other rights provided by law or under the loan documents and the AP-AMH Loan.

In the ordinary course of business, certain of the Lenders under the Credit Agreement and their affiliates have provided to the Company and its subsidiaries and the associated practices, and may in the future provide, (i) investment banking, commercial banking (including pursuant to certain existing business loan and credit agreements being terminated in connection with entering into the Credit Agreement), cash management, foreign exchange or other financial services, and (ii) services as a bond trustee and other trust and fiduciary services, for which they have received compensation and may receive compensation in the future.

Deferred Financing Costs

In September 2019, the Company recorded deferred financing costs of $6.5 million related to the issuance of the Credit Facility. This amount was recorded as a direct reduction of the carrying amount of the related debt liability. The deferred financing costs will be amortized over the life of the Credit Facility using the effective interest rate method.

Effective Interest Rate

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The Company’s average effective interest rate on its total debt during the six months ended June 30, 2020 and 2019, was 3.93% and 4.71%, respectively. Interest expense in the consolidated statements of income included amortization of deferred debt issuance costs for the three and six months ended June 30, 2020 and 2019, of $0.3 million and $0, respectively, and $0.7 million and $0, respectively.

Lines of Credit – Related Party

NMM Business Loan

On June 14, 2018, NMM amended its promissory note agreement with Preferred Bank (“NMM Business Loan Agreement”), which provides for loan availability of up to $20.0 million with a maturity date of June 22, 2020. One of the Company’s board members is the chairman and CEO of Preferred Bank. The NMM Business Loan Agreement was subsequently amended on September 1, 2018, to temporarily increase the loan availability from $20.0 million to $27.0 million for the period from September 1, 2018 through January 31, 2019, further extended to October 31, 2019, to facilitate the issuance of an additional standby letter of credit for the benefit of CMS. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 5.625% as of December 31, 2018. The loan was guaranteed by Apollo Medical Holdings, Inc. and is collateralized by substantially all of the assets of NMM. The amounts outstanding as of June 30, 2019, of $5.0 million was fully repaid on September 11, 2019.

On September 5, 2018, NMM entered into a non-revolving line of credit agreement with Preferred Bank, which provides for loan availability of up to $20.0 million with a maturity date of September 5, 2019. This credit facility was subsequently amended on April 17, 2019, and July 29, 2019, to reduce the loan availability from $20.0 million to $16.0 million and from $16.0 million to $2.2 million, respectively. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 3.375% as of June 30, 2020, and 4.875% as of December 31, 2019. The line of credit is guaranteed by Apollo Medical Holdings, Inc. and is collateralized by substantially all assets of NMM. NMM obtained this line of credit to finance potential acquisitions. Each drawdown from the line of credit is converted into a five-year term loan with monthly principal payments, plus interest based on a five-year amortization schedule.

On September 11, 2019, the NMM Business Loan Agreement, dated as of June 14, 2018, between NMM and Preferred Bank, as amended, and the Line of Credit Agreement, dated as of September 5, 2018, between NMM and Preferred Bank, as amended, were terminated in connection with the closing of the credit facility. Certain letters of credit issued by Preferred Bank under the Line of Credit Agreement were terminated and reissued under the Credit Agreement. As of June 30, 2020, outstanding letters of credit totaled $14.8 million and the Company has $10.2 million available under the revolving credit facility for letters of credit.

APC Business Loan

On June 14, 2018, APC amended its promissory note agreement with Preferred Bank, which provides for loan availability of up to $10.0 million with a maturity date of June 22, 2020. This credit facility was subsequently amended on April 17, 2019, and June 11, 2019, to increase the loan availability from $10.0 million to $40.0 million and extend the maturity date through December 31, 2020. On August 1, 2019, and September 10, 2019, this credit facility was further amended to increase loan availability from $40.0 million to $43.8 million, and decrease loan availability from $43.8 million to $4.1 million, respectively. This decrease further limited the purpose of the indebtedness under APC Business Loan Agreement to the issuance of standby letters of credit, and added as a permitted lien the security interest in all of its assets granted by APC in favor of NMM under a Security Agreement dated on or about September 11, 2019, securing APC’s obligations to NMM under, and as required pursuant to, the APC management services agreement dated as of July 1, 1999, as amended. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 3.375% and 4.875% as of June 30, 2020, and December 31, 2019, respectively.

As of June 30, 2020 and December 31, 2019, there was no availability under this line of credit.

Intercompany Loans

Each of AMH, MMG, BAHA, Apollo Care Connect, AKM Medical Group, Inc. ("AKM") and SCHC has entered into an Intercompany Loan Agreement with AMM under which AMM has agreed to provide a revolving loan commitment to each such affiliated entities in an amount set forth in each Intercompany Loan Agreement. Each Intercompany Loan Agreement provides that AMM’s obligation to make any advances automatically terminates concurrently with the termination of the management agreement with the applicable affiliated entity. In addition, each Intercompany Loan Agreement provides that (i) any material breach by the shareholder of record of the applicable Physician Shareholder Agreement or (ii) the termination of

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the management agreement with the applicable affiliated entity constitutes an event of default under the Intercompany Loan Agreement. All the intercompany loans have been eliminated in consolidation (in thousands).

					Six Months Ended June 30, 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	%	$	6,193	$	6,193	$	—	$	—
Apollo Care Connect	1,000		10	%	1,283		1,283		—		—
MMG	3,000		10	%	3,571		3,571		—		—
AKM	5,000		10	%	—		—		—		—
SCHC	5,000		10	%	4,940		4,940		—		—
BAHA	250		10	%	4,066		4,066		—		—
	$	24,250			$	20,053	$	20,053	$	—	$	—

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires our management to make judgments, assumptions and estimates that affect the amounts of revenue, expenses, income, assets and liabilities, reported in our consolidated financial statements and accompanying notes. Actual results and the timing of recognition of such amounts could differ from those judgments, assumptions and estimates. In addition, judgments, assumptions and estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies, therefore, is integral to understanding our financial statements. Critical accounting policies and estimates are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We summarize our most significant accounting policies in relation to the accompanying consolidated financial statements in Note 2 thereto. Please also refer to the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

New Accounting Pronouncements

See Note 2 to the accompanying consolidated financial statements for recently issued accounting pronouncements, including information on new accounting standards and the future adoption of such standards.

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Off-Balance Sheet Arrangements

As of June 30, 2020, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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Inflation

Inflation and changing prices have had de minimis effect on our continuing operations over our two most recent fiscal years.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Borrowings under our Credit Agreement exposed us to interest rate risk. As of June 30, 2020, we had $245.3 million in outstanding borrowings under our Credit Agreement. The amount borrowed under the Credit Agreement bears interest at an annual rate equal to either, at the Company’s option, (a) the rate for Eurocurrency deposits for the corresponding deposits of U.S. dollars appearing on LIBOR, adjusted for any reserve requirement in effect, plus a spread of 2.00% to 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread of 1.00% to 2.00%, as determined on a quarterly basis based on the Company’s leverage ratio. The base rate is defined in a manner such that it will not be less than LIBOR. The Company will pay fees for standby letters of credit at an annual rate equal to 2.00% to 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, plus facing fees and standard fees payable to the issuing bank on the respective letter of credit. A hypothetical 1% change in our interest rates would have increased or decreased our interest expense for the three months ended June 30, 2020, by $2.5 million.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, 2020, we carried out an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including Co-Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act, were effective as of June 30, 2020, to ensure that information required to be disclosed by us in this Quarterly Report on Form 10-Q or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under Exchange Act during our second fiscal quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In the ordinary course of our business, we from time to time become involved in pending and threatened legal actions and proceedings, most of which involve claims of medical malpractice related to medical services that are provided by our affiliated hospitalists. 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, which may not come to light until a substantial period of time has passed following contract implementation. We may also become subject to other lawsuits which could involve significant claims and/or significant defense costs, but as of the date of this Quarterly Report on Form 10-Q, except as disclosed, we are not a party to any lawsuit or proceeding, which in the opinion of management is expected to individually or in the aggregate have a material adverse effect on us or our 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.

ITEM 1A. RISK FACTORS

Our business, financial condition and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or the healthcare industry, as well as risks that affect businesses in general. In addition to the information and risk factors set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020. The risks disclosed in such Annual Report and in this Quarterly Report could materially adversely affect our business, financial condition, cash flows or results of operations and thus our stock price. We believe there have been no material changes in our risk factors from those disclosed in the Annual Report except as described below. However, additional risks and uncertainties not currently known or we currently deem to be immaterial may also materially adversely affect our business, financial condition or results of operations.

These risk factors may be important to understanding other statements in this Quarterly Report and should be read in conjunction with the consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. Because of such risk factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

The current outbreak of the novel coronavirus disease, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could adversely impact or cause disruption to our business, financial condition and results of operations.

An epidemic outbreak or other public health crisis nationally or in the markets where we operate could adversely affect our operations and financial results.  For example, the recent outbreak of COVID-19, the World Health Organization declared a pandemic on March 11, 2020, and which the U.S. declared a national emergency on March 13, 2020, has caused governments and the private sector globally to take a number of drastic precautionary measures to contain the spread of the coronavirus, including the restriction and suspension of in-person classes at schools, colleges and universities, the cancellation of public events and other nonessential mass gatherings and the implementation of work from home, stay at home and other quarantine directives.  The potential impact and duration of the COVID-19 pandemic has had, and continues to have, a significant adverse impact across regional and global economies and financial markets. The global impact of the outbreak has been rapidly evolving and as new cases of the virus have continued, particularly in the U.S., countries around the world and states around the U.S., have reacted by instituting quarantines and restrictions on travel.

Almost every state implemented shelter-in-place or stay-at-home directives between March and May 2020, including, among others, Los Angeles and San Bernardino counties, and the state of California, where we operate. The lockdown restrictions implemented included quarantines, restrictions on travel, shelter-in-place orders, school closures, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects that could continue. These quarantines generally came with exceptions for essential healthcare and public health operations, among other essential businesses. Beginning in early May 2020, the U.S. began to lift the lockdown restrictions and allow for the reopening of businesses. The gradual reopening of retail, manufacturing, and office facilities came with required or recommended safety protocols. There is no assurance that the reopening of businesses, even if those businesses adhere to recommended safety protocols, will enable us or our subsidiaries, VIEs, affiliated IPAs, contracted physician groups, service providers and suppliers to avoid adverse effects on our or their operations and businesses. Due to the increase in the number of COVID-19 cases after the reopening of many states beginning in early June 2020, there is no assurance that local and state governments will not reinstitute new lockdown directives.

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In order to protect our employees, we have implemented a number of precautionary measures, including a work from home policy, under which the vast majority of our employees currently operate. Such measures may have a substantial impact on employee attendance or productivity, or adversely affect our ability to recruit, attract or retain skilled personnel, which in turn may adversely affect our operations, including our ability to effectively provide management services to our affiliated IPAs and contracted physician groups in compliance with regulatory requirements.  An extended outbreak may also result in disruptions to critical infrastructures and our supply chains and the supply chains of our affiliated IPAs and contracted physician groups, including the supply of pharmaceuticals and medical supplies.  The duration and extent of the impact from the coronavirus outbreak depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions. If we are not able to respond to and manage the impact of such events effectively, our business could be harmed.

Although the Company’s operations have not been directly affected as of the date of this Quarterly Report on Form 10-Q, the Company is also monitoring potential impacts from weeks of widespread protests and civil unrest that began at the end of May 2020 related to efforts to institute law enforcement and other social and political reforms.

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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended June 30, 2020, the Company issued an aggregate of 214,033 shares of common stock and received approximately $1,976,152 from the exercise of certain warrants at exercise prices ranging between $9.00 and $10.00 per share. The foregoing issuances were exempt from the registration provisions of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, and/or Regulation D promulgated thereunder.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.  OTHER INFORMATION

None.

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ITEM 6.  EXHIBITS

The following exhibits are either incorporated by reference into or filed or furnished with this Quarterly Report on Form 10-Q, as indicated below.

Exhibit No.	Description
2.1†	Agreement and Plan of Merger, dated December 21, 2016, among Apollo Medical Holdings, Inc., Network Medical Management, Inc., Apollo Acquisition Corp. and Kenneth Sim, M.D. (the “Merger Agreement”) (incorporated herein by reference to Annex A to the joint proxy statement/prospectus filed pursuant to Rule 424(b)(3) on November 15, 2017 that is a part of a Registration Statement on Form S-4)
2.2	Amendment to the Merger Agreement, dated March 30, 2017, among Apollo Medical Holdings, Inc., Network Medical Management, Inc., Apollo Acquisition Corp. and Kenneth Sim, M.D. (incorporated herein by reference to Annex A to the joint proxy statement/prospectus filed pursuant to Rule 424(b)(3) on November 15, 2017 that is a part of a Registration Statement on Form S-4)
2.3	Amendment No. 2 to the Merger Agreement, dated October 17, 2017, among Apollo Medical Holdings, Inc., Network Medical Management, Inc., Apollo Acquisition Corp. and Kenneth Sim, M.D. (incorporated herein by reference to Annex A to the joint proxy statement/prospectus filed pursuant to Rule 424(b)(3) on November 15, 2017 that is a part of a Registration Statement on Form S-4)
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)
3.1	Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 21, 2015)
3.2	Certificate of Amendment of Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 27, 2015)
3.3	Certificate of Amendment of Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 13, 2017)
3.4	Certificate of Amendment of Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 21, 2018)
3.5	Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on November 16, 2015)
3.6	Amendment to Sections 3.1 and 3.2 of Article III of Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on December 13, 2017)
3.7	Amendment to Sections 3.1 and 3.2 of Article III of Bylaws (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 21, 2018)
10.1	Employment Agreement, dated June 8, 2020, between Network Medical Management, Inc. and Kenneth Sim, M.D.
10.2	Employment Agreement, dated June 8, 2020, between Network Medical Management, Inc. and Thomas Lam, M.D.
10.3	Employment Agreement, dated June 8, 2020, between Network Medical Management, Inc. and Eric Chin
10.4	Employment Agreement, dated June 8, 2020, between Network Medical Management, Inc. and Adrian Vazquez, M.D.
10.5	Employment Agreement, dated June 8, 2020, between Network Medical Management, Inc. and Albert Young, M.D.
10.6	Employment Agreement, dated June 8, 2020, between Network Medical Management, Inc. and Brandon Sim
31.1*	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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32**	Certification of Principal Executive Officers and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	APOLLO MEDICAL HOLDINGS, INC.
Dated: August 7, 2020	By:	/s/ Kenneth Sim
		Kenneth Sim, M.D. Executive Chairman & Co-Chief Executive Officer (Principal Executive Officer)
Dated: August 7, 2020	By:	/s/ Thomas Lam
		Thomas Lam, M.D., M.P.H. Co-Chief Executive Officer & President (Principal Executive Officer)
Dated: August 7, 2020	By:	/s/ Eric Chin
		Eric Chin Chief Financial Officer and Interim Co-Chief Operating Officer (Principal Financial Officer)

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EX-10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 8, 2020, by and between Network Medical Management, Inc., a California corporation (the “Employer”), and Kenneth Sim, M.D. (the “Employee” and together with the Employer referred to as the “Parties”) to become effective as of the date hereof (the “EffectiveDate”).

WHEREAS, the Employer desires to employ the Employee from and after the Effective Date on the terms and conditions set forth below, and the Employee is willing to serve the Employer on such terms and conditions.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Term. The term of this Agreement shall initially be for a one (1) year period commencing on the Effective Date. The term of this Agreement shall automatically renew for an additional year on each anniversary of the Effective Date unless either Party gives the other written notice of intent not to renew at least sixty (60) days prior to such date. Notwithstanding the foregoing, the initial term and any renewal year shall be subject to earlier termination as provided in Section 4 below. The initial term and any renewal years are referred to herein as the “Term”.

2. Positions and Duties. During the Term, the Employee shall serve as a senior executive officer of the Employer. The Employee shall perform for the Employer the duties customarily associated with being a senior executive officer that are consistent with your experience and skills and such other duties as may be assigned to the Employee from time to time by the Employer’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities. The Employee shall devote such working time, attention, knowledge, skills and efforts as may be required to fulfill the Employee’s duties hereunder, as reasonably determined by the Board. The Employee shall be permitted to perform services as required under the Hospitalist Participation Service Agreement, and provided, further that the Employee may participate as a member of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations so long as any such positions are disclosed to the Board and do not materially interfere with the Employee’s duties and responsibilities to the Employer. The Employee shall be based in Alhambra, California.

3. Compensation and Related Matters. The Employer shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term. Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee.

(a) Base Salary. The Employer shall pay the Employee for all services rendered a base salary of Nine Hundred Fifty Thousand Dollars ($950,000) per year (the “Base Salary”), payable in accordance with the Employer’s payroll procedures, subject to customary withholdings and employment taxes. The Base Salary shall be evaluated annually by the Board for increase only.

(b) Annual Bonus. The Employee will be eligible to receive an annual cash bonus (the “Annual Bonus”) for each fiscal year during the Term on such terms and conditions as the Board shall determine in its discretion consistent with the terms of the Employer’s business plan.

(c) Long Term Incentive Awards. The Employee shall be eligible to participate in any long term incentive plan that may be available to similarly positioned executives. The Board may determine to grant long-term incentive awards in cash or in equity awards settled in shares of the Employer’s stock, including but not limited to stock options, restricted stock and performance shares. In the event the Employee terminates service due to being a Good Leaver, any requirements under a long-term incentive award held by the Employee shall be deemed to have been satisfied by the Employer immediately prior to such termination. A “Good Leaver” means that, during the

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Term, either the Employee has resigned for Good Reason (as defined in Section 4(e) below), the Employer has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates employment on account of death or Disability (as defined in Section 4(b) below). For avoidance of doubt, being a Good Leaver entitles the Employee to be fully vested with respect to any stock options with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if he had remained continuously employed with the Employer.

(d) Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year which shall be accrued ratably during the calendar year, to be taken at such times and intervals as shall be agreed to by Employer and the Employee in their reasonable discretion. The Employee shall be entitled to accrue a maximum of twenty (20) business days of paid time off. When the maximum accrual is reached, no additional PTO time will accrue until Employee uses one or more accrued PTO days. Accrued and unused PTO shall be paid in cash at the end of a calendar year.

(e) Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Employer in accordance with the Employer’s expense reimbursement policy.

(f) Other Benefits. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Employer to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Irrespective of other benefits provided to employees, the Employee’s benefits package shall include: (i) the Employer’s payment of premiums for medical, dental and vision care coverage; (ii) the Employer’s payment of insurance premiums for short-term and long-term disability insurance providing for no less than sixty percent (60%) of Employee’s Base Salary to be payable to the Employee as long as the covered disability persists in a manner that substantially prevents employment in the same occupation as the position Employee last held with Employer but not beyond age sixty-five (65); and (iii) the Employer’s payment of insurance premiums for term life insurance providing for no less than two million dollars of coverage (subject to meeting applicable underwriting requirements).

(g) Tax Withholding. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement, to the extent it reasonably and in good faith believes it is required to make such deductions, withholdings and tax reports. Payments with respect to compensation and benefits referred to under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Employee for any adverse tax effect associated with any payments or benefits, or for any deduction or withholding from any payment or benefit.

4. Termination. The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:

(a) Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.

(b) Disability. The Employer may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation. This provision is not intended to reduce any rights the Employee may have pursuant to any law, including without limitation the California Family Rights Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the Americans with Disabilities Act.

(c) Termination by the Employer for Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Employer; (ii) the commission by the

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Employee of any felony; (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a material breach, according to the standard of the Employer, by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Employer; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Employer to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Employer or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Employer shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Employer’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Employer’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (x) expense reimbursement disputes in which the Employee acts in reasonable good faith; (y) occasional, customary and de minimis use of the Employer’s property for personal purposes; and (z) acting in good faith upon advice of Employer’s legal counsel.

(d) Termination without Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice. Any termination by the Employer of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d). Any suspension of the Employee’s employment with pay or benefits by the Board in good faith pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause or provide with Good Reason to terminate employment.

(e) Termination by the Employee. At any time during the Term, the Employee may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Employee’s responsibilities, authority or duties; (ii) the material breach of this Agreement by the Employer, including but not limited to a failure to pay Base Salary or Annual Bonus as provided for under this Agreement; or (iii) any relocation of the Employee’s principal place of business to a location more than 30 miles from the Employer’s current executive offices in Alhambra, California; provided, however, that this clause (iii) will not apply to the extent that any new office location is less than 30 miles from the Employee’s residence. “Good Reason Process” shall mean (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Employer in writing of the occurrence of the Good Reason condition within (60) days of the occurrence of such condition; (iii) the Employee cooperates in good faith with the Employer’s efforts, for a period of sixty (60) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within thirty (30) days after the end of the Cure Period. If the Employer cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Employer for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure

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period; (iii) if the Employee’s employment is terminated by the Employer under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; (iv) if the Employee’s employment is terminated by the Employee under Section 4(e) without Good Reason, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Employer; or (v) if the Employee’s employment is terminated by the Employee under Section 4(e) with Good Reason, the date on which Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Employer, the Employer may unilaterally accelerate the Date of Termination but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement. For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i) of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.

5. Compensation upon Termination.

(a) Accrued Benefits. If the Employee’s employment with the Employer is terminated for any reason during the Term, or if the Term is not renewed, the Employer shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “AccruedBenefits”) within the time prescribed by California law. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Employer, payment will be made to the Employee under the terms of the applicable plan, program or arrangement.

(b) Termination by the Employer without Cause or by the Employee with GoodReason. If the Employee’s employment is terminated by the Employer without Cause as provided in Section 4(d), or the Employee terminates his employment for Good Reason as provided in Section 4(e), or the Employee terminates employment at the end of the Term after the Employer provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then, (i) the Employer shall, through the Date of Termination, pay the Employee his or her Accrued Benefits, and (ii) if the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven-day revocation period:

(i) the Employer shall pay the Employee an amount equal to one-twelfth (1/12) of the Employee’s most recent Base Salary times the number of full years of service completed, not to exceed twelve (12) years of service (but determined prior to any action involving Base Salary that would constitute Good Reason) (the “Severance Amount”). Employer acknowledges that Employee has completed not less than twelve (12) full years of service (including Employee’s service for the Employer’s parent entity, subsidiaries and affiliates), such that the Severance Amount payable to Employee pursuant to the terms of this Agreement shall equal the maximum Severance Amount of one (1) year of the Employee’s most recent Base Salary. To the extent that such Severance Amount exceeds the 409A Separation Pay Limit (as defined below), such amount shall be paid in a single lump sum on the regular payroll date of the Employer, pertaining to then current salaried employees of the Employer, (“payroll date”) next following the first anniversary date of the Employee’s Date of Termination. The portion of the Severance Amount that does not exceed the 409A Separation Pay Limit shall be paid in substantially equal amounts on each payroll date over a one year period; and

(ii) the Employer shall pay the Employee an amount in cash equal to the Employer’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Employer’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:

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(A) No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);

(B) This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;

(C) Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:

(1) the Employee is no longer eligible for and continuing to receive the

COBRA coverage elected in subparagraph (A);

(2) the time period set forth in the first sentence of this paragraph (ii),

(3) the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and

(4) if the Employer in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.

(iii) Each individual payment of Severance Amount under Section

5(b)(i), and each payment under Section 5(b)(ii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).

(iv) Each individual payment of the Severance Amount under Section 5(b)(i), and each payment under Section 5(b)(ii), of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Employer allows in its sole discretion. The Employer may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC. Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Employer to constitute NQDC payable to a “specified employee” as defined under Section

409A, then the Employer shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Employer, or (y) the date of Employee’s death.

(v) for purposes of this Section 5, “Section 409A” means Section

409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

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(vi) for purposes of this Section 5, “409A Separation Pay Limit” means two times the lesser of (x) the Employee’s annual compensation during the calendar year preceding the year of the termination of employment; and (y) the adjusted compensation limit under Code Section 401(a)(17) in effect for the year of the termination.

6. Confidential Information, Nonsolicitation, and Cooperation.

(a) Definitions.

(i) As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

(ii) As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b) Confidential Information. As used in this Agreement, “ConfidentialInformation” means information belonging to the Employer or its Affiliates which is of value to the Employer or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Employer) and the disclosure of which could result in a competitive or other disadvantage to the Employer or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Employer or its Affiliates, including, without limitation, the management of the Employer or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Employer, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Employer or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Employer or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c) Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Employer and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Employer and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Employer, except as may be necessary within the scope of Employee’s duties with Employer and in the ordinary course of performing the Employee’s duties to the Employer or as otherwise provided in Section 6(d). Employee understands and agrees not to sell, license or otherwise exploit any products or services which embody or otherwise exploit in whole or in part any Confidential Information or materials. Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of

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Confidential Information obtained by Employee during or in connection with the course of Employee’s employment constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Employer or its Affiliates, either during employment, or at any time thereafter.

(d) Protected Rights. Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Employer, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.

(e) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Employer or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Employer and its Affiliates. The Employee shall return to the Employer all such materials and property as and when requested by the Employer. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Employer and its Affiliates regardless of by whom they were compiled.

(f) Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.

(g) Removal of Material. The Employee will not remove any Confidential Information from the Employer’s or its Affiliate’s premises except for use in the Employer’s business, and only consistent with the Employee’s duties with the Employer.

(h) Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Employer’s and its Affiliate’s business, and consistent with the Employee’s duties with the Employer. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

(i) Computer Security. The Employee agrees to comply with the Employer’s policies and procedures concerning computer security.

(j) E-Mail. The Employee acknowledges that the Employer retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.

(k) Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Employer or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Employer, or using any resources or materials of the Employer or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Employer (together “Proprietary Inventions”) will be the sole property of the Employer or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Employer the Employee’s entire right, title and interest in and to any and all Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Employer to obtain,

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maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.

NOTICE TO CALIFORNIA EMPLOYEES

Pursuant to California Labor Code §2870, an agreement requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer does not apply to an invention which qualifies fully under the provisions of California Labor Code § 2870, which provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of the State of California and is unenforceable.

(l) Nonsolicitation. Employee agrees and covenants that, at any time during Employee’s employment with the Employer and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Employer for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of the Employer’s employees or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Employer or its Affiliates, whether in an employment capacity or otherwise (this provision does not prohibit the Employee’s post- termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Employer or its Affiliates, as a result of which relations between the Employer or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Employer or its Affiliates.

(m) Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Employer and has attached to this Agreement. The Employee represents to the Employer that the Employee’s execution of this Agreement, the Employee’s employment with the Employer and the performance of the Employee’s proposed duties for the Employer will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Employer, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Employer any copies or other tangible embodiments of non- public information belonging to or obtained from any such previous employment or other party.

(n) Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of any claims or actions now in

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existence or that may be brought in the future against or on behalf of the Employer that relate to events or occurrences that transpired while the Employee was employed by the Employer. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Employer in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.

(o) Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Employer and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Employer and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Employer, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Employer a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Employer shall have the right to retain any amounts otherwise payable by the Employer to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Employer and its Affiliates from and against any damages incurred by the Employer or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of this Agreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

7. Successors. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and permitted assigns, including any corporation or entity with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that Employee’s obligations are personal and shall not be assigned by Employee. The Employee consents to be bound by the provisions of this Agreement for the benefit of the Employer or its Affiliates to whose employ the Employee may be transferred without the necessity that this Agreement be resigned at the time of such transfer. In the event of the Employee’s death after the Date of Termination but prior to the completion by the Employer of all payments due to the Employee under this Agreement, the Employer shall continue such payments to the Employee’s beneficiary designated in writing to the Employer prior to the Employee’s death (or to the Employee’s estate, if the Employee fails to make such designation).

8. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

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10. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Employee at the last address for which the Employee has provided written notice to the Employer, or to the Employer at its main office, to the attention of Human Resources.

11. Publicity. The Employee hereby grants to the Employer the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Employer for the duration of Employee’s employment with Employer.

12. Conflicting Obligations and Rights. The Employee agrees to inform the Employer of any apparent conflicts between the Employee’s work for the Employer and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Employer’s behalf. Otherwise, the Employer may conclude that no such conflict exists and the Employee agrees thereafter to make no such claim against the Employer. The Employer shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

13. Notification of New Employer. In the event that the Employee leaves the employ of the Employer, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section

6 of this Agreement. The Employee further hereby authorizes the Employer to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Employer.

15. Amendment. This Agreement may be amended or modified only by a written instrument signed by the

Employee and by a duly authorized representative of the Employer.

16. Governing Law. This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State.

17. Obligations of Successors. The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no such succession had taken place.

18. Limitation on Payments in Certain Events.

(a) Limitation on Payments. Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Employer shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be

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obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

(b) The independent registered public accounting firm engaged by the Employer for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 18. If the independent registered public accounting firm so engaged by the Employer is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Employer shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Employer shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee at such time as requested by the Employer or the Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Employer and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Parties.

19. Consent to Jurisdiction; Forum Selection. At all times the Employee and Employer: (a) irrevocably submit to the exclusive jurisdiction of the Los Angeles Superior Court and United States District Court for the Central District of California, whichever may have competent subject matter jurisdiction, in any action or proceeding arising out of or relating to this Agreement, and irrevocably agree that all claims in respect of any such action or proceeding may be heard and determined in such court; (b) to the extent permitted by law, irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at the address set forth in this Agreement (or otherwise on record with the Employer); (c) to the extent permitted by law, irrevocably confirm that service of process out of such courts in such manner shall be deemed due service upon such party for the purposes of such action or proceeding; (d) to the extent permitted by law, irrevocably waives (i) any objection the Employee or Employer may have to the laying of venue of any such action or proceeding in any of such courts, or (ii) any claim that the Employee or Employer may have that any such action or proceeding has been brought in an inconvenient forum; and (e) to the extent permitted by law, irrevocably agrees that a final nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section shall affect the right of any party hereto to serve legal process in any manner permitted by law.

20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer by its duly authorized officer, and by the Employee, as of the date first above written.

EMPLOYER:

NETWORK MEDICAL MANAGEMENT, INC.: By: /s/Thomas Lam, M.D.  

Printed Name: Thomas Lam, M.D.  

Its: Co-Chief Executive Officer  

EMPLOYEE:

Signed: /s/Kenneth Sim, M.D.  

Printed Name: Kenneth Sim, M.D.  

[Signature page to Employment Agreement]

EXHIBIT A

Release of Claims

I, , in consideration of and subject to the performance by Network Medical Management,

Inc., a California corporation (the “Company”) of its obligations under the Employment Agreement, dated as of _ _,

20 (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Releases.

(a) I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

(b) SECTION 1542 WAIVER. Employee agrees that all rights he may have under Section 1542 of the California Civil Code are hereby waived. Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.

5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.

6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.

7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s

401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.

8. I understand that I continue to be bound by Section 6 of the Agreement.

9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of the State of California.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT: (i) I HAVE READ IT CAREFULLY;

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(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;

(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;

(v) I HAVE HAD AT LEAST TWENTY ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;

(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE 21-DAY [OR 45 DAY] CONSIDERATION PERIOD;

(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATED AS OF , 20

[Name]

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EX-10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 8, 2020, by and between Network Medical Management, Inc., a California corporation (the “Employer”), and Thomas Lam, M.D. (the “Employee” and together with the Employer referred to as the “Parties”) to become effective as of the date hereof (the “EffectiveDate”).

WHEREAS, the Employer desires to employ the Employee from and after the Effective Date on the terms and conditions set forth below, and the Employee is willing to serve the Employer on such terms and conditions.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Term. The term of this Agreement shall initially be for a one (1) year period commencing on the Effective Date. The term of this Agreement shall automatically renew for an additional year on each anniversary of the Effective Date unless either Party gives the other written notice of intent not to renew at least sixty (60) days prior to such date. Notwithstanding the foregoing, the initial term and any renewal year shall be subject to earlier termination as provided in Section 4 below. The initial term and any renewal years are referred to herein as the “Term”.

2. Positions and Duties. During the Term, the Employee shall serve as a senior executive officer of the Employer. The Employee shall perform for the Employer the duties customarily associated with being a senior executive officer that are consistent with your experience and skills and such other duties as may be assigned to the Employee from time to time by the Employer’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities. The Employee shall devote such working time, attention, knowledge, skills and efforts as may be required to fulfill the Employee’s duties hereunder, as reasonably determined by the Board. The Employee shall be permitted to perform services as required under the Hospitalist Participation Service Agreement, and provided, further that the Employee may participate as a member of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations so long as any such positions are disclosed to the Board and do not materially interfere with the Employee’s duties and responsibilities to the Employer. The Employee shall be based in Alhambra, California.

3. Compensation and Related Matters. The Employer shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term. Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee.

(a) Base Salary. The Employer shall pay the Employee for all services rendered a base salary of Nine Hundred Fifty Thousand Dollars ($950,000) per year (the “Base Salary”), payable in accordance with the Employer’s payroll procedures, subject to customary withholdings and employment taxes. The Base Salary shall be evaluated annually by the Board for increase only.

(b) Annual Bonus. The Employee will be eligible to receive an annual cash bonus (the “Annual Bonus”) for each fiscal year during the Term on such terms and conditions as the Board shall determine in its discretion consistent with the terms of the Employer’s business plan.

(c) Long Term Incentive Awards. The Employee shall be eligible to participate in any long term incentive plan that may be available to similarly positioned executives. The Board may determine to grant long-term incentive awards in cash or in equity awards settled in shares of the Employer’s stock, including but not limited to stock options, restricted stock and performance shares. In the event the Employee terminates service due to being a Good Leaver, any requirements under a long-term incentive award held by the Employee shall be deemed to have been satisfied by the Employer immediately prior to such termination. A “Good Leaver” means that, during the

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Term, either the Employee has resigned for Good Reason (as defined in Section 4(e) below), the Employer has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates employment on account of death or Disability (as defined in Section 4(b) below). For avoidance of doubt, being a Good Leaver entitles the Employee to be fully vested with respect to any stock options with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if he had remained continuously employed with the Employer.

(d) Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year which shall be accrued ratably during the calendar year, to be taken at such times and intervals as shall be agreed to by Employer and the Employee in their reasonable discretion. The Employee shall be entitled to accrue a maximum of twenty (20) business days of paid time off. When the maximum accrual is reached, no additional PTO time will accrue until Employee uses one or more accrued PTO days. Accrued and unused PTO shall be paid in cash at the end of a calendar year.

(e) Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Employer in accordance with the Employer’s expense reimbursement policy.

(f) Other Benefits. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Employer to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Irrespective of other benefits provided to employees, the Employee’s benefits package shall include: (i) the Employer’s payment of premiums for medical, dental and vision care coverage; (ii) the Employer’s payment of insurance premiums for short-term and long-term disability insurance providing for no less than sixty percent (60%) of Employee’s Base Salary to be payable to the Employee as long as the covered disability persists in a manner that substantially prevents employment in the same occupation as the position Employee last held with Employer but not beyond age sixty-five (65); and (iii) the Employer’s payment of insurance premiums for term life insurance providing for no less than two million dollars of coverage (subject to meeting applicable underwriting requirements).

(g) Tax Withholding. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement, to the extent it reasonably and in good faith believes it is required to make such deductions, withholdings and tax reports. Payments with respect to compensation and benefits referred to under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Employee for any adverse tax effect associated with any payments or benefits, or for any deduction or withholding from any payment or benefit.

4. Termination. The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:

(a) Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.

(b) Disability. The Employer may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation. This provision is not intended to reduce any rights the Employee may have pursuant to any law, including without limitation the California Family Rights Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the Americans with Disabilities Act.

(c) Termination by the Employer for Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Employer; (ii) the commission by the

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Employee of any felony; (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a material breach, according to the standard of the Employer, by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Employer; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Employer to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Employer or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Employer shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Employer’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Employer’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (x) expense reimbursement disputes in which the Employee acts in reasonable good faith; (y) occasional, customary and de minimis use of the Employer’s property for personal purposes; and (z) acting in good faith upon advice of Employer’s legal counsel.

(d) Termination without Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice. Any termination by the Employer of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d). Any suspension of the Employee’s employment with pay or benefits by the Board in good faith pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause or provide with Good Reason to terminate employment.

(e) Termination by the Employee. At any time during the Term, the Employee may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Employee’s responsibilities, authority or duties; (ii) the material breach of this Agreement by the Employer, including but not limited to a failure to pay Base Salary or Annual Bonus as provided for under this Agreement; or (iii) any relocation of the Employee’s principal place of business to a location more than 30 miles from the Employer’s current executive offices in Alhambra, California; provided, however, that this clause (iii) will not apply to the extent that any new office location is less than 30 miles from the Employee’s residence. “Good Reason Process” shall mean (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Employer in writing of the occurrence of the Good Reason condition within (60) days of the occurrence of such condition; (iii) the Employee cooperates in good faith with the Employer’s efforts, for a period of sixty (60) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within thirty (30) days after the end of the Cure Period. If the Employer cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Employer for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure

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period; (iii) if the Employee’s employment is terminated by the Employer under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; (iv) if the Employee’s employment is terminated by the Employee under Section 4(e) without Good Reason, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Employer; or (v) if the Employee’s employment is terminated by the Employee under Section 4(e) with Good Reason, the date on which Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Employer, the Employer may unilaterally accelerate the Date of Termination but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement. For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i) of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.

5. Compensation upon Termination.

(a) Accrued Benefits. If the Employee’s employment with the Employer is terminated for any reason during the Term, or if the Term is not renewed, the Employer shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “AccruedBenefits”) within the time prescribed by California law. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Employer, payment will be made to the Employee under the terms of the applicable plan, program or arrangement.

(b) Termination by the Employer without Cause or by the Employee with GoodReason. If the Employee’s employment is terminated by the Employer without Cause as provided in Section 4(d), or the Employee terminates his employment for Good Reason as provided in Section 4(e), or the Employee terminates employment at the end of the Term after the Employer provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then, (i) the Employer shall, through the Date of Termination, pay the Employee his or her Accrued Benefits, and (ii) if the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven-day revocation period:

(i) the Employer shall pay the Employee an amount equal to one-twelfth (1/12) of the Employee’s most recent Base Salary times the number of full years of service completed, not to exceed twelve (12) years of service (but determined prior to any action involving Base Salary that would constitute Good Reason) (the “Severance Amount”). Employer acknowledges that Employee has completed not less than twelve (12) full years of service (including Employee’s service for the Employer’s parent entity, subsidiaries and affiliates), such that the Severance Amount payable to Employee pursuant to the terms of this Agreement shall equal the maximum Severance Amount of one (1) year of the Employee’s most recent Base Salary. To the extent that such Severance Amount exceeds the 409A Separation Pay Limit (as defined below), such amount shall be paid in a single lump sum on the regular payroll date of the Employer, pertaining to then current salaried employees of the Employer, (“payroll date”) next following the first anniversary date of the Employee’s Date of Termination. The portion of the Severance Amount that does not exceed the 409A Separation Pay Limit shall be paid in substantially equal amounts on each payroll date over a one year period; and

(ii) the Employer shall pay the Employee an amount in cash equal to the Employer’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Employer’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:

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(A) No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);

(B) This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;

(C) Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:

(1) the Employee is no longer eligible for and continuing to receive the

COBRA coverage elected in subparagraph (A);

(2) the time period set forth in the first sentence of this paragraph (ii),

(3) the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and

(4) if the Employer in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.

(iii) Each individual payment of Severance Amount under Section

5(b)(i), and each payment under Section 5(b)(ii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).

(iv) Each individual payment of the Severance Amount under Section 5(b)(i), and each payment under Section 5(b)(ii), of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Employer allows in its sole discretion. The Employer may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC. Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Employer to constitute NQDC payable to a “specified employee” as defined under Section

409A, then the Employer shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Employer, or (y) the date of Employee’s death.

(v) for purposes of this Section 5, “Section 409A” means Section

409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

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(vi) for purposes of this Section 5, “409A Separation Pay Limit” means two times the lesser of (x) the Employee’s annual compensation during the calendar year preceding the year of the termination of employment; and (y) the adjusted compensation limit under Code Section 401(a)(17) in effect for the year of the termination.

6. Confidential Information, Nonsolicitation, and Cooperation.

(a) Definitions.

(i) As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

(ii) As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b) Confidential Information. As used in this Agreement, “ConfidentialInformation” means information belonging to the Employer or its Affiliates which is of value to the Employer or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Employer) and the disclosure of which could result in a competitive or other disadvantage to the Employer or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Employer or its Affiliates, including, without limitation, the management of the Employer or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Employer, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Employer or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Employer or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c) Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Employer and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Employer and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Employer, except as may be necessary within the scope of Employee’s duties with Employer and in the ordinary course of performing the Employee’s duties to the Employer or as otherwise provided in Section 6(d). Employee understands and agrees not to sell, license or otherwise exploit any products or services which embody or otherwise

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exploit in whole or in part any Confidential Information or materials. Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of Confidential Information obtained by Employee during or in connection with the course of Employee’s employment constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Employer or its Affiliates, either during employment, or at any time thereafter.

(d) Protected Rights. Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Employer, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.

(e) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Employer or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Employer and its Affiliates. The Employee shall return to the Employer all such materials and property as and when requested by the Employer. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Employer and its Affiliates regardless of by whom they were compiled.

(f) Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.

(g) Removal of Material. The Employee will not remove any Confidential Information from the Employer’s or its Affiliate’s premises except for use in the Employer’s business, and only consistent with the Employee’s duties with the Employer.

(h) Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Employer’s and its Affiliate’s business, and consistent with the Employee’s duties with the Employer. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

(i) Computer Security. The Employee agrees to comply with the Employer’s policies and procedures concerning computer security.

(j) E-Mail. The Employee acknowledges that the Employer retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.

(k) Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Employer or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Employer, or using any resources or materials of the Employer or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Employer (together “Proprietary Inventions”) will be the sole property of the Employer or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Employer the Employee’s entire right, title and interest in and to any and all Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Employer to obtain,

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maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.

NOTICE TO CALIFORNIA EMPLOYEES

Pursuant to California Labor Code §2870, an agreement requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer does not apply to an invention which qualifies fully under the provisions of California Labor Code § 2870, which provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under

subdivision (a), the provision is against the public policy of the State of California and is unenforceable.

(l) Nonsolicitation. Employee agrees and covenants that, at any time during Employee’s employment with the Employer and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Employer for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of the Employer’s employees or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Employer or its Affiliates, whether in an employment capacity or otherwise (this provision does not prohibit the Employee’s post- termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Employer or its Affiliates, as a result of which relations between the Employer or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Employer or its Affiliates.

(m) Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Employer and has attached to this Agreement. The Employee represents to the Employer that the Employee’s execution of this Agreement, the Employee’s employment with the Employer and the performance of the Employee’s proposed duties for the Employer will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Employer, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Employer any copies or other tangible embodiments of non- public information belonging to or obtained from any such previous employment or other party.

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(n) Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of the Employer that relate to events or occurrences that transpired while the Employee was employed by the Employer. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Employer in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.

(o) Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Employer and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Employer and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Employer, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Employer a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Employer shall have the right to retain any amounts otherwise payable by the Employer to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Employer and its Affiliates from and against any damages incurred by the Employer or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of this Agreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

7. Successors. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and permitted assigns, including any corporation or entity with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that Employee’s obligations are personal and shall not be assigned by Employee. The Employee consents to be bound by the provisions of this Agreement for the benefit of the Employer or its Affiliates to whose employ the Employee may be transferred without the necessity that this Agreement be resigned at the time of such transfer. In the event of the Employee’s death after the Date of Termination but prior to the completion by the Employer of all payments due to the Employee under this Agreement, the Employer shall continue such payments to the Employee’s beneficiary designated in writing to the Employer prior to the Employee’s death (or to the Employee’s estate, if the Employee fails to make such designation).

8. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the

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waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

10. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Employee at the last address for which the Employee has provided written notice to the Employer, or to the Employer at its main office, to the attention of Human Resources.

11. Publicity. The Employee hereby grants to the Employer the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Employer for the duration of Employee’s employment with Employer.

12. Conflicting Obligations and Rights. The Employee agrees to inform the Employer of any apparent conflicts between the Employee’s work for the Employer and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Employer’s behalf. Otherwise, the Employer may conclude that no such conflict exists and the Employee agrees thereafter to make no such claim against the Employer. The Employer shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

13. Notification of New Employer. In the event that the Employee leaves the employ of the Employer, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section

6 of this Agreement. The Employee further hereby authorizes the Employer to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Employer.

15. Amendment. This Agreement may be amended or modified only by a written instrument signed by the

Employee and by a duly authorized representative of the Employer.

16. Governing Law. This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State.

17. Obligations of Successors. The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no such succession had taken place.

18. Limitation on Payments in Certain Events.

(a) Limitation on Payments. Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Employer shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of

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the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

(b) The independent registered public accounting firm engaged by the Employer for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 18. If the independent registered public accounting firm so engaged by the Employer is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Employer shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Employer shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee at such time as requested by the Employer or the Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Employer and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Parties.

19. Consent to Jurisdiction; Forum Selection. At all times the Employee and Employer: (a) irrevocably submit to the exclusive jurisdiction of the Los Angeles Superior Court and United States District Court for the Central District of California, whichever may have competent subject matter jurisdiction, in any action or proceeding arising out of or relating to this Agreement, and irrevocably agree that all claims in respect of any such action or proceeding may be heard and determined in such court; (b) to the extent permitted by law, irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at the address set forth in this Agreement (or otherwise on record with the Employer); (c) to the extent permitted by law, irrevocably confirm that service of process out of such courts in such manner shall be deemed due service upon such party for the purposes of such action or proceeding; (d) to the extent permitted by law, irrevocably waives (i) any objection the Employee or Employer may have to the laying of venue of any such action or proceeding in any of such courts, or (ii) any claim that the Employee or Employer may have that any such action or proceeding has been brought in an inconvenient forum; and (e) to the extent permitted by law, irrevocably agrees that a final nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section shall affect the right of any party hereto to serve legal process in any manner permitted by law.

20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer by its duly authorized officer, and by the Employee, as of the date first above written.

EMPLOYER:

NETWORK MEDICAL MANAGEMENT, INC.:

By:   /s/ Kenneth Sim

Printed Name: Kenneth Sim, M.D.

Its: Co-Chief Executive Officer

EMPLOYEE:

Signed:   /s/ Thomas Lam

Printed Name: Thomas Lam, M.D. 

[Signature page to Employment Agreement]

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EXHIBIT A

Release of Claims

I, , in consideration of and subject to the performance by Network Medical Management,

Inc., a California corporation (the “Company”) of its obligations under the Employment Agreement, dated as of _ _,

20 (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Releases.

(a) I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

(b) SECTION 1542 WAIVER. Employee agrees that all rights he may have under Section 1542 of the California Civil Code are hereby waived. Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.

5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.

6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.

7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s

401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.

8. I understand that I continue to be bound by Section 6 of the Agreement.

9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of the State of California.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT: (i) I HAVE READ IT CAREFULLY;

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(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;

(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;

(v) I HAVE HAD AT LEAST TWENTY ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;

(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE 21-DAY [OR 45 DAY] CONSIDERATION PERIOD;

(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATED AS OF , 20

[Name]

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EX-10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 8, 2020, by and between Network Medical Management, Inc., a California corporation (the “Employer”), and Eric Chin (the “Employee” and together with the Employer referred to as the “Parties”) to become effective as of the date hereof (the “EffectiveDate”).

WHEREAS, the Employer desires to employ the Employee from and after the Effective Date on the terms and conditions set forth below, and the Employee is willing to serve the Employer on such terms and conditions.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Term. The term of this Agreement shall initially be for a one (1) year period commencing on the Effective Date. The term of this Agreement shall automatically renew for an additional year on each anniversary of the Effective Date unless either Party gives the other written notice of intent not to renew at least sixty (60) days prior to such date. Notwithstanding the foregoing, the initial term and any renewal year shall be subject to earlier termination as provided in Section 4 below. The initial term and any renewal years are referred to herein as the “Term”.

2. Positions and Duties. During the Term, the Employee shall serve as a senior executive officer of the Employer. The Employee shall perform for the Employer the duties customarily associated with being a senior executive officer that are consistent with your experience and skills and such other duties as may be assigned to the Employee from time to time by the Employer’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities. The Employee shall devote such working time, attention, knowledge, skills and efforts as may be required to fulfill the Employee’s duties hereunder, as reasonably determined by the Board, and provided, further that the Employee may participate as a member of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations so long as any such positions are disclosed to the Board and do not materially interfere with the Employee’s duties and responsibilities to the Employer. The Employee shall be based in Alhambra, California.

3. Compensation and Related Matters. The Employer shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term. Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee.

(a) Base Salary. The Employer shall pay the Employee for all services rendered a base salary of Three Hundred Thousand Dollars ($300,000) per year (the “Base Salary”), payable in accordance with the Employer’s payroll procedures, subject to customary withholdings and employment taxes. The Base Salary shall be evaluated annually by the Board for increase only.

(b) Annual Bonus. The Employee will be eligible to receive an annual cash bonus (the “Annual Bonus”) for each fiscal year during the Term on such terms and conditions as the Board shall determine in its discretion consistent with the terms of the Employer’s business plan.

(c) Long Term Incentive Awards. The Employee shall be eligible to participate in any long term incentive plan that may be available to similarly positioned executives. The Board may determine to grant long-term incentive awards in cash or in equity awards settled in shares of the Employer’s stock, including but not limited to stock options, restricted stock and performance shares. In the event the Employee terminates service due to being a Good Leaver, any requirements under a long-term incentive award held by the Employee shall be deemed to have been satisfied by the Employer immediately prior to such termination. A “Good Leaver” means that, during the Term, either the Employee has resigned for Good Reason (as defined in Section 4(e) below), the Employer has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates

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employment on account of death or Disability (as defined in Section 4(b) below). For avoidance of doubt, being a Good Leaver entitles the Employee to be fully vested with respect to any stock options with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if he had remained continuously employed with the Employer.

(d) Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year which shall be accrued ratably during the calendar year, to be taken at such times and intervals as shall be agreed to by Employer and the Employee in their reasonable discretion. The Employee shall be entitled to accrue a maximum of twenty (20) business days of paid time off. When the maximum accrual is reached, no additional PTO time will accrue until Employee uses one or more accrued PTO days. Accrued and unused PTO shall be paid in cash at the end of a calendar year.

(e) Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Employer in accordance with the Employer’s expense reimbursement policy.

(f) Other Benefits. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Employer to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Irrespective of other benefits provided to employees, the Employee’s benefits package shall include: (i) the Employer’s payment of premiums for medical, dental and vision care coverage; (ii) the Employer’s payment of insurance premiums for short-term and long-term disability insurance providing for no less than sixty percent (60%) of Employee’s Base Salary to be payable to the Employee as long as the covered disability persists in a manner that substantially prevents employment in the same occupation as the position Employee last held with Employer but not beyond age sixty-five (65); and (iii) the Employer’s payment of insurance premiums for term life insurance providing for no less than two million dollars of coverage (subject to meeting applicable underwriting requirements).

(g) Tax Withholding. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement, to the extent it reasonably and in good faith believes it is required to make such deductions, withholdings and tax reports. Payments with respect to compensation and benefits referred to under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Employee for any adverse tax effect associated with any payments or benefits, or for any deduction or withholding from any payment or benefit.

4. Termination. The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:

(a) Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.

(b) Disability. The Employer may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation. This provision is not intended to reduce any rights the Employee may have pursuant to any law, including without limitation the California Family Rights Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the Americans with Disabilities Act.

(c) Termination by the Employer for Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Employer; (ii) the commission by the Employee of any felony; (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a

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material breach, according to the standard of the Employer, by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Employer; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Employer to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Employer or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Employer shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Employer’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Employer’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (x) expense reimbursement disputes in which the Employee acts in reasonable good faith; (y) occasional, customary and de minimis use of the Employer’s property for personal purposes; and (z) acting in good faith upon advice of Employer’s legal counsel.

(d) Termination without Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice. Any termination by the Employer of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d). Any suspension of the Employee’s employment with pay or benefits by the Board in good faith pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause or provide with Good Reason to terminate employment.

(e) Termination by the Employee. At any time during the Term, the Employee may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Employee’s responsibilities, authority or duties; (ii) the material breach of this Agreement by the Employer, including but not limited to a failure to pay Base Salary or Annual Bonus as provided for under this Agreement; or (iii) any relocation of the Employee’s principal place of business to a location more than 30 miles from the Employer’s current executive offices in Alhambra, California; provided, however, that this clause (iii) will not apply to the extent that any new office location is less than 30 miles from the Employee’s residence. “Good Reason Process” shall mean (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Employer in writing of the occurrence of the Good Reason condition within (60) days of the occurrence of such condition; (iii) the Employee cooperates in good faith with the Employer’s efforts, for a period of sixty (60) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within thirty (30) days after the end of the Cure Period. If the Employer cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Employer for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure period; (iii) if the Employee’s employment is terminated by the Employer under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; (iv) if the Employee’s employment is terminated by the

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Employee under Section 4(e) without Good Reason, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Employer; or (v) if the Employee’s employment is terminated by the Employee under Section 4(e) with Good Reason, the date on which Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Employer, the Employer may unilaterally accelerate the Date of Termination but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement. For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i) of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.

5. Compensation upon Termination.

(a) Accrued Benefits. If the Employee’s employment with the Employer is terminated for any reason during the Term, or if the Term is not renewed, the Employer shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “AccruedBenefits”) within the time prescribed by California law. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Employer, payment will be made to the Employee under the terms of the applicable plan, program or arrangement.

(b) Termination by the Employer without Cause or by the Employee with GoodReason. If the Employee’s employment is terminated by the Employer without Cause as provided in Section 4(d), or the Employee terminates his employment for Good Reason as provided in Section 4(e), or the Employee terminates employment at the end of the Term after the Employer provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then, (i) the Employer shall, through the Date of Termination, pay the Employee his or her Accrued Benefits, and (ii) if the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven-day revocation period:

(i) the Employer shall pay the Employee an amount equal to one-twelfth (1/12) of the Employee’s most recent Base Salary times the number of full years of service completed, not to exceed twelve (12) years of service (but determined prior to any action involving Base Salary that would constitute Good Reason) (the “Severance Amount”). For the avoidance of doubt, the maximum Severance Amount payable to Employee pursuant to the terms of this Agreement shall equal one (1) year of the Employee’s most recent Base Salary. To the extent that such Severance Amount exceeds the 409A Separation Pay Limit (as defined below), such amount shall be paid in a single lump sum on the regular payroll date of the Employer, pertaining to then current salaried employees of the Employer, (“payroll date”) next following the first anniversary date of the Employee’s Date of Termination. The portion of the Severance Amount that does not exceed the 409A Separation Pay Limit shall be paid in substantially equal amounts on each payroll date over a one year period; and

(ii) the Employer shall pay the Employee an amount in cash equal to the Employer’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Employer’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:

(A) No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);

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(B) This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;

(C) Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:

(1) the Employee is no longer eligible for and continuing to receive the

COBRA coverage elected in subparagraph (A);

(2) the time period set forth in the first sentence of this paragraph (ii),

(3) the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and

(4) if the Employer in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.

(iii) Each individual payment of Severance Amount under Section

5(b)(i), and each payment under Section 5(b)(ii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).

(iv) Each individual payment of the Severance Amount under Section 5(b)(i), and each payment under Section 5(b)(ii), of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Employer allows in its sole discretion. The Employer may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC. Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Employer to constitute NQDC payable to a “specified employee” as defined under Section

409A, then the Employer shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Employer, or (y) the date of Employee’s death.

(v) for purposes of this Section 5, “Section 409A” means Section

409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

(vi) for purposes of this Section 5, “409A Separation Pay Limit” means two times the lesser of (x) the Employee’s annual compensation during the calendar year preceding the year of the termination of employment; and (y) the

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adjusted compensation limit under Code Section 401(a)(17) in effect for the year of the termination.

6. Confidential Information, Nonsolicitation, and Cooperation.

(a) Definitions.

(i) As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

(ii) As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b) Confidential Information. As used in this Agreement, “ConfidentialInformation” means information belonging to the Employer or its Affiliates which is of value to the Employer or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Employer) and the disclosure of which could result in a competitive or other disadvantage to the Employer or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Employer or its Affiliates, including, without limitation, the management of the Employer or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Employer, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Employer or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Employer or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c) Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Employer and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Employer and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Employer, except as may be necessary within the scope of Employee’s duties with Employer and in the ordinary course of performing the Employee’s duties to the Employer or as otherwise provided in Section 6(d). Employee understands and agrees not to sell, license or otherwise exploit any products or services which embody or otherwise exploit in whole or in part any Confidential Information or materials. Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of Confidential Information obtained by Employee during or in connection with the course of Employee’s employment

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constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Employer or its Affiliates, either during employment, or at any time thereafter.

(d) Protected Rights. Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Employer, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.

(e) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Employer or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Employer and its Affiliates. The Employee shall return to the Employer all such materials and property as and when requested by the Employer. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Employer and its Affiliates regardless of by whom they were compiled.

(f) Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.

(g) Removal of Material. The Employee will not remove any Confidential Information from the Employer’s or its Affiliate’s premises except for use in the Employer’s business, and only consistent with the Employee’s duties with the Employer.

(h) Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Employer’s and its Affiliate’s business, and consistent with the Employee’s duties with the Employer. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

(i) Computer Security. The Employee agrees to comply with the Employer’s policies and procedures concerning computer security.

(j) E-Mail. The Employee acknowledges that the Employer retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.

(k) Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Employer or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Employer, or using any resources or materials of the Employer or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Employer (together “Proprietary Inventions”) will be the sole property of the Employer or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Employer the Employee’s entire right, title and interest in and to any and all Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Employer to obtain,

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maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.

NOTICE TO CALIFORNIA EMPLOYEES

Pursuant to California Labor Code §2870, an agreement requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer does not apply to an invention which qualifies fully under the provisions of California Labor Code § 2870, which provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of the State of California and is unenforceable.

(l)  Nonsolicitation. Employee agrees and covenants that, at any time during Employee’s employment

with the Employer and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Employer for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of the Employer’s employees or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Employer or its Affiliates, whether in an employment capacity or otherwise (this provision does not prohibit the Employee’s post- termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Employer or its Affiliates, as a result of which relations between the Employer or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Employer or its Affiliates.

(m) Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Employer and has attached to this Agreement. The Employee represents to the Employer that the Employee’s execution of this Agreement, the Employee’s employment with the Employer and the performance of the Employee’s proposed duties for the Employer will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Employer, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Employer any copies or other tangible embodiments of non- public information belonging to or obtained from any such previous employment or other party.

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(n) Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of the Employer that relate to events or occurrences that transpired while the Employee was employed by the Employer. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Employer in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.

(o) Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Employer and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Employer and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Employer, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Employer a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Employer shall have the right to retain any amounts otherwise payable by the Employer to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Employer and its Affiliates from and against any damages incurred by the Employer or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of this Agreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

7. Successors. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and permitted assigns, including any corporation or entity with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that Employee’s obligations are personal and shall not be assigned by Employee. The Employee consents to be bound by the provisions of this Agreement for the benefit of the Employer or its Affiliates to whose employ the Employee may be transferred without the necessity that this Agreement be resigned at the time of such transfer. In the event of the Employee’s death after the Date of Termination but prior to the completion by the Employer of all payments due to the Employee under this Agreement, the Employer shall continue such payments to the Employee’s beneficiary designated in writing to the Employer prior to the Employee’s death (or to the Employee’s estate, if the Employee fails to make such designation).

8. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the

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waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

10. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Employee at the last address for which the Employee has provided written notice to the Employer, or to the Employer at its main office, to the attention of Human Resources.

11. Publicity. The Employee hereby grants to the Employer the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Employer for the duration of Employee’s employment with Employer.

12. Conflicting Obligations and Rights. The Employee agrees to inform the Employer of any apparent conflicts between the Employee’s work for the Employer and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Employer’s behalf. Otherwise, the Employer may conclude that no such conflict exists and the Employee agrees thereafter to make no such claim against the Employer. The Employer shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

13. Notification of New Employer. In the event that the Employee leaves the employ of the Employer, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section

6 of this Agreement. The Employee further hereby authorizes the Employer to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Employer.

15. Amendment. This Agreement may be amended or modified only by a written instrument signed by the

Employee and by a duly authorized representative of the Employer.

16. Governing Law. This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State.

17. Obligations of Successors. The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no such succession had taken place.

18. Limitation on Payments in Certain Events.

(a) Limitation on Payments. Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Employer shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of

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the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

(b) The independent registered public accounting firm engaged by the Employer for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 18. If the independent registered public accounting firm so engaged by the Employer is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Employer shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Employer shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee at such time as requested by the Employer or the Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Employer and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Parties.

19. Consent to Jurisdiction; Forum Selection. At all times the Employee and Employer: (a) irrevocably submit to the exclusive jurisdiction of the Los Angeles Superior Court and United States District Court for the Central District of California, whichever may have competent subject matter jurisdiction, in any action or proceeding arising out of or relating to this Agreement, and irrevocably agree that all claims in respect of any such action or proceeding may be heard and determined in such court; (b) to the extent permitted by law, irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at the address set forth in this Agreement (or otherwise on record with the Employer); (c) to the extent permitted by law, irrevocably confirm that service of process out of such courts in such manner shall be deemed due service upon such party for the purposes of such action or proceeding; (d) to the extent permitted by law, irrevocably waives (i) any objection the Employee or Employer may have to the laying of venue of any such action or proceeding in any of such courts, or (ii) any claim that the Employee or Employer may have that any such action or proceeding has been brought in an inconvenient forum; and (e) to the extent permitted by law, irrevocably agrees that a final nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section shall affect the right of any party hereto to serve legal process in any manner permitted by law.

20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer by its duly authorized officer, and by the Employee, as of the date first above written.

EMPLOYER:

NETWORK MEDICAL MANAGEMENT, INC.:

By: /s/ Thomas Lam

Printed Name: Thomas Lam, M.D.

Its: Co-Chief Executive Officer

EMPLOYEE:

Signed: /s/ Eric Chin

Printed Name: Eric Chin  

[Signature page to Employment Agreement]

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EXHIBIT A

Release of Claims

I, , in consideration of and subject to the performance by Network Medical Management,

Inc., a California corporation (the “Company”) of its obligations under the Employment Agreement, dated as of _ _,

20 (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Releases.

(a) I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

(b) SECTION 1542 WAIVER. Employee agrees that all rights he may have under Section 1542 of the California Civil Code are hereby waived. Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.

5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.

6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.

7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s

401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.

8. I understand that I continue to be bound by Section 6 of the Agreement.

9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of the State of California.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT: (i) I HAVE READ IT CAREFULLY;

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(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;

(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;

(v) I HAVE HAD AT LEAST TWENTY ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;

(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE 21-DAY [OR 45 DAY] CONSIDERATION PERIOD;

(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATED AS OF , 20

[Name]

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EX-10.4

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 8, 2020, by and between Network Medical Management, Inc., a California corporation (the “Employer”), and Adrian Vazquez, M.D. (the “Employee” and together with the Employer referred to as the “Parties”) to become effective as of the date hereof (the “EffectiveDate”).

WHEREAS, the Employer desires to employ the Employee from and after the Effective Date on the terms and conditions set forth below, and the Employee is willing to serve the Employer on such terms and conditions.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Term. The term of this Agreement shall initially be for a one (1) year period commencing on the Effective Date. The term of this Agreement shall automatically renew for an additional year on each anniversary of the Effective Date unless either Party gives the other written notice of intent not to renew at least sixty (60) days prior to such date. Notwithstanding the foregoing, the initial term and any renewal year shall be subject to earlier termination as provided in Section 4 below. The initial term and any renewal years are referred to herein as the “Term”.

2. Positions and Duties. During the Term, the Employee shall serve as a senior executive officer of the Employer. The Employee shall perform for the Employer the duties customarily associated with being a senior executive officer that are consistent with your experience and skills and such other duties as may be assigned to the Employee from time to time by the Employer’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities. The Employee shall devote such working time, attention, knowledge, skills and efforts as may be required to fulfill the Employee’s duties hereunder, as reasonably determined by the Board. The Employee shall be permitted to perform services as required under the Hospitalist Participation Service Agreement, and provided, further that the Employee may participate as a member of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations so long as any such positions are disclosed to the Board and do not materially interfere with the Employee’s duties and responsibilities to the Employer. The Employee shall be based in Alhambra, California.

3. Compensation and Related Matters. The Employer shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term. Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee.

(a) Base Salary. The Employer shall pay the Employee for all services rendered a base salary of Four Hundred Fifty Thousand Dollars ($450,000) per year (the “Base Salary”), payable in accordance with the Employer’s payroll procedures, subject to customary withholdings and employment taxes. The Base Salary shall be evaluated annually by the Board for increase only.

(b) Annual Bonus. The Employee will be eligible to receive an annual cash bonus (the “Annual Bonus”) for each fiscal year during the Term on such terms and conditions as the Board shall determine in its discretion consistent with the terms of the Employer’s business plan.

(c) Long Term Incentive Awards. The Employee shall be eligible to participate in any long term incentive plan that may be available to similarly positioned executives. The Board may determine to grant long-term incentive awards in cash or in equity awards settled in shares of the Employer’s stock, including but not limited to stock options, restricted stock and performance shares. In the event the Employee terminates service due to being a Good Leaver, any requirements under a long-term incentive award held by the Employee shall be deemed to have been satisfied by the Employer immediately prior to such termination. A “Good Leaver” means that, during the Term, either the Employee has resigned for Good Reason (as defined in Section 4(e) below), the Employer has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates

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employment on account of death or Disability (as defined in Section 4(b) below). For avoidance of doubt, being a Good Leaver entitles the Employee to be fully vested with respect to any stock options with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if he had remained continuously employed with the Employer.

(d) Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year which shall be accrued ratably during the calendar year, to be taken at such times and intervals as shall be agreed to by Employer and the Employee in their reasonable discretion. The Employee shall be entitled to accrue a maximum of twenty (20) business days of paid time off. When the maximum accrual is reached, no additional PTO time will accrue until Employee uses one or more accrued PTO days. Accrued and unused PTO shall be paid in cash at the end of a calendar year.

(e) Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Employer in accordance with the Employer’s expense reimbursement policy.

(f) Other Benefits. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Employer to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Irrespective of other benefits provided to employees, the Employee’s benefits package shall include: (i) the Employer’s payment of premiums for medical, dental and vision care coverage; (ii) the Employer’s payment of insurance premiums for short-term and long-term disability insurance providing for no less than sixty percent (60%) of Employee’s Base Salary to be payable to the Employee as long as the covered disability persists in a manner that substantially prevents employment in the same occupation as the position Employee last held with Employer but not beyond age sixty-five (65); and (iii) the Employer’s payment of insurance premiums for term life insurance providing for no less than two million dollars of coverage (subject to meeting applicable underwriting requirements).

(g) Tax Withholding. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement, to the extent it reasonably and in good faith believes it is required to make such deductions, withholdings and tax reports. Payments with respect to compensation and benefits referred to under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Employee for any adverse tax effect associated with any payments or benefits, or for any deduction or withholding from any payment or benefit.

4. Termination. The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:

(a) Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.

(b) Disability. The Employer may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation. This provision is not intended to reduce any rights the Employee may have pursuant to any law, including without limitation the California Family Rights Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the Americans with Disabilities Act.

(c) Termination by the Employer for Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Employer; (ii) the commission by the Employee of any felony; (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a material breach, according to the standard of the Employer, by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Employer; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Employer to cooperate, or the willful destruction or failure to preserve documents or other materials known to be

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relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Employer or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Employer shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Employer’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Employer’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (x) expense reimbursement disputes in which the Employee acts in reasonable good faith; (y) occasional, customary and de minimis use of the Employer’s property for personal purposes; and (z) acting in good faith upon advice of Employer’s legal counsel.

(d) Termination without Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice. Any termination by the Employer of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d). Any suspension of the Employee’s employment with pay or benefits by the Board in good faith pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause or provide with Good Reason to terminate employment.

(e) Termination by the Employee. At any time during the Term, the Employee may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Employee’s responsibilities, authority or duties; (ii) the material breach of this Agreement by the Employer, including but not limited to a failure to pay Base Salary or Annual Bonus as provided for under this Agreement; or (iii) any relocation of the Employee’s principal place of business to a location more than 30 miles from the Employer’s current executive offices in Alhambra, California; provided, however, that this clause (iii) will not apply to the extent that any new office location is less than 30 miles from the Employee’s residence. “Good Reason Process” shall mean (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Employer in writing of the occurrence of the Good Reason condition within (60) days of the occurrence of such condition; (iii) the Employee cooperates in good faith with the Employer’s efforts, for a period of sixty (60) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within thirty (30) days after the end of the Cure Period. If the Employer cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Employer for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure period; (iii) if the Employee’s employment is terminated by the Employer under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; (iv) if the Employee’s employment is terminated by the Employee under Section 4(e) without Good Reason, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Employer; or (v) if the Employee’s employment is terminated by the Employee under Section 4(e) with Good Reason, the date on which Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Employer, the Employer may unilaterally accelerate the Date of Termination but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement. For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i)

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of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.

5. Compensation upon Termination.

(a) Accrued Benefits. If the Employee’s employment with the Employer is terminated for any reason during the Term, or if the Term is not renewed, the Employer shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “AccruedBenefits”) within the time prescribed by California law. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Employer, payment will be made to the Employee under the terms of the applicable plan, program or arrangement.

(b) Termination by the Employer without Cause or by the Employee with GoodReason. If the Employee’s employment is terminated by the Employer without Cause as provided in Section 4(d), or the Employee terminates his employment for Good Reason as provided in Section 4(e), or the Employee terminates employment at the end of the Term after the Employer provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then, (i) the Employer shall, through the Date of Termination, pay the Employee his or her Accrued Benefits, and (ii) if the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven-day revocation period:

(i) the Employer shall pay the Employee an amount equal to one-twelfth (1/12) of the Employee’s most recent Base Salary times the number of full years of service completed, not to exceed twelve (12) years of service (but determined prior to any action involving Base Salary that would constitute Good Reason) (the “Severance Amount”). Employer acknowledges that Employee has completed not less than twelve (12) full years of service (including Employee’s service for the Employer’s parent entity, subsidiaries and affiliates), such that the Severance Amount payable to Employee pursuant to the terms of this Agreement shall equal the maximum Severance Amount of one (1) year of the Employee’s most recent Base Salary. To the extent that such Severance Amount exceeds the 409A Separation Pay Limit (as defined below), such amount shall be paid in a single lump sum on the regular payroll date of the Employer, pertaining to then current salaried employees of the Employer, (“payroll date”) next following the first anniversary date of the Employee’s Date of Termination. The portion of the Severance Amount that does not exceed the 409A Separation Pay Limit shall be paid in substantially equal amounts on each payroll date over a one year period; and

(ii) the Employer shall pay the Employee an amount in cash equal to the Employer’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Employer’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:

(A) No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);

(B) This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;

(C) Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:

(1) the Employee is no longer eligible for and continuing to receive the

COBRA coverage elected in subparagraph (A);

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(2) the time period set forth in the first sentence of this paragraph (ii),

(3) the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and

(4) if the Employer in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.

(iii) Each individual payment of Severance Amount under Section

5(b)(i), and each payment under Section 5(b)(ii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).

(iv) Each individual payment of the Severance Amount under Section 5(b)(i), and each payment under Section 5(b)(ii), of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Employer allows in its sole discretion. The Employer may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC. Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Employer to constitute NQDC payable to a “specified employee” as defined under Section

409A, then the Employer shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Employer, or (y) the date of Employee’s death.

(v) for purposes of this Section 5, “Section 409A” means Section

409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

(vi) for purposes of this Section 5, “409A Separation Pay Limit” means two times the lesser of (x) the Employee’s annual compensation during the calendar year preceding the year of the termination of employment; and (y) the adjusted compensation limit under Code Section 401(a)(17) in effect for the year of the termination.

6. Confidential Information, Nonsolicitation, and Cooperation.

(a) Definitions.

(i) As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

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(ii) As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b) Confidential Information. As used in this Agreement, “ConfidentialInformation” means information belonging to the Employer or its Affiliates which is of value to the Employer or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Employer) and the disclosure of which could result in a competitive or other disadvantage to the Employer or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Employer or its Affiliates, including, without limitation, the management of the Employer or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Employer, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Employer or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Employer or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c) Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Employer and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Employer and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Employer, except as may be necessary within the scope of Employee’s duties with Employer and in the ordinary course of performing the Employee’s duties to the Employer or as otherwise provided in Section 6(d). Employee understands and agrees not to sell, license or otherwise exploit any products or services which embody or otherwise exploit in whole or in part any Confidential Information or materials. Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of Confidential Information obtained by Employee during or in connection with the course of Employee’s employment constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Employer or its Affiliates, either during employment, or at any time thereafter.

(d) Protected Rights. Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Employer, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.

(e) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Employer or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Employer and its Affiliates. The Employee shall return to the Employer all such materials and property as and when requested by the Employer. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Employer and its Affiliates regardless of by whom they were compiled.

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(f) Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.

(g) Removal of Material. The Employee will not remove any Confidential Information from the Employer’s or its Affiliate’s premises except for use in the Employer’s business, and only consistent with the Employee’s duties with the Employer.

(h) Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Employer’s and its Affiliate’s business, and consistent with the Employee’s duties with the Employer. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

(i) Computer Security. The Employee agrees to comply with the Employer’s policies and procedures concerning computer security.

(j) E-Mail. The Employee acknowledges that the Employer retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.

(k) Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Employer or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Employer, or using any resources or materials of the Employer or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Employer (together “Proprietary Inventions”) will be the sole property of the Employer or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Employer the Employee’s entire right, title and interest in and to any and all Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Employer to obtain, maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.

NOTICE TO CALIFORNIA EMPLOYEES

Pursuant to California Labor Code §2870, an agreement requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer does not apply to an invention which qualifies fully under the provisions of California Labor Code § 2870, which provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of the State of California and is unenforceable.

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(l) Nonsolicitation. Employee agrees and covenants that, at any time during Employee’s employment with the Employer and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Employer for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of the Employer’s employees or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Employer or its Affiliates, whether in an employment capacity or otherwise (this provision does not prohibit the Employee’s post- termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Employer or its Affiliates, as a result of which relations between the Employer or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Employer or its Affiliates.

(m) Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Employer and has attached to this Agreement. The Employee represents to the Employer that the Employee’s execution of this Agreement, the Employee’s employment with the Employer and the performance of the Employee’s proposed duties for the Employer will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Employer, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Employer any copies or other tangible embodiments of non- public information belonging to or obtained from any such previous employment or other party.

(n) Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of the Employer that relate to events or occurrences that transpired while the Employee was employed by the Employer. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Employer in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.

(o) Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Employer and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Employer and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Employer, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Employer a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Employer shall have the right to retain any amounts otherwise payable by the Employer to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Employer and its Affiliates from and against any damages incurred by the Employer or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of this Agreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any

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other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

7. Successors. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and permitted assigns, including any corporation or entity with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that Employee’s obligations are personal and shall not be assigned by Employee. The Employee consents to be bound by the provisions of this Agreement for the benefit of the Employer or its Affiliates to whose employ the Employee may be transferred without the necessity that this Agreement be resigned at the time of such transfer. In the event of the Employee’s death after the Date of Termination but prior to the completion by the Employer of all payments due to the Employee under this Agreement, the Employer shall continue such payments to the Employee’s beneficiary designated in writing to the Employer prior to the Employee’s death (or to the Employee’s estate, if the Employee fails to make such designation).

8. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

10. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Employee at the last address for which the Employee has provided written notice to the Employer, or to the Employer at its main office, to the attention of Human Resources.

11. Publicity. The Employee hereby grants to the Employer the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Employer for the duration of Employee’s employment with Employer.

12. Conflicting Obligations and Rights. The Employee agrees to inform the Employer of any apparent conflicts between the Employee’s work for the Employer and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Employer’s behalf. Otherwise, the Employer may conclude that no such conflict exists and the Employee agrees thereafter to make no such claim against the Employer. The Employer shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

13. Notification of New Employer. In the event that the Employee leaves the employ of the Employer, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section

6 of this Agreement. The Employee further hereby authorizes the Employer to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them, including, without limitation, the Employment Agreement dated December 20, 2016, between Employer’s affiliate, Apollo Medical Management, Inc., a California corporation, and Employee, which shall be cancelled in its entirety and of no further force or effect. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Employer.

15. Amendment. This Agreement may be amended or modified only by a written instrument signed by the

Employee and by a duly authorized representative of the Employer.

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16. Governing Law. This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State.

17. Obligations of Successors. The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no such succession had taken place.

18. Limitation on Payments in Certain Events.

(a) Limitation on Payments. Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Employer shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

(b) The independent registered public accounting firm engaged by the Employer for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 18. If the independent registered public accounting firm so engaged by the Employer is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Employer shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Employer shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee at such time as requested by the Employer or the Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Employer and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Parties.

19. Consent to Jurisdiction; Forum Selection. At all times the Employee and Employer: (a) irrevocably submit to the exclusive jurisdiction of the Los Angeles Superior Court and United States District Court for the Central District of California, whichever may have competent subject matter jurisdiction, in any action or proceeding arising out of or relating to this Agreement, and irrevocably agree that all claims in respect of any such action or proceeding may be heard and determined in such court; (b) to the extent permitted by law, irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at the address set forth in this Agreement (or otherwise on record with the Employer); (c) to the extent permitted by law, irrevocably confirm that service of process out of such courts in such manner shall be deemed due service upon such party for the purposes of such action or proceeding; (d) to the extent permitted by law, irrevocably waives (i) any objection the Employee or Employer may have to the laying of venue of any such action or proceeding in any of such courts, or (ii) any claim that the Employee or Employer may have that any such action or proceeding has been brought in an inconvenient forum; and (e) to the extent permitted by law, irrevocably agrees that a final nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment

or in any other manner provided by law. Nothing in this Section shall affect the right of any party hereto to serve legal process in any manner permitted by law.

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20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer by its duly authorized officer, and by the Employee, as of the date first above written.

EMPLOYER:

NETWORK MEDICAL MANAGEMENT, INC.:

By: /s/Thomas Lam

Printed Name: Thomas Lam, M.D.  

Its: Co-Chief Executive Officer  

EMPLOYEE:

Signed:    /s/Adrian Vazquez  

Printed Name: Adrian Vazquez, M.D.  

[Signature page to Employment Agreement]

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EXHIBIT A

Release of Claims

I, , in consideration of and subject to the performance by Network Medical Management,

Inc., a California corporation (the “Company”) of its obligations under the Employment Agreement, dated as of _ _,

20 (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Releases.

(a) I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

(b) SECTION 1542 WAIVER. Employee agrees that all rights he may have under Section 1542 of the California Civil Code are hereby waived. Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.

5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.

6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.

7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s

401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.

8. I understand that I continue to be bound by Section 6 of the Agreement.

9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of the State of California.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT: (i) I HAVE READ IT CAREFULLY;

(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;

(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

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(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;

(v) I HAVE HAD AT LEAST TWENTY ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;

(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE 21-DAY [OR 45 DAY] CONSIDERATION PERIOD;

(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATED AS OF , 20

[Name]

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EX-10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 8, 2020, by and between Network Medical Management, Inc., a California corporation (the “Employer”), and Albert Young, M.D. (the “Employee” and together with the Employer referred to as the “Parties”) to become effective as of the date hereof (the “EffectiveDate”).

WHEREAS, the Employer desires to employ the Employee from and after the Effective Date on the terms and conditions set forth below, and the Employee is willing to serve the Employer on such terms and conditions.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Term. The term of this Agreement shall initially be for a one (1) year period commencing on the Effective Date. The term of this Agreement shall automatically renew for an additional year on each anniversary of the Effective Date unless either Party gives the other written notice of intent not to renew at least sixty (60) days prior to such date. Notwithstanding the foregoing, the initial term and any renewal year shall be subject to earlier termination as provided in Section 4 below. The initial term and any renewal years are referred to herein as the “Term”.

2. Positions and Duties. During the Term, the Employee shall serve as a senior executive officer of the Employer. The Employee shall perform for the Employer the duties customarily associated with being a senior executive officer that are consistent with your experience and skills and such other duties as may be assigned to the Employee from time to time by the Employer’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities. The Employee shall devote such working time, attention, knowledge, skills and efforts as may be required to fulfill the Employee’s duties hereunder, as reasonably determined by the Board. The Employee shall be permitted to perform services as required under the Hospitalist Participation Service Agreement, and provided, further that the Employee may participate as a member of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations so long as any such positions are disclosed to the Board and do not materially interfere with the Employee’s duties and responsibilities to the Employer. The Employee shall be based in Alhambra, California.

3. Compensation and Related Matters. The Employer shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term. Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee.

(a) Base Salary. The Employer shall pay the Employee for all services rendered a base salary of Three Hundred Forty-Six Thousand Two Hundred Eighty-Six Dollars ($346,286) per year (the “Base Salary”), payable in accordance with the Employer’s payroll procedures, subject to customary withholdings and employment taxes. The Base Salary shall be evaluated annually by the Board for increase only.

(b) Annual Bonus. The Employee will be eligible to receive an annual cash bonus (the “Annual Bonus”) for each fiscal year during the Term on such terms and conditions as the Board shall determine in its discretion consistent with the terms of the Employer’s business plan.

(c) Long Term Incentive Awards. The Employee shall be eligible to participate in any long term incentive plan that may be available to similarly positioned executives. The Board may determine to grant long-term incentive awards in cash or in equity awards settled in shares of the Employer’s stock, including but not limited to stock options, restricted stock and performance shares. In the event the Employee terminates service due to being a Good Leaver, any requirements under a long-term incentive award held by the Employee shall be deemed to have been satisfied by the Employer immediately prior to such termination. A “Good Leaver” means that, during the

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Term, either the Employee has resigned for Good Reason (as defined in Section 4(e) below), the Employer has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates employment on account of death or Disability (as defined in Section 4(b) below). For avoidance of doubt, being a Good Leaver entitles the Employee to be fully vested with respect to any stock options with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if he had remained continuously employed with the Employer.

(d) Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year which shall be accrued ratably during the calendar year, to be taken at such times and intervals as shall be agreed to by Employer and the Employee in their reasonable discretion. The Employee shall be entitled to accrue a maximum of twenty (20) business days of paid time off. When the maximum accrual is reached, no additional PTO time will accrue until Employee uses one or more accrued PTO days. Accrued and unused PTO shall be paid in cash at the end of a calendar year.

(e) Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Employer in accordance with the Employer’s expense reimbursement policy.

(f) Other Benefits. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Employer to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Irrespective of other benefits provided to employees, the Employee’s benefits package shall include: (i) the Employer’s payment of premiums for medical, dental and vision care coverage; (ii) the Employer’s payment of insurance premiums for short-term and long-term disability insurance providing for no less than sixty percent (60%) of Employee’s Base Salary to be payable to the Employee as long as the covered disability persists in a manner that substantially prevents employment in the same occupation as the position Employee last held with Employer but not beyond age sixty-five (65); and (iii) the Employer’s payment of insurance premiums for term life insurance providing for no less than two million dollars of coverage (subject to meeting applicable underwriting requirements).

(g) Tax Withholding. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement, to the extent it reasonably and in good faith believes it is required to make such deductions, withholdings and tax reports. Payments with respect to compensation and benefits referred to under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Employee for any adverse tax effect associated with any payments or benefits, or for any deduction or withholding from any payment or benefit.

4. Termination. The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:

(a) Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.

(b) Disability. The Employer may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation. This provision is not intended to reduce any rights the Employee may have pursuant to any law, including without limitation the California Family Rights Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the Americans with Disabilities Act.

(c) Termination by the Employer for Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Employer; (ii) the commission by the

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Employee of any felony; (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a material breach, according to the standard of the Employer, by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Employer; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Employer to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Employer or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Employer shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Employer’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Employer’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (x) expense reimbursement disputes in which the Employee acts in reasonable good faith; (y) occasional, customary and de minimis use of the Employer’s property for personal purposes; and (z) acting in good faith upon advice of Employer’s legal counsel.

(d) Termination without Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice. Any termination by the Employer of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d). Any suspension of the Employee’s employment with pay or benefits by the Board in good faith pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause or provide with Good Reason to terminate employment.

(e) Termination by the Employee. At any time during the Term, the Employee may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Employee’s responsibilities, authority or duties; (ii) the material breach of this Agreement by the Employer, including but not limited to a failure to pay Base Salary or Annual Bonus as provided for under this Agreement; or (iii) any relocation of the Employee’s principal place of business to a location more than 30 miles from the Employer’s current executive offices in Alhambra, California; provided, however, that this clause (iii) will not apply to the extent that any new office location is less than 30 miles from the Employee’s residence. “Good Reason Process” shall mean (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Employer in writing of the occurrence of the Good Reason condition within (60) days of the occurrence of such condition; (iii) the Employee cooperates in good faith with the Employer’s efforts, for a period of sixty (60) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within thirty (30) days after the end of the Cure Period. If the Employer cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Employer for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure

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period; (iii) if the Employee’s employment is terminated by the Employer under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; (iv) if the Employee’s employment is terminated by the Employee under Section 4(e) without Good Reason, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Employer; or (v) if the Employee’s employment is terminated by the Employee under Section 4(e) with Good Reason, the date on which Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Employer, the Employer may unilaterally accelerate the Date of Termination but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement. For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i) of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.

5. Compensation upon Termination.

(a) Accrued Benefits. If the Employee’s employment with the Employer is terminated for any reason during the Term, or if the Term is not renewed, the Employer shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “AccruedBenefits”) within the time prescribed by California law. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Employer, payment will be made to the Employee under the terms of the applicable plan, program or arrangement.

(b) Termination by the Employer without Cause or by the Employee with GoodReason. If the Employee’s employment is terminated by the Employer without Cause as provided in Section 4(d), or the Employee terminates his employment for Good Reason as provided in Section 4(e), or the Employee terminates employment at the end of the Term after the Employer provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then, (i) the Employer shall, through the Date of Termination, pay the Employee his or her Accrued Benefits, and (ii) if the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven-day revocation period:

(i) the Employer shall pay the Employee an amount equal to one-twelfth (1/12) of the Employee’s most recent Base Salary times the number of full years of service completed, not to exceed twelve (12) years of service (but determined prior to any action involving Base Salary that would constitute Good Reason) (the “Severance Amount”). Employer acknowledges that Employee has completed not less than twelve (12) full years of service (including Employee’s service for the Employer’s parent entity, subsidiaries and affiliates), such that the Severance Amount payable to Employee pursuant to the terms of this Agreement shall equal the maximum Severance Amount of one (1) year of the Employee’s most recent Base Salary. To the extent that such Severance Amount exceeds the 409A Separation Pay Limit (as defined below), such amount shall be paid in a single lump sum on the regular payroll date of the Employer, pertaining to then current salaried employees of the Employer, (“payroll date”) next following the first anniversary date of the Employee’s Date of Termination. The portion of the Severance Amount that does not exceed the 409A Separation Pay Limit shall be paid in substantially equal amounts on each payroll date over a one year period; and

(ii) the Employer shall pay the Employee an amount in cash equal to the Employer’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Employer’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:

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(A) No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);

(B) This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;

(C) Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:

(1) the Employee is no longer eligible for and continuing to receive the

COBRA coverage elected in subparagraph (A);

(2) the time period set forth in the first sentence of this paragraph (ii),

(3) the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and

(4) if the Employer in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.

(iii) Each individual payment of Severance Amount under Section

5(b)(i), and each payment under Section 5(b)(ii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).

(iv) Each individual payment of the Severance Amount under Section 5(b)(i), and each payment under Section 5(b)(ii), of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Employer allows in its sole discretion. The Employer may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC. Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Employer to constitute NQDC payable to a “specified employee” as defined under Section

409A, then the Employer shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Employer, or (y) the date of Employee’s death.

(v) for purposes of this Section 5, “Section 409A” means Section

409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

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(vi) for purposes of this Section 5, “409A Separation Pay Limit” means two times the lesser of (x) the Employee’s annual compensation during the calendar year preceding the year of the termination of employment; and (y) the adjusted compensation limit under Code Section 401(a)(17) in effect for the year of the termination.

6. Confidential Information, Nonsolicitation, and Cooperation.

(a) Definitions.

(i) As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

(ii) As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b) Confidential Information. As used in this Agreement, “ConfidentialInformation” means information belonging to the Employer or its Affiliates which is of value to the Employer or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Employer) and the disclosure of which could result in a competitive or other disadvantage to the Employer or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Employer or its Affiliates, including, without limitation, the management of the Employer or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Employer, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Employer or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Employer or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c) Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Employer and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Employer and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Employer, except as may be necessary within the scope of Employee’s duties with Employer and in the ordinary course of performing the Employee’s duties to the Employer or as otherwise provided in Section 6(d). Employee understands and agrees not to sell, license or otherwise exploit any products or services which embody or otherwise

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exploit in whole or in part any Confidential Information or materials. Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of Confidential Information obtained by Employee during or in connection with the course of Employee’s employment constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Employer or its Affiliates, either during employment, or at any time thereafter.

(d) Protected Rights. Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Employer, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.

(e) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Employer or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Employer and its Affiliates. The Employee shall return to the Employer all such materials and property as and when requested by the Employer. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Employer and its Affiliates regardless of by whom they were compiled.

(f) Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.

(g) Removal of Material. The Employee will not remove any Confidential Information from the Employer’s or its Affiliate’s premises except for use in the Employer’s business, and only consistent with the Employee’s duties with the Employer.

(h) Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Employer’s and its Affiliate’s business, and consistent with the Employee’s duties with the Employer. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

(i) Computer Security. The Employee agrees to comply with the Employer’s policies and procedures concerning computer security.

(j) E-Mail. The Employee acknowledges that the Employer retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.

(k) Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Employer or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Employer, or using any resources or materials of the Employer or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Employer (together “Proprietary Inventions”) will be the sole property of the Employer or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Employer the Employee’s entire right, title and interest in and to any and all

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Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Employer to obtain, maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.

NOTICE TO CALIFORNIA EMPLOYEES

Pursuant to California Labor Code §2870, an agreement requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer does not apply to an invention which qualifies fully under the provisions of California Labor Code § 2870, which provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of the State of California and is unenforceable.

(l) Nonsolicitation. Employee agrees and covenants that, at any time during Employee’s employment with the Employer and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Employer for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of the Employer’s employees or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Employer or its Affiliates, whether in an employment capacity or otherwise (this provision does not prohibit the Employee’s post- termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Employer or its Affiliates, as a result of which relations between the Employer or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Employer or its Affiliates.

(m) Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Employer and has attached to this Agreement. The Employee represents to the Employer that the Employee’s execution of this Agreement, the Employee’s employment with the Employer and the performance of the Employee’s proposed duties for the Employer will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Employer, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Employer any copies or other tangible embodiments of non- public information belonging to or obtained from any such previous employment or other party.

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(n) Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of the Employer that relate to events or occurrences that transpired while the Employee was employed by the Employer. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Employer in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.

(o) Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Employer and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Employer and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Employer, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Employer a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Employer shall have the right to retain any amounts otherwise payable by the Employer to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Employer and its Affiliates from and against any damages incurred by the Employer or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of thisAgreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

7. Successors. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and permitted assigns, including any corporation or entity with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that Employee’s obligations are personal and shall not be assigned by Employee. The Employee consents to be bound by the provisions of this Agreement for the benefit of the Employer or its Affiliates to whose employ the Employee may be transferred without the necessity that this Agreement be resigned at the time of such transfer. In the event of the Employee’s death after the Date of Termination but prior to the completion by the Employer of all payments due to the Employee under this Agreement, the Employer shall continue such payments to the Employee’s beneficiary designated in writing to the Employer prior to the Employee’s death (or to the Employee’s estate, if the Employee fails to make such designation).

8. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the

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waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

10. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Employee at the last address for which the Employee has provided written notice to the Employer, or to the Employer at its main office, to the attention of Human Resources.

11. Publicity. The Employee hereby grants to the Employer the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Employer for the duration of Employee’s employment with Employer.

12. Conflicting Obligations and Rights. The Employee agrees to inform the Employer of any apparent conflicts between the Employee’s work for the Employer and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Employer’s behalf. Otherwise, the Employer may conclude that no such conflict exists and the Employee agrees thereafter to make no such claim against the Employer. The Employer shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

13. Notification of New Employer. In the event that the Employee leaves the employ of the Employer, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section

6 of this Agreement. The Employee further hereby authorizes the Employer to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Employer.

15. Amendment. This Agreement may be amended or modified only by a written instrument signed by the

Employee and by a duly authorized representative of the Employer.

16. Governing Law. This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State.

17. Obligations of Successors. The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no such succession had taken place.

18. Limitation on Payments in Certain Events.

(a) Limitation on Payments. Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Employer shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of

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the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

(b) The independent registered public accounting firm engaged by the Employer for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 18. If the independent registered public accounting firm so engaged by the Employer is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Employer shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Employer shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee at such time as requested by the Employer or the Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Employer and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Parties.

19. Consent to Jurisdiction; Forum Selection. At all times the Employee and Employer: (a) irrevocably submit to the exclusive jurisdiction of the Los Angeles Superior Court and United States District Court for the Central District of California, whichever may have competent subject matter jurisdiction, in any action or proceeding arising out of or relating to this Agreement, and irrevocably agree that all claims in respect of any such action or proceeding may be heard and determined in such court; (b) to the extent permitted by law, irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at the address set forth in this Agreement (or otherwise on record with the Employer); (c) to the extent permitted by law, irrevocably confirm that service of process out of such courts in such manner shall be deemed due service upon such party for the purposes of such action or proceeding; (d) to the extent permitted by law, irrevocably waives (i) any objection the Employee or Employer may have to the laying of venue of any such action or proceeding in any of such courts, or (ii) any claim that the Employee or Employer may have that any such action or proceeding has been brought in an inconvenient forum; and (e) to the extent permitted by law, irrevocably agrees that a final nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section shall affect the right of any party hereto to serve legal process in any manner permitted by law.

20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer by its duly authorized officer, and by the Employee, as of the date first above written.

EMPLOYER:

NETWORK MEDICAL MANAGEMENT, INC.

By: /s/ Thomas Lam

Printed Name: Thomas Lam, M.D.

Its: Co-Chief Executive Officer

EMPLOYEE:

Signed:   /s/ Albert Young

Printed Name: Albert Young, M.D.

[Signature page to Employment Agreement]

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EXHIBIT A

Release of Claims

I, , in consideration of and subject to the performance by Network Medical Management,

Inc., a California corporation (the “Company”) of its obligations under the Employment Agreement, dated as of _ _,

20 (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Releases.

(a) I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

(b) SECTION 1542 WAIVER. Employee agrees that all rights he may have under Section 1542 of the California Civil Code are hereby waived. Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.

5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.

6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.

7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s

401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.

8. I understand that I continue to be bound by Section 6 of the Agreement.

9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of the State of California.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT: (i) I HAVE READ IT CAREFULLY;

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(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;

(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;

(v) I HAVE HAD AT LEAST TWENTY ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;

(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE 21-DAY [OR 45 DAY] CONSIDERATION PERIOD;

(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATED AS OF , 20

[Name]

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EX-10.6

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 8, 2020, by and between Network Medical Management, Inc., a California corporation (the “Employer”), and Brandon Sim (the “Employee” and together with the Employer referred to as the “Parties”) to become effective as of the date hereof (the “EffectiveDate”).

WHEREAS, the Employer desires to employ the Employee from and after the Effective Date on the terms and conditions set forth below, and the Employee is willing to serve the Employer on such terms and conditions.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Term. The term of this Agreement shall initially be for a one (1) year period commencing on the Effective Date. The term of this Agreement shall automatically renew for an additional year on each anniversary of the Effective Date unless either Party gives the other written notice of intent not to renew at least sixty (60) days prior to such date. Notwithstanding the foregoing, the initial term and any renewal year shall be subject to earlier termination as provided in Section 4 below. The initial term and any renewal years are referred to herein as the “Term”.

2. Positions and Duties. During the Term, the Employee shall serve as a senior executive officer of the Employer. The Employee shall perform for the Employer the duties customarily associated with being a senior executive officer that are consistent with your experience and skills and such other duties as may be assigned to the Employee from time to time by the Employer’s Board of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities. The Employee shall devote such working time, attention, knowledge, skills and efforts as may be required to fulfill the Employee’s duties hereunder, as reasonably determined by the Board, and provided, further that the Employee may participate as a member of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations so long as any such positions are disclosed to the Board and do not materially interfere with the Employee’s duties and responsibilities to the Employer. The Employee shall be based in Alhambra, California.

3. Compensation and Related Matters. The Employer shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term. Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee.

(a) Base Salary. The Employer shall pay the Employee for all services rendered a base salary of One Hundred Thousand Dollars ($100,000) per year (the “Base Salary”), payable in accordance with the Employer’s payroll procedures, subject to customary withholdings and employment taxes. The Base Salary shall be evaluated annually by the Board for increase only.

(b) Annual Bonus. The Employee will be eligible to receive an annual cash bonus (the “Annual Bonus”) for each fiscal year during the Term on such terms and conditions as the Board shall determine in its discretion consistent with the terms of the Employer’s business plan.

(c) Long Term Incentive Awards. The Employee shall be eligible to participate in any long term incentive plan that may be available to similarly positioned executives. The Board may determine to grant long-term incentive awards in cash or in equity awards settled in shares of the Employer’s stock, including but not limited to stock options, restricted stock and performance shares. In the event the Employee terminates service due to being a Good Leaver, any requirements under a long-term incentive award held by the Employee shall be deemed to have been satisfied by the Employer immediately prior to such termination. A “Good Leaver” means that, during the Term, either the Employee has resigned for Good Reason (as defined in Section 4(e) below), the Employer has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates

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employment on account of death or Disability (as defined in Section 4(b) below). For avoidance of doubt, being a Good Leaver entitles the Employee to be fully vested with respect to any stock options with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if he had remained continuously employed with the Employer.

(d) Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year which shall be accrued ratably during the calendar year, to be taken at such times and intervals as shall be agreed to by Employer and the Employee in their reasonable discretion. The Employee shall be entitled to accrue a maximum of twenty (20) business days of paid time off. When the maximum accrual is reached, no additional PTO time will accrue until Employee uses one or more accrued PTO days. Accrued and unused PTO shall be paid in cash at the end of a calendar year.

(e) Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Employer in accordance with the Employer’s expense reimbursement policy.

(f) Other Benefits. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Employer to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Irrespective of other benefits provided to employees, the Employee’s benefits package shall include: (i) the Employer’s payment of premiums for medical, dental and vision care coverage; (ii) the Employer’s payment of insurance premiums for short-term and long-term disability insurance providing for no less than sixty percent (60%) of Employee’s Base Salary to be payable to the Employee as long as the covered disability persists in a manner that substantially prevents employment in the same occupation as the position Employee last held with Employer but not beyond age sixty-five (65); and (iii) the Employer’s payment of insurance premiums for term life insurance providing for no less than two million dollars of coverage (subject to meeting applicable underwriting requirements).

(g) Tax Withholding. The Employer shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement, to the extent it reasonably and in good faith believes it is required to make such deductions, withholdings and tax reports. Payments with respect to compensation and benefits referred to under this Agreement shall be in amounts net of any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Employer to make any payments to compensate the Employee for any adverse tax effect associated with any payments or benefits, or for any deduction or withholding from any payment or benefit.

4. Termination. The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:

(a) Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.

(b) Disability. The Employer may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation. This provision is not intended to reduce any rights the Employee may have pursuant to any law, including without limitation the California Family Rights Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the Americans with Disabilities Act.

(c) Termination by the Employer for Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Employer; (ii) the commission by the Employee of any felony; (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a

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material breach, according to the standard of the Employer, by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Employer; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Employer to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Employer or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Employer shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Employer’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Employer’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (x) expense reimbursement disputes in which the Employee acts in reasonable good faith; (y) occasional, customary and de minimis use of the Employer’s property for personal purposes; and (z) acting in good faith upon advice of Employer’s legal counsel.

(d) Termination without Cause. At any time during the Term, the Employer may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice. Any termination by the Employer of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d). Any suspension of the Employee’s employment with pay or benefits by the Board in good faith pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause or provide with Good Reason to terminate employment.

(e) Termination by the Employee. At any time during the Term, the Employee may terminate his employment hereunder for any reason, including, but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Employee’s responsibilities, authority or duties; (ii) the material breach of this Agreement by the Employer, including but not limited to a failure to pay Base Salary or Annual Bonus as provided for under this Agreement; or (iii) any relocation of the Employee’s principal place of business to a location more than 30 miles from the Employer’s current executive offices in Alhambra, California; provided, however, that this clause (iii) will not apply to the extent that any new office location is less than 30 miles from the Employee’s residence. “Good Reason Process” shall mean (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Employer in writing of the occurrence of the Good Reason condition within (60) days of the occurrence of such condition; (iii) the Employee cooperates in good faith with the Employer’s efforts, for a period of sixty (60) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within thirty (30) days after the end of the Cure Period. If the Employer cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Employer for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure period; (iii) if the Employee’s employment is terminated by the Employer under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; (iv) if the Employee’s employment is terminated by the

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Employee under Section 4(e) without Good Reason, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Employer; or (v) if the Employee’s employment is terminated by the Employee under Section 4(e) with Good Reason, the date on which Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Employer, the Employer may unilaterally accelerate the Date of Termination but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement. For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i) of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.

5. Compensation upon Termination.

(a) Accrued Benefits. If the Employee’s employment with the Employer is terminated for any reason during the Term, or if the Term is not renewed, the Employer shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “AccruedBenefits”) within the time prescribed by California law. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Employer, payment will be made to the Employee under the terms of the applicable plan, program or arrangement.

(b) Termination by the Employer without Cause or by the Employee with GoodReason. If the Employee’s employment is terminated by the Employer without Cause as provided in Section 4(d), or the Employee terminates his employment for Good Reason as provided in Section 4(e), or the Employee terminates employment at the end of the Term after the Employer provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then, (i) the Employer shall, through the Date of Termination, pay the Employee his or her Accrued Benefits, and (ii) if the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven-day revocation period:

(i) the Employer shall pay the Employee an amount equal to one-twelfth (1/12) of the Employee’s most recent Base Salary times the number of full years of service completed, not to exceed twelve (12) years of service (but determined prior to any action involving Base Salary that would constitute Good Reason) (the “Severance Amount”). For the avoidance of doubt, the maximum Severance Amount payable to Employee pursuant to the terms of this Agreement shall equal one (1) year of the Employee’s most recent Base Salary. To the extent that such Severance Amount exceeds the 409A Separation Pay Limit (as defined below), such amount shall be paid in a single lump sum on the regular payroll date of the Employer, pertaining to then current salaried employees of the Employer, (“payroll date”) next following the first anniversary date of the Employee’s Date of Termination. The portion of the Severance Amount that does not exceed the 409A Separation Pay Limit shall be paid in substantially equal amounts on each payroll date over a one year period; and

(ii) the Employer shall pay the Employee an amount in cash equal to the Employer’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Employer’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:

(A) No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);

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(B) This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;

(C) Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:

(1) the Employee is no longer eligible for and continuing to receive the

COBRA coverage elected in subparagraph (A);

(2) the time period set forth in the first sentence of this paragraph (ii),

(3) the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and

(4) if the Employer in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.

(iii) Each individual payment of Severance Amount under Section

5(b)(i), and each payment under Section 5(b)(ii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).

(iv) Each individual payment of the Severance Amount under Section 5(b)(i), and each payment under Section 5(b)(ii), of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Employer allows in its sole discretion. The Employer may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC. Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Employer to constitute NQDC payable to a “specified employee” as defined under Section

409A, then the Employer shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Employer, or (y) the date of Employee’s death.

(v) for purposes of this Section 5, “Section 409A” means Section

409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

(vi) for purposes of this Section 5, “409A Separation Pay Limit” means two times the lesser of (x) the Employee’s annual compensation during the calendar year preceding the year of the termination of employment; and (y) the adjusted compensation limit under Code Section 401(a)(17) in effect for the year of the termination.

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6. Confidential Information, Nonsolicitation, and Cooperation.

(a) Definitions.

(i) As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

(ii) As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b) Confidential Information. As used in this Agreement, “ConfidentialInformation” means information belonging to the Employer or its Affiliates which is of value to the Employer or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Employer) and the disclosure of which could result in a competitive or other disadvantage to the Employer or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Employer or its Affiliates, including, without limitation, the management of the Employer or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Employer, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Employer or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Employer or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c) Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Employer and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Employer and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Employer, except as may be necessary within the scope of Employee’s duties with Employer and in the ordinary course of performing the Employee’s duties to the Employer or as otherwise provided in Section 6(d). Employee understands and agrees not to sell, license or otherwise exploit any products or services which embody or otherwise exploit in whole or in part any Confidential Information or materials. Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of Confidential Information obtained by Employee during or in connection with the course of Employee’s employment constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Employer or its Affiliates, either during employment, or at any time thereafter.

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(d) Protected Rights. Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Employer, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.

(e) Documents, Records, etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Employer or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Employer and its Affiliates. The Employee shall return to the Employer all such materials and property as and when requested by the Employer. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Employer and its Affiliates regardless of by whom they were compiled.

(f) Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.

(g) Removal of Material. The Employee will not remove any Confidential Information from the Employer’s or its Affiliate’s premises except for use in the Employer’s business, and only consistent with the Employee’s duties with the Employer.

(h) Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Employer’s and its Affiliate’s business, and consistent with the Employee’s duties with the Employer. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

(i) Computer Security. The Employee agrees to comply with the Employer’s policies and procedures concerning computer security.

(j) E-Mail. The Employee acknowledges that the Employer retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.

(k) Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Employer or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Employer, or using any resources or materials of the Employer or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Employer (together “Proprietary Inventions”) will be the sole property of the Employer or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Employer the Employee’s entire right, title and interest in and to any and all Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Employer to obtain, maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.

NOTICE TO CALIFORNIA EMPLOYEES

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Pursuant to California Labor Code §2870, an agreement requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer does not apply to an invention which qualifies fully under the provisions of California Labor Code § 2870, which provides as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of the State of California and is unenforceable.

(l) Nonsolicitation. Employee agrees and covenants that, at any time during Employee’s employment with the Employer and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Employer for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of the Employer’s employees or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Employer or its Affiliates, whether in an employment capacity or otherwise (this provision does not prohibit the Employee’s post- termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Employer or its Affiliates, as a result of which relations between the Employer or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Employer or its Affiliates.

(m) Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Employer and has attached to this Agreement. The Employee represents to the Employer that the Employee’s execution of this Agreement, the Employee’s employment with the Employer and the performance of the Employee’s proposed duties for the Employer will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Employer, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Employer any copies or other tangible embodiments of non- public information belonging to or obtained from any such previous employment or other party.

(n) Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Employer in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of the Employer that relate to events or occurrences that transpired while the Employee was employed by the Employer. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Employer at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Employer in connection with

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any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Employer. The Employer shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.

(o) Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Employer and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Employer and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Employer, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Employer a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Employer shall have the right to retain any amounts otherwise payable by the Employer to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Employer and its Affiliates from and against any damages incurred by the Employer or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of this Agreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

7. Successors. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and permitted assigns, including any corporation or entity with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that Employee’s obligations are personal and shall not be assigned by Employee. The Employee consents to be bound by the provisions of this Agreement for the benefit of the Employer or its Affiliates to whose employ the Employee may be transferred without the necessity that this Agreement be resigned at the time of such transfer. In the event of the Employee’s death after the Date of Termination but prior to the completion by the Employer of all payments due to the Employee under this Agreement, the Employer shall continue such payments to the Employee’s beneficiary designated in writing to the Employer prior to the Employee’s death (or to the Employee’s estate, if the Employee fails to make such designation).

8. Enforceability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

10. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Employee at the last address for which the Employee has provided written notice to the Employer, or to the Employer at its main office, to the attention of Human Resources.

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11. Publicity. The Employee hereby grants to the Employer the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Employer for the duration of Employee’s employment with Employer.

12. Conflicting Obligations and Rights. The Employee agrees to inform the Employer of any apparent conflicts between the Employee’s work for the Employer and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Employer’s behalf. Otherwise, the Employer may conclude that no such conflict exists and the Employee agrees thereafter to make no such claim against the Employer. The Employer shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

13. Notification of New Employer. In the event that the Employee leaves the employ of the Employer, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section

6 of this Agreement. The Employee further hereby authorizes the Employer to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.

14. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Employer.

15. Amendment. This Agreement may be amended or modified only by a written instrument signed by the

Employee and by a duly authorized representative of the Employer.

16. Governing Law. This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State.

17. Obligations of Successors. The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform if no such succession had taken place.

18. Limitation on Payments in Certain Events.

(a) Limitation on Payments. Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Employer shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

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(b) The independent registered public accounting firm engaged by the Employer for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 18. If the independent registered public accounting firm so engaged by the Employer is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Employer shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Employer shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Employer and the Employee at such time as requested by the Employer or the Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Employer and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Parties.

19. Consent to Jurisdiction; Forum Selection. At all times the Employee and Employer: (a) irrevocably submit to the exclusive jurisdiction of the Los Angeles Superior Court and United States District Court for the Central District of California, whichever may have competent subject matter jurisdiction, in any action or proceeding arising out of or relating to this Agreement, and irrevocably agree that all claims in respect of any such action or proceeding may be heard and determined in such court; (b) to the extent permitted by law, irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at the address set forth in this Agreement (or otherwise on record with the Employer); (c) to the extent permitted by law, irrevocably confirm that service of process out of such courts in such manner shall be deemed due service upon such party for the purposes of such action or proceeding; (d) to the extent permitted by law, irrevocably waives (i) any objection the Employee or Employer may have to the laying of venue of any such action or proceeding in any of such courts, or (ii) any claim that the Employee or Employer may have that any such action or proceeding has been brought in an inconvenient forum; and (e) to the extent permitted by law, irrevocably agrees that a final nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section shall affect the right of any party hereto to serve legal process in any manner permitted by law.

20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Employer by its duly authorized officer, and by the Employee, as of the date first above written.

EMPLOYER:

NETWORK MEDICAL MANAGEMENT, INC.:

By:    /s/ Thomas Lam

Printed Name: Thomas Lam, M.D.

Its: Co-Chief Executive Officer

EMPLOYEE:

Signed:    /s/ Brandon Sim

Printed Name: Brandon Sim

[Signature page to Employment Agreement]

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EXHIBIT A

Release of Claims

I, , in consideration of and subject to the performance by Network Medical Management,

Inc., a California corporation (the “Company”) of its obligations under the Employment Agreement, dated as of _ _,

20 (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Releases.

(a) I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

(b) SECTION 1542 WAIVER. Employee agrees that all rights he may have under Section 1542 of the California Civil Code are hereby waived. Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.

5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.

6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.

7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s

401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.

8. I understand that I continue to be bound by Section 6 of the Agreement.

9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of the State of California.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT: (i) I HAVE READ IT CAREFULLY;

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(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;

(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;

(v) I HAVE HAD AT LEAST TWENTY ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;

(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE 21-DAY [OR 45 DAY] CONSIDERATION PERIOD;

(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATED AS OF , 20

[Name]

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth Sim, M.D., certify that:

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:	August 7, 2020	/s/ Kenneth Sim
		Kenneth Sim Executive Chairman and Co-Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas Lam, M.D., certify that:

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:	August 7, 2020	/s/ Thomas Lam
		Thomas Lam Co-Chief Executive Officer and President (Principal Executive Officer)

EX-31.3

EXHIBIT 31.3

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric Chin, certify that:

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:	August 7, 2020	/s/ Eric Chin
		Eric Chin Chief Financial Officer and Interim Co-Chief Operating Officer (Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350.

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth Sim, M.D., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Apollo Medical Holdings, Inc. for the quarter ended June 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Apollo Medical Holdings, Inc.

Date:	August 7, 2020	/s/ Kenneth Sim
		Kenneth Sim Executive Chairman and Co-Chief Executive Officer (Principal Executive Officer)

I, Thomas Lam, M.D., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Apollo Medical Holdings, Inc. for the quarter ended June 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Apollo Medical Holdings, Inc.

Date:	August 7, 2020	/s/ Thomas Lam
		Thomas Lam Co-Chief Executive Officer and President (Principal Executive Officer)

I, Eric Chin, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Apollo Medical Holdings, Inc. for the quarter ended June 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Apollo Medical Holdings, Inc.

Date:	August 7, 2020	/s/ Eric Chin
		Eric Chin Chief Financial Officer and Interim Co-Chief Operating Officer (Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 03, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	001-37392
Entity Registrant Name	Apollo Medical Holdings, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-4472349
Entity Address, Address Line One	1668 S. Garfield Avenue
Entity Address, Address Line Two	2nd Floor
Entity Address, City or Town	Alhambra
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91801
City Area Code	626
Local Phone Number	282-0288
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	AMEH
Entity Common Stock, Shares Outstanding (in shares)		53,513,655
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001083446
Current Fiscal Year End Date	--12-31

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 152,441	$ 103,189
Restricted cash	0	75
Investment in marketable securities	117,656	116,539
Receivables, net	17,588	11,004
Receivables, net – related parties	59,328	48,136
Other receivables	15,919	16,885
Prepaid expenses and other current assets	11,188	10,315
Loans receivable	6,425	6,425
Loans receivable – related parties	0	16,500
Total current assets	380,545	329,068
Noncurrent assets
Restricted cash	746	746
Land, property and equipment, net	11,485	12,130
Intangible assets, net	94,790	103,012
Goodwill	239,053	238,505
Investment in other entities – equity method	26,817	28,427
Investments in privately held entities	37,075	896
Operating lease right-of-use assets	20,219	14,248
Other assets	22,487	1,681
Total noncurrent assets	452,672	399,645
Total assets	833,217	728,713
Current liabilities
Accounts payable and accrued expenses	24,788	27,279
Fiduciary accounts payable	1,853	2,027
Medical liabilities	70,273	58,725
Income taxes payable	42,210	4,529
Dividend payable	431	271
Finance lease liabilities	102	102
Operating lease liabilities	3,350	2,990
Current portion of long-term debt	9,500	9,500
Total current liabilities	152,507	105,423
Noncurrent liabilities
Deferred tax liability	13,654	18,269
Finance lease liabilities, net of current portion	355	416
Operating lease liabilities, net of current portion	17,418	11,373
Long-term debt, net of current portion and deferred financing costs	230,455	232,172
Total noncurrent liabilities	261,882	262,230
Total liabilities	414,389	367,653
Commitments and contingencies (Note 11)
Mezzanine equity
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation	210,980	168,725
Stockholders’ equity
Common stock, $0.001 par value per share; 100,000,000 shares authorized, 36,309,513 and 35,908,057 shares outstanding, excluding 17,475,707 and 17,458,810 treasury shares, at June 30, 2020, and December 31, 2019, respectively	36	36
Additional paid-in capital	163,986	159,608
Retained earnings	43,001	31,905
Retained earnings	207,023	191,549
Noncontrolling interest	825	786
Total stockholders’ equity	207,848	192,335
Total liabilities, mezzanine equity and stockholders’ equity	833,217	728,713
Series A Preferred Stock
Stockholders’ equity
Preferred stock	0	0
Series B Preferred Stock
Stockholders’ equity
Preferred stock	$ 0	$ 0

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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)	36,309,513	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

XML

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue
Total revenue	$ 165,169	$ 130,050	$ 330,274	$ 225,806
Operating expenses
Cost of services	136,079	101,363	280,283	184,795
General and administrative expenses	11,556	11,818	23,390	22,081
Depreciation and amortization	4,628	4,455	9,330	8,872
Provision for doubtful accounts	0	(2,314)	0	(1,363)
Total expenses	152,263	115,322	313,003	214,385
Income from operations	12,906	14,728	17,271	11,421
Other income (expense)
Income (loss) from equity method investments	834	(42)	2,888	(892)
Gain on sale of equity method investment	99,647	0	99,647	0
Interest expense	(2,673)	(311)	(5,541)	(522)
Interest income	863	474	1,792	797
Other income	1,282	24	1,384	211
Total other income (expense), net	99,953	145	100,170	(406)
Income before provision for income taxes	112,859	14,873	117,441	11,015
Provision for income taxes	31,858	4,209	33,453	2,801
Net income	81,001	10,664	83,988	8,214
Net income attributable to noncontrolling interests	73,957	7,119	72,892	4,529
Net income attributable to Apollo Medical Holdings, Inc.	$ 7,044	$ 3,545	$ 11,096	$ 3,685
Earnings per share – basic (in dollars per share)	$ 0.20	$ 0.10	$ 0.31	$ 0.11
Earnings per share – diluted (in dollars per share)	$ 0.19	$ 0.09	$ 0.30	$ 0.10
Capitation, net
Revenue
Total revenue	$ 140,949	$ 103,224	$ 281,370	$ 174,740
Risk pool settlements and incentives
Revenue
Total revenue	12,003	11,191	23,239	21,285
Management fee income
Revenue
Total revenue	8,690	10,353	17,505	19,349
Fee-for-service, net
Revenue
Total revenue	2,270	3,878	5,697	7,959
Other income
Revenue
Total revenue	$ 1,257	$ 1,404	$ 2,463	$ 2,473

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CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Common Stock Outstanding	Additional Paid-in Capital	Retained Earnings	Noncontrolling Interest	Noncontrolling Interest Mezzanine
Equity, beginning balance at Dec. 31, 2018	$ 181,544	$ 35	$ 162,723	$ 17,788	$ 998	$ 225,117
Equity, beginning balance (in shares) at Dec. 31, 2018		34,578,040
Net (loss) income	550			140	410	(3,000)
Purchase of treasury shares	0					(40)
Purchase of treasury shares (in shares)		(93,451)
Shares issued for exercise of options and warrants	140		140			155
Shares issued for exercise of options and warrants (in shares)		17,516
Share-based compensation	143		143			202
Share-based compensation (in shares)		1,599
Dividends	0					(10,000)
Equity, ending balance at Mar. 31, 2019	182,377	$ 35	163,006	17,928	1,408	212,434
Equity, ending balance (in shares) at Mar. 31, 2019		34,503,704
Net (loss) income	3,768			3,545	223	6,896
Shares issued for exercise of options and warrants	758		758			50
Shares issued for exercise of options and warrants (in shares)		135,108
Share-based compensation	128		128			203
Dividends	(942)				(942)
Equity, ending balance at Jun. 30, 2019	186,089	$ 35	163,892	21,473	689	219,583
Equity, ending balance (in shares) at Jun. 30, 2019		34,638,812
Equity, beginning balance at Dec. 31, 2019	192,335	$ 36	159,608	31,905	786	168,725
Equity, beginning balance (in shares) at Dec. 31, 2019		35,908,057
Net (loss) income	4,147			4,052	95	(1,161)
Purchase of treasury shares	(301)		(301)
Purchase of treasury shares (in shares)		(16,897)
Purchase of noncontrolling interest	0					(125)
Shares issued for exercise of options and warrants	722		722
Shares issued for exercise of options and warrants (in shares)		151,601
Share-based compensation	1,058		1,058
Dividends	0					(10,000)
Equity, ending balance at Mar. 31, 2020	197,961	$ 36	161,087	35,957	881	157,439
Equity, ending balance (in shares) at Mar. 31, 2020		36,042,761
Net (loss) income	7,335			7,044	291	73,667
Purchase of noncontrolling interest	0					(126)
Shares issued for vesting of restricted stock awards (in shares)		24,453
Shares issued for vesting of restricted stock awards	0
Shares issued for exercise of options and warrants	2,283		2,283
Shares issued for exercise of options and warrants (in shares)		242,299
Share-based compensation	852		852
Cancellation of restricted stock awards	(236)		(236)
Dividends	(347)				(347)	(20,000)
Equity, ending balance at Jun. 30, 2020	$ 207,848	$ 36	$ 163,986	$ 43,001	$ 825	$ 210,980
Equity, ending balance (in shares) at Jun. 30, 2020		36,309,513

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities
Net income	$ 83,988	$ 8,214
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	9,330	8,872
Amortization of debt issuance costs	658	0
Provision for doubtful accounts	0	(1,363)
Share-based compensation	1,910	676
Unrealized loss (gain) from investment in equity securities	25	(15)
(Income) loss from equity method investments	(2,888)	892
Gain on sale of equity method investments	(99,647)	0
Deferred tax	(4,473)	(549)
Changes in operating assets and liabilities, net of business combinations:
Receivables, net	(6,284)	588
Receivables, net – related parties	(11,191)	(12,665)
Other receivables	966	(11,897)
Prepaid expenses and other current assets	(873)	(2,740)
Right-of-use assets	1,680	1,098
Other assets	(5,095)	(243)
Accounts payable and accrued expenses	(3,043)	3,340
Fiduciary accounts payable	(174)	260
Medical liabilities	11,252	(3,819)
Income taxes payable	37,681	(11,622)
Operating lease liabilities	(1,247)	(1,044)
Net cash provided by (used in) operating activities	12,575	(22,017)
Cash flows from investing activities
Payments for business acquisition, net of cash acquired	0	(41,518)
Proceeds from repayment of loans receivable – related parties	16,500	0
Advances on loans receivable	0	(6,425)
Purchases of marketable securities	(1,142)	(8)
Purchases of investment – equity method	(500)	(2,158)
Proceeds from sale of equity method investment	52,743	0
Purchases of property and equipment	(451)	(378)
Dividend received	0	240
Net cash provided by (used in) investing activities	67,150	(50,247)
Cash flows from financing activities
Repayment of bank loan and lines of credit	0	(8,040)
Dividends paid	(30,187)	(10,942)
Repayment of term loan	(2,375)	0
Payment of finance lease obligations	(61)	(50)
Proceeds from the exercise of stock options and warrants	2,863	898
Repurchase of shares	(788)	(40)
Borrowings on line of credit	0	39,600
Proceeds from common stock offering	0	205
Net cash (used in) provided by financing activities	(30,548)	21,631
Net increase (decrease) in cash, cash equivalents and restricted cash	49,177	(50,633)
Cash, cash equivalents and restricted cash, beginning of period	104,010	107,637
Cash, cash equivalents and restricted cash, end of period	153,187	57,004
Supplementary disclosures of cash flow information:
Cash paid for income taxes	0	16,700
Cash paid for interest	2,623	439
Supplemental disclosures of non-cash investing and financing activities
Deferred tax liability adjustment to goodwill	0	8,355
Preferred shares received from sale of equity method investment	36,179	0
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents	152,441	52,726
Restricted cash – non-current	746	4,278
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$ 153,187	$ 57,004

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Description of Business

6 Months Ended

Jun. 30, 2020

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”), APA ACO, Inc. ("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 variable interest entity ("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;

1.ApolloMed loaned AP-AMH $545.0 million pursuant to a 10-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 purchased by AP-AMH, as described below. 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 daily basis and that are equal to the sum of (i) APC’s net income from healthcare services (as defined in the Certificate of Determination), plus (ii) any dividends received by APC from certain of APC’s affiliated entities, less (iii) any Retained Amounts (as defined in the Certificate of Determination).

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 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 ApolloMed’s stockholders.

4.ApolloMed licensed to AP-AMH the right to use certain trade names 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.

APC's ownership in ApolloMed was 32.28% at June 30, 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 organized by a group of highly qualified physicians, which 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 June 30, 2020, APC 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 stockholder 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 approximately 170,000 enrollees, as of June 30, 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 400 primary care physicians and 700 specialty care physicians, and four community and regional hospital medical centers that provide quality health care services to approximately 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 that 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 the sale 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 preferred stock having an estimated fair value of approximately $36.2 million on the date of sale. In addition, pursuant to the terms of the stock purchase agreement, APC has a beneficial interest in the equity method investment sold. The estimated fair value of such interest on April 30, 2020 was $15.7 million (see Note 5). 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 UCI has 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 did not affect net income attributable to ApolloMed.

APAACO, jointly owned by NMM and AMM, began participating in the Next Generation Accountable Care Organization (“NGACO") Model of the Centers for Medicare & Medicaid Services (“CMS”) in January 2017. The NGACO Model is a 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, 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. ("Apollo Care Connect"), 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.

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

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 sheets 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 June 30, 2020, and for the three and six months ended June 30, 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 and six months ended June 30, 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 June 30, 2020 and December 31, 2019, and the consolidated statements of income for the three and six months ended June 30, 2020 and 2019,  include the accounts of ApolloMed, its consolidated subsidiaries, NMM, AMM, APAACO, and Apollo Care Connect, its consolidated VIE, AP-AMH, NMM's consolidated subsidiaries, and 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.

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 90 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 June 30, 2020, the Company’s deposit accounts with banks exceeded the FDIC’s insured limit by approximately $290.9 million, including approximately $117.6 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 June 30, 2020 and December 31, 2019, investments in marketable securities amounted to approximately $117.7 million and $116.5 million, respectively, and consisted of equity securities and certificates of deposit with various financial institutions, reported at par value, plus accrued interest, with maturity dates from four 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 and 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. Other receivables consists of 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.

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 applicable contracts and 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. As of June 30, 2020 and December 31, 2019 the Company had $1.3 million and $2.9 million of allowance for doubtful accounts, respectively.

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 payor type for the three and six months ended June 30, 2020 and 2019 (in thousands):

	For the Three Months Ended June 30,
	2020		2019
Commercial	$	25,479	$	25,365
Medicare	62,038		57,965
Medicaid	68,450		36,277
Other third parties	9,202		10,443
Revenue	$	165,169	$	130,050

	For the Six Months Ended June 30,
	2020		2019
Commercial	$	50,192	$	50,383
Medicare	126,918		95,063
Medicaid	134,897		61,647
Other third parties	18,267		18,713
Revenue	$	330,274	$	225,806

The Company had major payors that contributed the following percentages of net revenue:

	For the Three Months Ended June 30,
	2020		2019
Payor A	11.9	%	13.7	%
Payor B	10.3	%	12.6	%
Payor C	*		10.5	%
Payor D	17.5	%	13.7	%
Payor E	12.4	%	*
Payor F	10.1	%	*

	For the Six Months Ended June 30,
	2020		2019
Payor A	11.9	%	15.8	%
Payor B	10.3	%	14.3	%
Payor C	*		11.7	%
Payor D	17.5	%	*
Payor E	12.9	%	*
Payor F	10.3	%	*

* Less than 10% of total net revenues

The Company had major payors that contributed to the following percentages of receivables and receivables – related parties:

	As of June 30, 2020		As of December 31, 2019
Payor D	12.4	%	*
Payor G	33.5	%	30.4	%
Payor H	35.1	%	36.0	%

* Less than 10% of total receivables and receivables — related parties, net

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 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 June 30, 2020, are presented below (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market funds*	$	108,195	$	—	$	—	$	108,195
Marketable securities – certificates of deposit	117,611		—		—		117,611
Marketable securities – equity securities	45		—				45
Total	$	225,851	$	—	$	—	$	225,851

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2019, are presented below (in thousands):

	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

* Included in cash and cash equivalents

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 six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 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.

Investments in Privately Held Entities

The Company accounts for certain investments using the cost method of accounting when it is determined that the investment provides the Company with little or no influence over the investee. Under the cost method of accounting, the investment is measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. The investments in privately held entities that do not report NAV are subject to qualitative assessment for indicators of impairments.

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 claims (see Note 8), and 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 will 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 will 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 will 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 claims, risk adjustment factors, and 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 $7.6 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 $22.9 million and $45.5 million in total AIPBP payments for the three and six months ended June 30, 2020, respectively, of which $20.5 million and $42.4 million has been recognized as revenue for the three and six months ended June 30, 2020, respectively. The Company also recorded assets of approximately $8.5 million related to IBNR claims as of June 30, 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-Service 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 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 $3.1 million and $8.9 million as of June 30, 2020, and December 31, 2019, respectively, and is presented within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets. During the six months ended June 30, 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.

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 equity ownership interests held by certain VIEs) in the Company’s consolidated entities. 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 June 30, 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. 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 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.

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Business Combinations and Goodwill

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Business Combinations and Goodwill

Business Combinations and Goodwill

Alpha Care Medical Group, Inc.

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 June 30, 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):

	Balance Sheet
Assets acquired
Cash and cash equivalents	$	3,569
Accounts receivable, net	10,336
Other current assets	4,675
Network relationship intangible assets	22,636
Goodwill	28,585
Accounts payable	(2,795)
Deferred tax liabilities	(6,334)
Medical liabilities	(15,616)
Net assets acquired	$	45,056
Cash paid	$	45,056

Accountable Health Care, IPA, a Professional Medical Corporation

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):

	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	23,566
Accounts payable	(3,759)
Medical liabilities	(12,154)
Subordinated loan	(15,327)
Net asset acquired	$	9,667
Equity investment contributed	$	2,417
Cash paid	$	7,250

AMG, a Professional Medical Corporation

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 one year from the date of acquisition.

Goodwill is not deductible for tax purposes.

The change in the carrying value of goodwill for the six months ended June 30, 2020, was as follows (in thousands);

Balance, January 1, 2020	$	238,505
Adjustments	548
Balance, June 30, 2020	$	239,053

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Intangible Assets, Net

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets, Net

Intangible Assets, Net

At June 30, 2020, the Company’s intangible assets, net, consisted of the following (in thousands):

	Useful Life (Years)	Gross June 30, 2020		Accumulated Amortization		Net June 30, 2020
Amortized intangible assets:
Network relationships	11-15	$	143,930	$	(67,015)	$	76,915
Management contracts	15	22,832		(10,736)		12,096
Member relationships	12	6,696		(2,793)		3,903
Patient management platform	5	2,060		(1,064)		996
Trade names/trademarks	20	1,011		(131)		880
		$	176,529	$	(81,739)	$	94,790

At December 31, 2019, the Company’s intangible assets, net, consisted of the following (in thousands):

	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 names/trademarks	20	1,011		(105)		906
		$	176,529	$	(73,517)	$	103,012

Included in depreciation and amortization on the accompanying consolidated statements of income is amortization expense of $4.1 million and $3.9 million for the three months ended June 30, 2020 and 2019, respectively, and $8.2 million and $7.7 million for the six months ended June 30, 2020 and 2019, respectively.

Future amortization expense is estimated to be as follows for the following years ending December 31 (in thousands):

	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,807
2021	14,524
2022	12,673
2023	10,842
2024	9,830
Thereafter	39,114
Total	$	94,790

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Investments in Other Entities — Equity Method

6 Months Ended

Jun. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments in Other Entities — Equity Method

Investments in Other Entities — Equity Method

Rollforward of Equity Method Investment (in thousands)

	December 31, 2019		Allocation of Income (Loss)		Contribution		Sale		June 30, 2020
LaSalle Medical Associates – IPA Line of Business	$	6,397	$	(428)	$	—	$	—	$	5,969
Pacific Medical Imaging & Oncology Center, Inc.	1,396		77		—		—		1,473
Universal Care, Inc.	1,438		3,560		—		(4,998)		—
Diagnostic Medical Group	2,334		(102)		—		—		2,232
531 W. College, LLC – related party	16,698		(231)		500		—		16,967
MWN, LLC – related party	164		12		—		—		176
	$	28,427	$	2,888	$	500	$	(4,998)	$	26,817

LaSalle Medical Associates — IPA Line of Business

LMA was founded by Dr. Albert Arteaga in 1996 and currently operates six neighborhood medical centers through its network of approximately 2,300 PCP and Specialists providers, treating children, adults and seniors in San Bernardino County, California. LMA’s patients are primarily served by Medi-Cal. LMA also accepts Blue Cross, Blue Shield, Molina, Care 1st, Health Net and Inland Empire Health Plan. LMA is also an IPA of independently contracted doctors, hospitals and clinics, delivering high-quality care to approximately 290,000 patients in Fresno, Kings, Los Angeles, Madera, Riverside, San Bernardino and Tulare Counties. During 2012, APC-LSMA and LMA entered into a share purchase agreement whereby APC-LSMA invested $5.0 million for a 25% interest in LMA’s IPA line of business. NMM has a management services agreement with LMA. APC accounts for its investment in LMA under the equity method as APC has the ability to exercise significant influence, but not control over LMA’s operations. For the three months ended June 30, 2020, APC recognized income from this investment of $0.2 million. For the three months ended June 30, 2019, APC recognized a loss from this investment of $1.3 million. For the six months ended June 30, 2020 and 2019, APC recognized losses of $0.4 million and $2.4 million, respectively, in the accompanying consolidated statements of income. The accompanying consolidated balance sheets include the related investment balance of $6.0 million and $6.4 million at June 30, 2020 and December 31, 2019, respectively.

LMA’s summarized balance sheets at June 30, 2020 and December 31, 2019, and summarized statements of operations for the six months ended June 30, 2020 and 2019, with respect to its IPA line of business are as follows (in thousands):

Balance Sheets

	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	2,852	$	6,345
Receivables, net	6,751		5,124
Other current assets	880		3,526
Loan receivable	2,250		2,250
Restricted cash	688		683
Total assets	$	13,421	$	17,928
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	$	20,735	$	23,530
Stockholders’ deficit	(7,314)		(5,602)
Total liabilities and stockholders’ deficit	$	13,421	$	17,928

Statements of Operations

	Six Months Ended June 30,
	2020		2019
Revenues	$	92,113	$	93,434
Expenses	93,680		102,845
Net loss	$	(1,567)	$	(9,411)

Pacific Medical Imaging and Oncology Center, Inc.

Incorporated in California in 2004, PMIOC provides comprehensive diagnostic imaging services using state-of-the-art technology. PMIOC offers high-quality diagnostic services, such as MRI/MRA, PET/CT, CT, nuclear medicine, ultrasound, digital x-rays, bone densitometry and digital mammography, at its facilities.

In July 2015, APC-LSMA and PMIOC entered into a share purchase agreement whereby APC-LSMA invested $1.2 million for a 40% ownership interest in PMIOC.

APC and PMIOC have an Ancillary Service Contract together whereby PMIOC provides covered services on behalf of APC to enrollees of the plans of APC. Under the Ancillary Service Contract, APC paid PMIOC fees of approximately $0.4 million and $0.6 million, for the three months ended June 30, 2020 and 2019, respectively, and fees of approximately $1.0 million and $1.4 million for the six months ended June 30, 2020 and 2019. APC accounts for its investment in PMIOC under the equity method of accounting as APC has the ability to exercise significant influence, but not control over PMIOC’s operations. For the three months ended June 30, 2020, APC recognized a loss from this investment of $10,200. For the three months ended June 30, 2019, APC recognized income from this investment of $0.1 million. For the six months ended June 30, 2020 and 2019, APC recognized income of $0.1 million and $0.2 million, respectively, in the accompanying consolidated statements of income. The accompanying consolidated balance sheets include the related investment balance of $1.5 million and $1.4 million at June 30, 2020 and December 31, 2019, respectively.

Universal Care, Inc.

UCI is a privately held health plan that has been in operation since 1985. UCI holds a license under the California Knox-Keene Health Care Services Plan Act to operate as a full-service health plan. UCI contracts with CMS under the Medicare Advantage Prescription Drug Program.

In August 2015, UCAP purchased 100,000 shares of UCI class A-2 voting common stock from UCI for $10.0 million, which shares comprise 48.9% of UCI’s total outstanding shares and 50% of UCI’s voting common stock.

On April 30, 2020, UCAP completed the sale 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 an estimated fair value of approximately $36.2 million on the date of sale, included in investments in privately held entities. The fair value of the preferred shares was determined utilizing a market approach which includes significant unobservable inputs (Level 3) including forecasted revenue along with estimates of revenue multiples, volatility and time-to-liquidity. In addition, pursuant to the terms of the stock purchase agreement, APC has a beneficial interest in the equity method investment sold. The estimated fair value of such interest on April 30, 2020 was $15.7 million and is included in "Other assets" in the accompanying consolidated balance sheets. The beneficial interest is the result of a gross margin provision in the stock purchase agreement which entitles UCAP to potentially receive additional cash and preferred shares (currently held in an escrow account with cash of $15.6 million and preferred shares with an estimated fair value of $6.4 million, total estimated fair value of $22.0 million on the date of sale) based on the gross margin of UCI for calendar year 2020 as measured against a target. The amount to be received varies dependent upon the gross margin as compared to the target but cannot exceed the amounts that are in the escrow account. Additionally, the stock purchase agreement includes a tangible net equity provision that may result in the receipt or payment of additional amounts based on a comparison of final tangible net equity of UCI on the date of sale (determined with the benefit of one year of hindsight) as compared to the estimated tangible net equity at the time of sale. It is expected that settlement of the beneficial interest will begin in the second half of 2021. The Company determined the fair value of the beneficial interest using an income approach which includes significant unobservable inputs (Level 3). Specifically, the Company utilized a probability weighted discounted cash flow model using a risk-free treasury rate to estimate fair value which considered various scenarios of gross margin adjustment and the impact of each adjustment to the expected proceeds from the escrow account and assigned probabilities to each such scenario in determining fair value. The gross margin adjustment is defined as three times any deficit in actual gross margin of UCI for the year ended December 31, 2020 below a target gross margin unless such deficit is within a specific collar amount.

The gain on sale of equity method investment recognized in connection with this transaction was determined as follows:

	Amount (in '000s)
Cash proceeds (excludes proceeds to settle indebtedness owed to APC from UCI)	$	52,743
Preferred shares in Bright Health, Inc.	$	36,179
Beneficial interest in UCI	$	15,723
Less: Carrying value of equity method investment on date of sale	$	(4,998)
Gain on sale of equity method investment	$	99,647

For the three months ended June 30, 2020 and June 30, 2019 APC recorded income from this investment of approximately $0.9 million and $4.5 million. For the six months ended June 30, 2020 and June 30, 2019 APC recorded income from this investment of approximately $3.6 million and $5.5 million in the accompanying consolidated statements of income, respectively. As a result of the sale, there was no investment balance as of June 30, 2020 as compared to an investment balance of $1.4 million as of December 31, 2019.

UCI's balance sheet at December 31, 2019 and statements of income for the four months ended April 30, 2020 and six months ended June 30, 2019 are as follows (in thousands):

Balance Sheets

	December 31, 2019
Assets
Cash and cash equivalents	$	33,890
Receivables, net	63,843
Other current assets	38,280
Loan receivable	882
Restricted cash	4,021
Total assets	$	140,916
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	$	128,330
Other liabilities	33,133
Stockholders’ deficit	(20,547)
Total liabilities and stockholders’ deficit	$	140,916

Statements of Operations

	Four Months Ended		Six Months Ended
	April 30, 2020		June 30, 2019
Revenues	$	195,308	$	247,517
Expenses	189,028		239,389
Income before benefit from income taxes	6,280		8,128
Benefit from income taxes	—		(3,167)
Net income	$	6,280	$	11,295

Diagnostic Medical Group

In May 2016, David C.P. Chen M.D., individually, and APC-LSMA, entered into a share purchase agreement whereby APC-LSMA acquired a 40% ownership interest in DMG.

APC accounts for its investment in DMG under the equity method of accounting as APC has the ability to exercise significant influence, but not control over DMG’s operations. For the three months ended June 30, 2020 and 2019, APC recognized loss and income from this investment of $0.1 million and $0.2 million, respectively, in the consolidated statements of income. For the six months ended June 30, 2020 and 2019, APC recognized loss and income from investment of $0.1 million and $0.4 million, respectively, in the consolidated statements of income. The accompanying consolidated balance sheets include the related investment balances of $2.2 million and $2.3 million as of June 30, 2020 and December 31, 2019, respectively.

531 W. College LLC – Related Party

In June 2018, College Street Investment LP, a California limited partnership (“CSI”), APC and NMM entered into an operating agreement to govern the limited liability company, 531 W. College, LLC and the conduct of its business, and to specify their relative rights and obligations. CSI, APC and NMM, each owns 50%, 25% and 25%, respectively, of member units based on initial capital contributions of $16.7 million, $8.3 million, and $8.3 million, respectively.

In June 2018, 531 W. College, LLC closed its purchase of a non-operational hospital located in Los Angeles from Societe Francaise De Bienfaisance Mutuelle De Los Angeles, a California nonprofit corporation, for a total purchase price of $33.3 million. On April 23, 2019, NMM and APC entered into an agreement whereby NMM assigned and APC assumed NMM’s 25% membership interest in 531 W. College, LLC for approximately $8.3 million. Subsequently, APC has a 50% ownership in 531 W. College LLC with a total investment balance of approximately $17.0 million.

APC accounts for its investment in 531 W. College, LLC under the equity method of accounting as APC has the ability to exercise significant influence, but not control over the operations of this joint venture. For the three months ended June 30, 2020 and 2019, APC recognized loss and income of $0.1 million and $12,649, respectively. For the six months ended June 30, 2020 and 2019, APC recorded losses of $0.2 million and $34,319 in the accompanying consolidated statements of income, respectively. During the period ended June 30, 2020, the Company contributed $0.5 million to 531 W. College LLC as part of its 50% interest and had investment balances of $17.0 million and $16.7 million, respectively, at June 30, 2020 and December 31, 2019.

531 W. College LLC’s balance sheets at June 30, 2020 and December 31, 2019, and statements of operations for the six months ended June 30, 2020 and 2019, are as follows (in thousands):

Balance sheets

	June 30, 2020		December 31, 2019
Assets
Cash	$	126	$	139
Other current assets	—		17
Other assets	70		70
Property and equipment, net	33,697		33,581
Total assets	$	33,893	$	33,807
Liabilities and Members’ Equity
Current liabilities	$	1,109	$	1,062
Stockholders’ equity	32,784		32,745
Total liabilities and members’ equity	$	33,893	$	33,807

Statements of Operation

	Six Months Ended June 30,
	2020		2019
Revenues	—		—
Expenses	579		538
Loss from operations	(579)		(538)
Other income	$	21	$	385
Net loss	$	(558)	$	(153)

MWN LLC – Related Party

In December 2018, NMM, 6 Founders LLC, a California limited liability company doing business as Pacific6 Enterprises (“Pacific6”), and Health Source MSO Inc., a California corporation (“HSMSO”) entered into an operating agreement to govern

MWN Community Hospital, LLC and the conduct of its business and to specify their relative rights and obligations. NMM, Pacific6, and HSMSO each own 33.3% of the membership shares based on each member’s initial capital contributions of $3,000 and working capital contributions of $30,000. NMM invested an additional $0.3 million for working capital purposes in August 2019. For the three and six months ended June 30, 2020, NMM recorded loss and income from its investment in MWN LLC of $43,000 and $12,000, respectively, in the accompanying consolidated statements of income and had an investment balance of $0.2 million as of June 30, 2020 and December 31, 2019.

Investments in privately held entities that do not report net asset value

MediPortal, LLC

In May 2018, APC purchased 270,000 membership interests of MediPortal LLC, a New York limited liability company, for $0.4 million or $1.50 per membership interest, which represented an approximately 2.8% ownership interest. In connection with the initial purchase, APC received a five-year warrant to purchase an additional 270,000 membership interests. Additionally, APC received a five-year option to purchase an additional 380,000 membership interests and a five-year warrant to purchase 480,000 membership interests, which MediPortal LLC will grant APC upon completion of its health portal. As of June 30, 2020, the health portal has not been completed. As APC does not have the ability to exercise significant influence, and lacks control, over the investee, this investment is accounted for using a measurement alternative which allows the investment to be measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

AchievaMed

On July 1, 2019, NMM and AchievaMed, Inc., a California corporation (“AchievaMed”), entered into an agreement in which NMM would purchase 50% of the aggregate shares of capital stock of AchievaMed over a period of time not to exceed five years. As a result of this transaction NMM invested $0.5 million for a 10% interest. The related investment balance of $0.5 million is included in “Investment in privately held entities” in the accompanying consolidated balance sheets as of June 30, 2020.

Bright Health, Inc.

In April 2020, UCAP completed the sale 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 an estimated fair value of approximately $36.2 million on the date of sale. The related investment balance of $36.2 million is included in “Investment in privately held entities” in the accompanying consolidated balance sheets as of June 30, 2020.

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Loan Receivable and Loan Receivable – Related Parties

6 Months Ended

Jun. 30, 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 June 30, 2020) and payable in monthly installments of interest only on the first day of each month until the maturity date of December 31, 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 December 31, 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 on the consolidated balance sheets in the amount of $6.4 million as of June 30, 2020.

On February 28, 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 June 30, 2020, the outstanding amount due was $0.9 million and included in the “Prepaid expenses and other current assets” in the accompanying consolidated balance sheets.

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 estimates an expected credit loss based on the remittance schedule of the note.

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. On April 30, 2020, the outstanding balance was fully repaid as part of UCAP's disposition of its 48.9% ownership interest in UCI to Bright.

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Accounts Payable and Accrued Expenses

6 Months Ended

Jun. 30, 2020

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):

	June 30, 2020		December 31, 2019
Accounts payable	$	10,425	$	6,914
Capitation payable	2,754		2,813
Subcontractor IPA payable	3,083		3,360
Professional fees	2,325		1,837
Due to related parties	80		225
Accrued compensation	3,060		3,238
Contract liabilities	3,061		8,892
Total accounts payable and accrued expenses	$	24,788	$	27,279

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Medical Liabilities

6 Months Ended

Jun. 30, 2020

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):

	June 30, 2020		June 30, 2019
Medical liabilities, beginning of period	$	58,725	$	33,642
Components of medical care costs related to claims incurred:
Current period	165,571		93,833
Prior periods	233		2,688
Total medical care costs	165,804		96,521
Payments for medical care costs related to claims incurred:
Current period	(97,112)		(60,440)
Prior periods	(57,470)		(39,744)
Total paid	(154,582)		(100,184)
Acquired from Alpha Care	—		13,120
Adjustments	326		(156)
Medical liabilities, end of period	$	70,273	$	42,943

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Credit Facility, Bank Loan and Lines of Credit

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Credit Facility, Bank Loan and Lines of Credit

Credit Facility, Bank Loan and Lines of Credit

Credit Facility

The Company’s credit facility consisted of the following (in thousands):

	June 30, 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	(5,295)
Long-term debt	$	230,455

Future commitments of the Company’s credit facility is to be as follows for the years ending December 31 (in thousands):

	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,125
2021	10,688
2022	14,250
2023	15,437
2024	197,750
Total	$	245,250

Credit Agreement

In September 2019, the Company entered into a secured credit agreement (the “Credit Agreement,” and the credit facility thereunder, the "Credit Facility") with Truist Bank (formerly known as SunTrust Bank), in its capacity as administrative agent for the lenders (in such capacity, the “Agent”), as a lender, an issuer of letters of credit and as swingline lender, and Preferred Bank, JPMorgan Chase Bank, N.A., MUFG Union Bank, N.A., Royal Bank of Canada, Fifth Third Bank and City National Bank, as lenders (the “Lenders”). In connection with the closing of the Credit Agreement, the Company, its subsidiary, NMM, and the Agent entered into a Guaranty and Security Agreement (the “Guaranty and Security Agreement”), pursuant to which, among other things, NMM guaranteed the obligations of the Company under the Credit Agreement.

The Credit Agreement provides for a five-year revolving credit facility to the Company of $100.0 million (“Revolver Loan”), which includes a letter of credit subfacility of up to $25.0 million. The Credit Agreement also provides for a term loan of $190.0 million, (“Term Loan A”). The unpaid principal amount of the term loan is payable in quarterly installments on the last day of each fiscal quarter commencing on December 31, 2019. The principal payment for each of the first eight fiscal quarters is $2.4 million, for the following eight fiscal quarters thereafter is $3.6 million and for the following three fiscal quarters thereafter is $4.8 million. The remaining principal payment on the term loan is due on September 11, 2024.

The proceeds of the term loan and up to $60.0 million of the revolving credit facility were used to (i) finance a portion of the AP-AMH Loan, (ii) refinance certain indebtedness of the Company and its subsidiaries and, indirectly, APC, (iii) pay transaction costs and expenses arising in connection with the Credit Agreement, the AP-AMH Loan and certain other related transactions and (iv) provide for working capital, capital expenditures and other general corporate purposes. The remainder of the revolving credit facility will be used to finance future acquisitions and investments and to provide for working capital needs, capital expenditures and other general corporate purposes.

The Company is required to pay an annual facility fee of 0.20% to 0.35% on the available commitments under the Credit Agreement, regardless of usage, with the applicable fee determined on a quarterly basis based on the Company’s leverage ratio. The Company is also required to pay customary fees as specified in a separate fee agreement between the Company and SunTrust Robinson Humphrey, Inc., the lead arranger of the Credit Agreement.

Amounts borrowed under the Credit Agreement will bear interest at an annual rate equal to either, at the Company’s option, (a) the rate for Eurocurrency deposits for the corresponding deposits of U.S. dollars appearing on Reuters Screen LIBOR01 Page (“LIBOR”), adjusted for any reserve requirement in effect, plus a spread of between 2.00% and 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread between 1.00% and 2.00%, as determined on a quarterly basis based on the Company’s leverage ratio. As of June 30, 2020, the interest rate on Term Loan A and Revolver Loan was 3.57% and 3.24%, respectively. The base rate is defined in a manner such that it will not be less than LIBOR. The Company will pay fees for standby letters of credit at an annual rate of between 2.00% and 3.00%, as determined on a quarterly basis based on the Company’s leverage ratio, plus facing fees and standard fees payable to the issuing bank on the respective letter of credit. Loans outstanding under the Credit Agreement may be prepaid at any time without penalty, except for LIBOR breakage costs and expenses. If LIBOR ceases to be reported, the Credit Agreement requires the Company and the Agent to endeavor to establish a commercially reasonable alternative rate of interest and until they are able to do so, all borrowings must be at the base rate.

The Credit Agreement requires the Company and its subsidiaries to comply with various affirmative covenants, including, without limitation, furnishing updated financial and other information, preserving existence and entitlements, maintaining properties and insurance, complying with laws, maintaining books and records, requiring any new domestic subsidiary meeting a materiality threshold specified in the Credit Agreement to become a guarantor thereunder and paying obligations. The Credit Agreement requires the Company and its subsidiaries to comply with, and to use commercially reasonable efforts to the extent permitted by law to cause certain material associated practices of the Company, including APC, to comply with, restrictions on liens, indebtedness and investments (including restrictions on acquisitions by the Company), subject to specified exceptions. The Credit Agreement also contains various other negative covenants binding the Company and its subsidiaries, including, without limitation, restrictions on fundamental changes, dividends and distributions, sales and leasebacks, transactions with affiliates, burdensome agreements, use of proceeds, maintenance of business, amendments of organizational documents, accounting changes and prepayments and modifications of subordinated debt.

The Credit Agreement requires the Company to comply with two key financial ratios, each calculated on a consolidated basis. The Company must maintain a maximum consolidated leverage ratio of not greater than 3.75 to 1.00 as of the last day of each fiscal quarter. The maximum consolidated leverage ratio decreases by 0.25 each year, until it is reduced to 3.00 to 1.00 for each fiscal quarter ending after September 30, 2022. The Company must maintain a minimum consolidated interest coverage ratio of not less than 3.25 to 1.00 as of the last day of each fiscal quarter. As of June 30, 2020, the Company was in compliance with the covenants relating to its credit facility.

Pursuant to the Guaranty and Security Agreement, the Company and NMM have granted the Lenders a security interest in all of their assets, including, without limitation, all stock and other equity issued by their subsidiaries (including NMM) and all rights with respect to the AP-AMH Loan. The Guaranty and Security Agreement requires the Company and NMM to comply with various affirmative and negative covenants, including, without limitation, covenants relating to maintaining perfected security interests, providing information and documentation to the Agent, complying with contractual obligations relating to the collateral, restricting the sale and issuance of securities by their respective subsidiaries and providing the Agent access to the collateral.

The Credit Agreement contains events of default, including, without limitation, failure to make a payment when due, default on various covenants in the Credit Agreement, breach of representations or warranties, cross-default on other material indebtedness, bankruptcy or insolvency, occurrence of certain judgments and certain events under the Employee Retirement Income Security Act of 1974 aggregating more than $10.0 million, invalidity of the loan documents, any lien under the Guaranty and Security Agreement ceasing to be valid and perfected, any change in control, as defined in the Credit Agreement, an event of default under the AP-AMH Loan, failure by APC to pay dividends in cash for any period of two consecutive fiscal quarters, failure by AP-AMH to pay cash interest to the Company, or if any modification is made to the Certificate of Determination or the Special Purpose Shareholder Agreement that directly or indirectly restricts, conditions, impairs, reduces or otherwise limits the payment of the Series A Preferred dividend by APC to AP-AMH. In addition, it will constitute an event of default under the Credit Agreement if APC uses all or any portion of the consideration received by APC from AP-AMH on account of AP-AMH’s purchase of Series A Preferred Stock for any purpose other than certain specific approved uses described in the following sentence, unless not less than 50.01% of all holders of common stock of APC at such time approve such use; provided that APC may use up to $50.0 million in the aggregate of such consideration for any purpose without any requirement to obtain such approval of the holders of common stock of APC. The approved uses include (i) any permitted investment, (ii) any dividend or distribution to the holders of the common stock of APC, (iii) any repurchase of common stock of APC, (iv) paying taxes relating to or arising from certain assets and transactions, or (v) funding losses, deficits or working capital support on account of certain non-healthcare assets in an amount not to exceed $125.0 million. If any event of default occurs and is continuing under the Credit Agreement, the Lenders may terminate their commitments, and may require the Company and its guarantors to repay outstanding debt and/or to provide a cash deposit as additional security for outstanding letters of credit. In

addition, the Agent, on behalf of the Lenders, may pursue remedies under the Guaranty and Security Agreement, including, without limitation, transferring pledged securities of the Company’s subsidiaries in the name of the Agent and exercising all rights with respect thereto (including the right to vote and to receive dividends), collect on pledged accounts, instruments and other receivables (including the AP-AMH Loan), and all other rights provided by law or under the loan documents and the AP-AMH Loan.

In the ordinary course of business, certain of the Lenders under the Credit Agreement and their affiliates have provided to the Company and its subsidiaries and the associated practices, and may in the future provide, (i) investment banking, commercial banking (including pursuant to certain existing business loan and credit agreements being terminated in connection with entering into the Credit Agreement), cash management, foreign exchange or other financial services, and (ii) services as a bond trustee and other trust and fiduciary services, for which they have received compensation and may receive compensation in the future.

Deferred Financing Costs

In September 2019, the Company recorded deferred financing costs of $6.5 million related to the issuance of the Credit Facility. This amount was recorded as a direct reduction of the carrying amount of the related debt liability. The deferred financing costs will be amortized over the life of the Credit Facility using the effective interest rate method.

Effective Interest Rate

The Company’s average effective interest rate on its total debt during the six months ended June 30, 2020 and 2019, was 3.93% and 4.71%, respectively. Interest expense in the consolidated statements of income included amortization of deferred debt issuance costs for the three and six months ended June 30, 2020 and 2019, of $0.3 million and $0, respectively, and $0.7 million and $0, respectively.

Lines of Credit – Related Party

NMM Business Loan

On June 14, 2018, NMM amended its promissory note agreement with Preferred Bank (“NMM Business Loan Agreement”), which provides for loan availability of up to $20.0 million with a maturity date of June 22, 2020. One of the Company’s board members is the chairman and CEO of Preferred Bank. The NMM Business Loan Agreement was subsequently amended on September 1, 2018, to temporarily increase the loan availability from $20.0 million to $27.0 million for the period from September 1, 2018 through January 31, 2019, further extended to October 31, 2019, to facilitate the issuance of an additional standby letter of credit for the benefit of CMS. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 5.625% as of December 31, 2018. The loan was guaranteed by Apollo Medical Holdings, Inc. and is collateralized by substantially all of the assets of NMM. The amounts outstanding as of June 30, 2019, of $5.0 million was fully repaid on September 11, 2019.

On September 5, 2018, NMM entered into a non-revolving line of credit agreement with Preferred Bank, which provides for loan availability of up to $20.0 million with a maturity date of September 5, 2019. This credit facility was subsequently amended on April 17, 2019, and July 29, 2019, to reduce the loan availability from $20.0 million to $16.0 million and from $16.0 million to $2.2 million, respectively. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 3.375% as of June 30, 2020, and 4.875% as of December 31, 2019. The line of credit is guaranteed by Apollo Medical Holdings, Inc. and is collateralized by substantially all assets of NMM. NMM obtained this line of credit to finance potential acquisitions. Each drawdown from the line of credit is converted into a five-year term loan with monthly principal payments, plus interest based on a five-year amortization schedule.

On September 11, 2019, the NMM Business Loan Agreement, dated as of June 14, 2018, between NMM and Preferred Bank, as amended, and the Line of Credit Agreement, dated as of September 5, 2018, between NMM and Preferred Bank, as amended, were terminated in connection with the closing of the credit facility. Certain letters of credit issued by Preferred Bank under the Line of Credit Agreement were terminated and reissued under the Credit Agreement. As of June 30, 2020, outstanding letters of credit totaled $14.8 million and the Company has $10.2 million available under the revolving credit facility for letters of credit.

APC Business Loan

On June 14, 2018, APC amended its promissory note agreement with Preferred Bank, which provides for loan availability of up to $10.0 million with a maturity date of June 22, 2020. This credit facility was subsequently amended on April 17, 2019, and June 11, 2019, to increase the loan availability from $10.0 million to $40.0 million and extend the maturity date through December 31, 2020. On August 1, 2019, and September 10, 2019, this credit facility was further amended to increase loan availability from $40.0 million to $43.8 million, and decrease loan availability from $43.8 million to $4.1 million, respectively. This decrease further limited the purpose of the indebtedness under APC Business Loan Agreement to the issuance of standby letters of credit, and added as a permitted lien the security interest in all of its assets granted by APC in favor of NMM under a Security Agreement dated on or about September 11, 2019, securing APC’s obligations to NMM under, and as required pursuant to, the APC management services agreement dated as of July 1, 1999, as amended. The interest rate is based on the Wall Street Journal “prime rate,” plus 0.125%, or 3.375% and 4.875% as of June 30, 2020, and December 31, 2019, respectively.

As of June 30, 2020 and December 31, 2019, there was no availability under this line of credit.

Standby Letters of Credit

On October 2, 2018, APAACO established a second irrevocable standby letter of credit with Preferred Bank (through the NMM Business Loan Agreement) for $6.6 million for the benefit of CMS. The letter of credit expires on December 31, 2020, and is automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution to terminate prior to 90 days from any expiration date. APAACO may continue to draw from the letter of credit for one year following the bank’s notification of non-renewal. This standby letter of credit was subsequently amended on August 14, 2019, to increase amount from $6.6 million to $14.8 million and extended expiration date on December 31, 2020, with all other terms and conditions remain unchanged. In connection with the closing of the Credit Facility, this letter of credit was terminated and reissued under the Credit Agreement.

APC established irrevocable standby letters of credit with Preferred Bank under the APC Business Loan Agreement 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.

Alpha Care established irrevocable standby letters of credit with Preferred Bank under the APC Business Loan Agreement 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.

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Mezzanine and Stockholders' Equity

6 Months Ended

Jun. 30, 2020

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 June 30, 2020 and December 31, 2019.

Stockholders’ Equity

As of June 30, 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:

	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	(120,000)	2.58		—	1,800
Options forfeited	(12,228)	17.57		—	—
Options outstanding at June 30, 2020	486,860	$	10.86	3.70	$	2,900
Options exercisable at June 30, 2020	380,894	$	7.11	2.74	$	3,000

During the six months ended June 30, 2020 and 2019, stock options were exercised for 120,000 and 111,000 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $0.3 million and $0.5 million, respectively. The exercise price ranged from $2.10 to $5.00 per share for the exercises during the six months ended June 30, 2020, and ranged from $1.50 to $5.79 per share for the exercises during the six months ended June 30, 2019.

During the six months ended June 30, 2020 and 2019, no stock options were exercised pursuant to the cashless exercise provision.

During the six months ended June 30, 2020, the Company granted 11,742 stock options with a vesting period of five-years 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:

June 30, 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	—		%

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 six months ended June 30, 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 and six months ended June 30, 2020, the Company recorded approximately $0.9 million and $1.6 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 June 30, 2020, was $3.8 million.

Warrants

The Company’s outstanding warrants consisted of the following:

	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	(273,900)	9.32		—	2,000
Warrants expired/forfeited	—	—		—	—
Warrants outstanding at June 30, 2020	2,880,690	$	10.02	1.61	$	18,700

Exercise Price Per Share		Warrants Outstanding	Weighted Average Remaining Contractual Life	Warrants Exercisable	Weighted Average Exercise Price Per Share
$	9.00	754,870	0.29	754,870	$	9.00
10.00		1,313,345	1.85	1,313,345	10.00
11.00		812,475	2.44	812,475	11.00
$ $ 9.00 –11.00		2,880,690	1.61	2,880,690	$	10.02

During the six months ended June 30, 2020 and 2019, common stock warrants were exercised for 273,900 and 41,624 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $2.6 million and $0.4 million, respectively. The exercise price ranged from $9.00 to $11.00 per share for the exercises during the six months ended June 30, 2020 and 2019, respectively.

Treasury Stock

APC owned 17,307,214 and 17,290,317 shares of ApolloMed’s common stock as of June 30, 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 directors, from which Dr. Kenneth Sim and Dr. Thomas Lam have been excluded. As of June 30, 2020, the brokerage account only held shares of ApolloMed totaling $7.6 million, and as such the ApolloMed shares in the brokerage account have been recorded as treasury shares.

Dividends

During the six months ended June 30, 2020 and 2019, APC paid dividends of $29.6 million and $10.0 million, respectively.

During the six months ended June 30, 2020 and 2019, CDSC paid dividends of $0.6 million and $1.2 million, respectively.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 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 June 30, 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 (see Note 9).

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, ApolloMed and AMM 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 ApolloMed and AMM 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.

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Related-Party Transactions

6 Months Ended

Jun. 30, 2020

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. On April 30, 2020, the outstanding balance was fully repaid as part of UCAP's disposition of its 48.9% ownership interest in UCI to Bright (see Note 6).

During the three and six months ended June 30, 2020 and 2019, NMM earned approximately $4.2 million and $5.2 million, respectively, and $8.4 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 and six months ended June 30, 2020 and 2019, APC paid approximately $0.4 million and $0.6 million, respectively, and $1.0 million and $1.4 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 and six months ended June 30, 2020 and 2019, APC paid approximately $0.9 million and $1.8 million, respectively, and $2.6 million and $3.8 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 and six months ended June 30, 2020 and 2019, APC paid approximately $0.1 million, respectively, and $0.1 million, 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 June 30, 2020 and 2019, APC paid an aggregate of approximately $9.0 million and $7.1 million, respectively, which include approximately $3.0 million and $1.9 million, respectively, to shareholders who are also officers of APC. During the six months ended June 30, 2020 and 2019, APC paid an aggregate of approximately of $16.3 million and $16.4 million, respectively, to shareholders of APC for provider services, which include approximately $4.8 million and $5.1 million, respectively, to shareholders who are also officers of APC.

During the three and six months ended June 30, 2020 and 2019, NMM paid approximately $0.3 million, respectively and $0.5 million, respectively, to Medical Property Partners (“MPP”) for an office lease. MPP shares common ownership with certain board members of NMM.

During the three and six months ended June 30, 2020, NMM paid approximately $0.4 million and $0.7 million, respectively, to One MSO, Inc. ("One MSO") for an office lease. One MSO is indirectly 50% owned by Drs. Sim and Lam. As of June 30, 2020, the Company had $10.6 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 and six months ended June 30, 2020 and 2019, the Company paid approximately $0.1 million, respectively, and $0.2 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 and six months ended June 30, 2020 and 2019, SCHC paid approximately $0.1 million, respectively, and $0.2 million, respectively, to Numen, LLC (“Numen”) for an office lease. Numen is owned by a shareholder of APC. As of June 30, 2020, the Company had $1.4 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.

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):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
AHMC – Risk pool, capitation, claims payment, net	$	6,057	$	16,350	$	18,056	$	27,950
HSMSO – Management fees, net	(189)		(265)		(321)		(915)
Aurion – Management fees	(53)		(100)		(128)		(200)
Net total	$	5,815	$	15,985	$	17,607	$	26,835

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 and six months ended June 30, 2020 and 2019, the Company has recognized risk pool revenue under this agreement of $10.2 million and $10.2 million, respectively, and $21.0 million and $25.0 million, respectively, for which $53.7 million and $40.4 million remain outstanding as of June 30, 2020 and December 31, 2019, respectively.

During the three and six months ended June 30, 2020 and 2019, NMM paid approximately $0 and $0.1 million, respectively, and $27,000 and $0.1 million, respectively, to ApolloMed board member, Matthew Mazdyasni, 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.

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company uses the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates.

On an interim basis, the Company estimates what its anticipated annual effective tax rate will be and records a quarterly income tax provision (benefit) in accordance with the estimated annual rate, plus the tax effect of certain discrete items that arise during the quarter. As the fiscal year progresses, the Company refines its estimates based on actual events and financial results during the quarter. This process can result in significant changes to the Company’s estimated effective tax rate. When this occurs, the income tax provision (benefit) is adjusted during the quarter in which the estimates are refined so that the year-to-date provision reflects the estimated annual effective tax rate. These changes, along with adjustments to the Company’s deferred taxes and related valuation allowance, may create fluctuations in the overall effective tax rate from quarter to quarter.

As of June 30, 2020, due to the overall cumulative losses incurred in recent years, the Company maintained a full valuation allowance against its deferred tax assets related to loss entities the Company cannot consolidate under the federal consolidation rules, as realization of these assets is uncertain.

The Company’s effective tax rate for the six months ended June 30, 2020, differed from the U.S. federal statutory rate primarily due to state income taxes, income from flow through entities, nondeductible permanent items, and change in valuation allowance.

As of June 30, 2020, the Company does not have any unrecognized tax benefits related to various federal and state income tax matters. The Company will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company is subject to U.S. federal income tax as well as income tax in California. The Company and its subsidiaries’ state and Federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2015 through December 31, 2018, and for the years ended December 31, 2016 through December 31, 2018, respectively. The Company does not anticipate material unrecognized tax benefits within the next 12 months.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes various income and payroll tax provisions that we are in the process of analyzing to determine the tax impacts.

However, we do not expect the benefits of the CARES Act to impact the Company’s annual estimated tax rate for the period June 30, 2020.

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Earnings Per Share

6 Months Ended

Jun. 30, 2020

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 ApolloMed 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 June 30, 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:

Three Months Ended June 30,	2020		2019
Earnings per share – basic	$	0.20	$	0.10
Earnings per share – diluted	$	0.19	$	0.09
Weighted average shares of common stock outstanding – basic	36,071,604		34,540,059
Weighted average shares of common stock outstanding – diluted	37,285,585		37,962,555

Six Months Ended June 30,	2020		2019
Earnings per share – basic	$	0.31	$	0.11
Earnings per share – diluted	$	0.30	$	0.10
Weighted average shares of common stock outstanding – basic	36,040,936		34,518,461
Weighted average shares of common stock outstanding – diluted	37,296,913		37,896,837

Below is a summary of the shares included in the diluted earnings per share computations:

Three Months Ended June 30,	2020	2019
Weighted average shares of common stock outstanding – basic	36,071,604	34,540,059
10% shares held back pursuant to indemnification clause	—	1,519,805
Stock options	169,402	363,593
Warrants	1,041,784	1,539,098
Restricted stock awards	2,795	—
Weighted average shares of common stock outstanding – diluted	37,285,585	37,962,555

Six Months Ended June 30,	2020	2019
Weighted average shares of common stock outstanding – basic	36,040,936	34,518,461
10% shares held back pursuant to indemnification clause	—	1,519,805
Stock options	173,299	368,273
Warrants	1,076,802	1,490,298
Restricted stock awards	5,876	—
Weighted average shares of common stock outstanding – diluted	37,296,913	37,896,837

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Variable Interest Entities (VIEs)

6 Months Ended

Jun. 30, 2020

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 and its VIEs, including Alpha Care and Accountable Health Care, and to which 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).

	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	113,790	$	87,110
Restricted cash	—		75
Investment in marketable securities	117,611		123,948
Receivables, net	15,687		9,300
Receivables, net – related party	55,889		42,976
Other receivables	734		744
Prepaid expenses and other current assets	7,752		7,403
Loan receivable	6,425		6,425
Loan receivable – related parties	—		16,500
Total current assets	317,888		294,481
Noncurrent assets
Land, property and equipment, net	9,085		9,547
Intangible assets, net	75,177		81,439
Goodwill	109,460		108,913
Investment in affiliates	285,569		318,315
Investment in privately held entities	36,584		1,615
Investments in other entities – equity method	26,864		28,427
Restricted cash	746		746
Operating lease right-of-use assets	7,017		4,751
Other assets	20,750		1,057
Total noncurrent assets	571,252		554,810
Total assets	$	889,140	$	849,291
Current liabilities
Accounts payable and accrued expenses	$	11,822	$	11,187
Fiduciary accounts payable	1,853		2,027
Medical liabilities	47,304		49,019
Income taxes payable	42,211		4,530
Amount due to affiliate	21,533		28,058
Dividends payable	431		271
Finance lease liabilities	102		102
Operating lease liabilities	1,319		1,088
Total current liabilities	126,575		96,282
Noncurrent liabilities
Deferred tax liability	9,490		14,059
Finance lease liabilities, net of current portion	355		416
Operating lease liabilities, net of current portion	5,833		3,742
Total noncurrent liabilities	15,678		18,217

Total liabilities $ 142,253  $ 114,499 

The assets of the Company’s other consolidated VIEs were not considered significant.

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Leases

6 Months Ended

Jun. 30, 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 June 30, 2020 and December 31, 2019, assets recorded under finance leases were $0.4 million and $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):

	Three Months Ended June 30,
	2020		2019
Operating lease cost	$	1,446	$	1,240
Finance lease cost
Amortization of lease expense	$	35	$	25
Interest on lease liabilities	4		4
Sublease income	$	(226)	$	(106)
Total finance lease cost, net	$	1,259	$	1,163

	Six Months Ended June 30,
	2020		2019
Operating lease cost	$	3,388	$	2,343
Finance lease cost
Amortization of lease expense	$	61	$	50
Interest on lease liabilities	7		9
Sublease income	$	(360)	$	(206)
Total finance lease cost, net	$	3,096	$	2,196

Other information related to leases was as follows (in thousands):

	Three Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,333		$	1,239
Operating cash flows from finance leases	4			4
Financing cash flows from finance leases	35			25
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	2,907			6,441
	Six Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,880		$	2,273
Operating cash flows from finance leases	7			9
Financing cash flows from finance leases	61			50
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	7,652			15,417
	Six Months Ended June 30,
	2020			2019
Weighted Average Remaining Lease Term
Operating leases	7.06 years			6.87 years
Finance leases	4.17 years			5.00 years
Weighted Average Discount Rate
Operating leases	6.10		%	6.18		%
Finance leases	3.00		%	3.00		%

Future minimum lease payments under non-cancellable leases as of June 30, 2020 is as follows (in thousands):

June 30, 2020	Operating Leases		Finance Leases
2020 (excluding the six months ended June 30, 2020)	$	2,337	$	59
2021	4,297		119
2022	3,529		119
2023	3,303		119
2024	2,940		79
Thereafter	9,459		—
Total future minimum lease payments	25,865		495
Less: imputed interest	5,097		38
Total lease liabilities	20,768		457
Less: current portion	3,350		102
Long-term lease liabilities	$	17,418	$	355

As of June 30, 2020, the Company does not have additional operating and finance leases that have not yet commenced.

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 June 30, 2020 and December 31, 2019, assets recorded under finance leases were $0.4 million and $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):

	Three Months Ended June 30,
	2020		2019
Operating lease cost	$	1,446	$	1,240
Finance lease cost
Amortization of lease expense	$	35	$	25
Interest on lease liabilities	4		4
Sublease income	$	(226)	$	(106)
Total finance lease cost, net	$	1,259	$	1,163

	Six Months Ended June 30,
	2020		2019
Operating lease cost	$	3,388	$	2,343
Finance lease cost
Amortization of lease expense	$	61	$	50
Interest on lease liabilities	7		9
Sublease income	$	(360)	$	(206)
Total finance lease cost, net	$	3,096	$	2,196

Other information related to leases was as follows (in thousands):

	Three Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,333		$	1,239
Operating cash flows from finance leases	4			4
Financing cash flows from finance leases	35			25
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	2,907			6,441
	Six Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,880		$	2,273
Operating cash flows from finance leases	7			9
Financing cash flows from finance leases	61			50
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	7,652			15,417
	Six Months Ended June 30,
	2020			2019
Weighted Average Remaining Lease Term
Operating leases	7.06 years			6.87 years
Finance leases	4.17 years			5.00 years
Weighted Average Discount Rate
Operating leases	6.10		%	6.18		%
Finance leases	3.00		%	3.00		%

Future minimum lease payments under non-cancellable leases as of June 30, 2020 is as follows (in thousands):

June 30, 2020	Operating Leases		Finance Leases
2020 (excluding the six months ended June 30, 2020)	$	2,337	$	59
2021	4,297		119
2022	3,529		119
2023	3,303		119
2024	2,940		79
Thereafter	9,459		—
Total future minimum lease payments	25,865		495
Less: imputed interest	5,097		38
Total lease liabilities	20,768		457
Less: current portion	3,350		102
Long-term lease liabilities	$	17,418	$	355

As of June 30, 2020, the Company does not have additional operating and finance leases that have not yet commenced.

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe accompanying consolidated balance sheets 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 June 30, 2020, and for the three and six months ended June 30, 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 June 30, 2020 and December 31, 2019, and the consolidated statements of income for the three and six months ended June 30, 2020 and 2019,  include the accounts of ApolloMed, its consolidated subsidiaries, NMM, AMM, APAACO, and Apollo Care Connect, its consolidated VIE, AP-AMH, NMM's consolidated subsidiaries, and 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.

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 90 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 June 30, 2020 and December 31, 2019, investments in marketable securities amounted to approximately $117.7 million and $116.5 million, respectively, and consisted of equity securities and certificates of deposit with various financial institutions, reported at par value, plus accrued interest, with maturity dates from four 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 and 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. Other receivables consists of 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.

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 applicable contracts and 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. As of June 30, 2020 and December 31, 2019 the Company had

Concentrations of Risks

Concentrations of RisksThe 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 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 and Investments in Privately Held Entities

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.

Investments in Privately Held Entities

The Company accounts for certain investments using the cost method of accounting when it is determined that the investment provides the Company with little or no influence over the investee. Under the cost method of accounting, the investment is measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. The investments in privately held entities that do not report NAV are subject to qualitative assessment for indicators of impairments.

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 claims (see Note 8), and 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 will 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 will 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 will 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 claims, risk adjustment factors, and 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 $7.6 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 $22.9 million and $45.5 million in total AIPBP payments for the three and six months ended June 30, 2020, respectively, of which $20.5 million and $42.4 million has been recognized as revenue for the three and six months ended June 30, 2020, respectively. The Company also recorded assets of approximately $8.5 million related to IBNR claims as of June 30, 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-Service 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 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.

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 equity ownership interests held by certain VIEs) in the Company’s consolidated entities. 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. 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 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.

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Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Schedule of Disaggregated Revenue by Each Payor Type

The following table presents disaggregated revenue generated by payor type for the three and six months ended June 30, 2020 and 2019 (in thousands):

	For the Three Months Ended June 30,
	2020		2019
Commercial	$	25,479	$	25,365
Medicare	62,038		57,965
Medicaid	68,450		36,277
Other third parties	9,202		10,443
Revenue	$	165,169	$	130,050

	For the Six Months Ended June 30,
	2020		2019
Commercial	$	50,192	$	50,383
Medicare	126,918		95,063
Medicaid	134,897		61,647
Other third parties	18,267		18,713
Revenue	$	330,274	$	225,806

Schedule of Contributions to Revenue and Receivables by Payor

The Company had major payors that contributed the following percentages of net revenue:

	For the Three Months Ended June 30,
	2020		2019
Payor A	11.9	%	13.7	%
Payor B	10.3	%	12.6	%
Payor C	*		10.5	%
Payor D	17.5	%	13.7	%
Payor E	12.4	%	*
Payor F	10.1	%	*

	For the Six Months Ended June 30,
	2020		2019
Payor A	11.9	%	15.8	%
Payor B	10.3	%	14.3	%
Payor C	*		11.7	%
Payor D	17.5	%	*
Payor E	12.9	%	*
Payor F	10.3	%	*

* Less than 10% of total net revenues

The Company had major payors that contributed to the following percentages of receivables and receivables – related parties:

	As of June 30, 2020		As of December 31, 2019
Payor D	12.4	%	*
Payor G	33.5	%	30.4	%
Payor H	35.1	%	36.0	%

* Less than 10% of total receivables and receivables — related parties, net

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of June 30, 2020, are presented below (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market funds*	$	108,195	$	—	$	—	$	108,195
Marketable securities – certificates of deposit	117,611		—		—		117,611
Marketable securities – equity securities	45		—				45
Total	$	225,851	$	—	$	—	$	225,851

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2019, are presented below (in thousands):

	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

* Included in cash and cash equivalents

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Business Combinations and Goodwill (Tables)

6 Months Ended

Jun. 30, 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):

	Balance Sheet
Assets acquired
Cash and cash equivalents	$	3,569
Accounts receivable, net	10,336
Other current assets	4,675
Network relationship intangible assets	22,636
Goodwill	28,585
Accounts payable	(2,795)
Deferred tax liabilities	(6,334)
Medical liabilities	(15,616)
Net assets acquired	$	45,056
Cash paid	$	45,056

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date (in thousands):

	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	23,566
Accounts payable	(3,759)
Medical liabilities	(12,154)
Subordinated loan	(15,327)
Net asset acquired	$	9,667
Equity investment contributed	$	2,417
Cash paid	$	7,250

Schedule of Change in Carrying Value of Goodwill

The change in the carrying value of goodwill for the six months ended June 30, 2020, was as follows (in thousands);

Balance, January 1, 2020	$	238,505
Adjustments	548
Balance, June 30, 2020	$	239,053

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Intangible Assets, Net (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets, Net

At June 30, 2020, the Company’s intangible assets, net, consisted of the following (in thousands):

	Useful Life (Years)	Gross June 30, 2020		Accumulated Amortization		Net June 30, 2020
Amortized intangible assets:
Network relationships	11-15	$	143,930	$	(67,015)	$	76,915
Management contracts	15	22,832		(10,736)		12,096
Member relationships	12	6,696		(2,793)		3,903
Patient management platform	5	2,060		(1,064)		996
Trade names/trademarks	20	1,011		(131)		880
		$	176,529	$	(81,739)	$	94,790

At December 31, 2019, the Company’s intangible assets, net, consisted of the following (in thousands):

	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 names/trademarks	20	1,011		(105)		906
		$	176,529	$	(73,517)	$	103,012

Schedule of Future Amortization Expense

Future amortization expense is estimated to be as follows for the following years ending December 31 (in thousands):

	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,807
2021	14,524
2022	12,673
2023	10,842
2024	9,830
Thereafter	39,114
Total	$	94,790

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Investments in Other Entities — Equity Method (Tables)

6 Months Ended

Jun. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Rollforward of Equity Method Investment (in thousands)

	December 31, 2019		Allocation of Income (Loss)		Contribution		Sale		June 30, 2020
LaSalle Medical Associates – IPA Line of Business	$	6,397	$	(428)	$	—	$	—	$	5,969
Pacific Medical Imaging & Oncology Center, Inc.	1,396		77		—		—		1,473
Universal Care, Inc.	1,438		3,560		—		(4,998)		—
Diagnostic Medical Group	2,334		(102)		—		—		2,232
531 W. College, LLC – related party	16,698		(231)		500		—		16,967
MWN, LLC – related party	164		12		—		—		176
	$	28,427	$	2,888	$	500	$	(4,998)	$	26,817

LMA’s summarized balance sheets at June 30, 2020 and December 31, 2019, and summarized statements of operations for the six months ended June 30, 2020 and 2019, with respect to its IPA line of business are as follows (in thousands):

Balance Sheets

	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	2,852	$	6,345
Receivables, net	6,751		5,124
Other current assets	880		3,526
Loan receivable	2,250		2,250
Restricted cash	688		683
Total assets	$	13,421	$	17,928
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	$	20,735	$	23,530
Stockholders’ deficit	(7,314)		(5,602)
Total liabilities and stockholders’ deficit	$	13,421	$	17,928

Statements of Operations

	Six Months Ended June 30,
	2020		2019
Revenues	$	92,113	$	93,434
Expenses	93,680		102,845
Net loss	$	(1,567)	$	(9,411)

UCI's balance sheet at December 31, 2019 and statements of income for the four months ended April 30, 2020 and six months ended June 30, 2019 are as follows (in thousands):

Balance Sheets

	December 31, 2019
Assets
Cash and cash equivalents	$	33,890
Receivables, net	63,843
Other current assets	38,280
Loan receivable	882
Restricted cash	4,021
Total assets	$	140,916
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	$	128,330
Other liabilities	33,133
Stockholders’ deficit	(20,547)
Total liabilities and stockholders’ deficit	$	140,916

Statements of Operations

	Four Months Ended		Six Months Ended
	April 30, 2020		June 30, 2019
Revenues	$	195,308	$	247,517
Expenses	189,028		239,389
Income before benefit from income taxes	6,280		8,128
Benefit from income taxes	—		(3,167)
Net income	$	6,280	$	11,295

531 W. College LLC’s balance sheets at June 30, 2020 and December 31, 2019, and statements of operations for the six months ended June 30, 2020 and 2019, are as follows (in thousands):

Balance sheets

	June 30, 2020		December 31, 2019
Assets
Cash	$	126	$	139
Other current assets	—		17
Other assets	70		70
Property and equipment, net	33,697		33,581
Total assets	$	33,893	$	33,807
Liabilities and Members’ Equity
Current liabilities	$	1,109	$	1,062
Stockholders’ equity	32,784		32,745
Total liabilities and members’ equity	$	33,893	$	33,807

Statements of Operation

	Six Months Ended June 30,
	2020		2019
Revenues	—		—
Expenses	579		538
Loss from operations	(579)		(538)
Other income	$	21	$	385
Net loss	$	(558)	$	(153)

Equity Method Investment, Gain On Sale

The gain on sale of equity method investment recognized in connection with this transaction was determined as follows:

	Amount (in '000s)
Cash proceeds (excludes proceeds to settle indebtedness owed to APC from UCI)	$	52,743
Preferred shares in Bright Health, Inc.	$	36,179
Beneficial interest in UCI	$	15,723
Less: Carrying value of equity method investment on date of sale	$	(4,998)
Gain on sale of equity method investment	$	99,647

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Accounts Payable and Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 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):

	June 30, 2020		December 31, 2019
Accounts payable	$	10,425	$	6,914
Capitation payable	2,754		2,813
Subcontractor IPA payable	3,083		3,360
Professional fees	2,325		1,837
Due to related parties	80		225
Accrued compensation	3,060		3,238
Contract liabilities	3,061		8,892
Total accounts payable and accrued expenses	$	24,788	$	27,279

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Medical Liabilities (Tables)

6 Months Ended

Jun. 30, 2020

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):

	June 30, 2020		June 30, 2019
Medical liabilities, beginning of period	$	58,725	$	33,642
Components of medical care costs related to claims incurred:
Current period	165,571		93,833
Prior periods	233		2,688
Total medical care costs	165,804		96,521
Payments for medical care costs related to claims incurred:
Current period	(97,112)		(60,440)
Prior periods	(57,470)		(39,744)
Total paid	(154,582)		(100,184)
Acquired from Alpha Care	—		13,120
Adjustments	326		(156)
Medical liabilities, end of period	$	70,273	$	42,943

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Credit Facility, Bank Loan and Lines of Credit (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Credit Facility

The Company’s credit facility consisted of the following (in thousands):

	June 30, 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	(5,295)
Long-term debt	$	230,455

Schedule of Future Commitments of Credit Facility

Future commitments of the Company’s credit facility is to be as follows for the years ending December 31 (in thousands):

	Amount
2020 (excluding the six months ended June 30, 2020)	$	7,125
2021	10,688
2022	14,250
2023	15,437
2024	197,750
Total	$	245,250

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Mezzanine and Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Stockholders' Equity Note [Abstract]

Stock Option Transactions Under Stock Option Plans

The Company’s outstanding stock options consisted of the following:

	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	(120,000)	2.58		—	1,800
Options forfeited	(12,228)	17.57		—	—
Options outstanding at June 30, 2020	486,860	$	10.86	3.70	$	2,900
Options exercisable at June 30, 2020	380,894	$	7.11	2.74	$	3,000

Schedule of Stock Options, Valuation Assumptions

During the six months ended June 30, 2020, the Company granted 11,742 stock options with a vesting period of five-years 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:

June 30, 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	—		%

Schedule of Outstanding Warrants

The Company’s outstanding warrants consisted of the following:

	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	(273,900)	9.32		—	2,000
Warrants expired/forfeited	—	—		—	—
Warrants outstanding at June 30, 2020	2,880,690	$	10.02	1.61	$	18,700

Exercise Price Per Share		Warrants Outstanding	Weighted Average Remaining Contractual Life	Warrants Exercisable	Weighted Average Exercise Price Per Share
$	9.00	754,870	0.29	754,870	$	9.00
10.00		1,313,345	1.85	1,313,345	10.00
11.00		812,475	2.44	812,475	11.00
$ $ 9.00 –11.00		2,880,690	1.61	2,880,690	$	10.02

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Related-Party Transactions (Tables)

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Schedule of Fees Incurred and Income Earned from Related Party Transactions

The following table sets forth fees incurred and income earned related to AHMC, HSMSO and Aurion (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
AHMC – Risk pool, capitation, claims payment, net	$	6,057	$	16,350	$	18,056	$	27,950
HSMSO – Management fees, net	(189)		(265)		(321)		(915)
Aurion – Management fees	(53)		(100)		(128)		(200)
Net total	$	5,815	$	15,985	$	17,607	$	26,835

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Schedule of Earnings Per Share Computations

Below is a summary of the earnings per share computations:

Three Months Ended June 30,	2020		2019
Earnings per share – basic	$	0.20	$	0.10
Earnings per share – diluted	$	0.19	$	0.09
Weighted average shares of common stock outstanding – basic	36,071,604		34,540,059
Weighted average shares of common stock outstanding – diluted	37,285,585		37,962,555

Six Months Ended June 30,	2020		2019
Earnings per share – basic	$	0.31	$	0.11
Earnings per share – diluted	$	0.30	$	0.10
Weighted average shares of common stock outstanding – basic	36,040,936		34,518,461
Weighted average shares of common stock outstanding – diluted	37,296,913		37,896,837

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:

Three Months Ended June 30,	2020	2019
Weighted average shares of common stock outstanding – basic	36,071,604	34,540,059
10% shares held back pursuant to indemnification clause	—	1,519,805
Stock options	169,402	363,593
Warrants	1,041,784	1,539,098
Restricted stock awards	2,795	—
Weighted average shares of common stock outstanding – diluted	37,285,585	37,962,555

Six Months Ended June 30,	2020	2019
Weighted average shares of common stock outstanding – basic	36,040,936	34,518,461
10% shares held back pursuant to indemnification clause	—	1,519,805
Stock options	173,299	368,273
Warrants	1,076,802	1,490,298
Restricted stock awards	5,876	—
Weighted average shares of common stock outstanding – diluted	37,296,913	37,896,837

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Variable Interest Entities (VIEs) (Tables)

6 Months Ended

Jun. 30, 2020

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 and its VIEs, including Alpha Care and Accountable Health Care, and to which 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).

	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	113,790	$	87,110
Restricted cash	—		75
Investment in marketable securities	117,611		123,948
Receivables, net	15,687		9,300
Receivables, net – related party	55,889		42,976
Other receivables	734		744
Prepaid expenses and other current assets	7,752		7,403
Loan receivable	6,425		6,425
Loan receivable – related parties	—		16,500
Total current assets	317,888		294,481
Noncurrent assets
Land, property and equipment, net	9,085		9,547
Intangible assets, net	75,177		81,439
Goodwill	109,460		108,913
Investment in affiliates	285,569		318,315
Investment in privately held entities	36,584		1,615
Investments in other entities – equity method	26,864		28,427
Restricted cash	746		746
Operating lease right-of-use assets	7,017		4,751
Other assets	20,750		1,057
Total noncurrent assets	571,252		554,810
Total assets	$	889,140	$	849,291
Current liabilities
Accounts payable and accrued expenses	$	11,822	$	11,187
Fiduciary accounts payable	1,853		2,027
Medical liabilities	47,304		49,019
Income taxes payable	42,211		4,530
Amount due to affiliate	21,533		28,058
Dividends payable	431		271
Finance lease liabilities	102		102
Operating lease liabilities	1,319		1,088
Total current liabilities	126,575		96,282
Noncurrent liabilities
Deferred tax liability	9,490		14,059
Finance lease liabilities, net of current portion	355		416
Operating lease liabilities, net of current portion	5,833		3,742
Total noncurrent liabilities	15,678		18,217

Total liabilities $ 142,253  $ 114,499 

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Information Related to Lease Costs

The components of lease expense were as follows (in thousands):

	Three Months Ended June 30,
	2020		2019
Operating lease cost	$	1,446	$	1,240
Finance lease cost
Amortization of lease expense	$	35	$	25
Interest on lease liabilities	4		4
Sublease income	$	(226)	$	(106)
Total finance lease cost, net	$	1,259	$	1,163

	Six Months Ended June 30,
	2020		2019
Operating lease cost	$	3,388	$	2,343
Finance lease cost
Amortization of lease expense	$	61	$	50
Interest on lease liabilities	7		9
Sublease income	$	(360)	$	(206)
Total finance lease cost, net	$	3,096	$	2,196

Other information related to leases was as follows (in thousands):

	Three Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,333		$	1,239
Operating cash flows from finance leases	4			4
Financing cash flows from finance leases	35			25
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	2,907			6,441
	Six Months Ended June 30,
	2020			2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,880		$	2,273
Operating cash flows from finance leases	7			9
Financing cash flows from finance leases	61			50
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	7,652			15,417
	Six Months Ended June 30,
	2020			2019
Weighted Average Remaining Lease Term
Operating leases	7.06 years			6.87 years
Finance leases	4.17 years			5.00 years
Weighted Average Discount Rate
Operating leases	6.10		%	6.18		%
Finance leases	3.00		%	3.00		%

Schedule of Future Minimum Operating Lease Payments After Adoption of 842

Future minimum lease payments under non-cancellable leases as of June 30, 2020 is as follows (in thousands):

June 30, 2020	Operating Leases		Finance Leases
2020 (excluding the six months ended June 30, 2020)	$	2,337	$	59
2021	4,297		119
2022	3,529		119
2023	3,303		119
2024	2,940		79
Thereafter	9,459		—
Total future minimum lease payments	25,865		495
Less: imputed interest	5,097		38
Total lease liabilities	20,768		457
Less: current portion	3,350		102
Long-term lease liabilities	$	17,418	$	355

Schedule of Future Minimum Finance Lease Payments After Adoption of 842

Future minimum lease payments under non-cancellable leases as of June 30, 2020 is as follows (in thousands):

June 30, 2020	Operating Leases		Finance Leases
2020 (excluding the six months ended June 30, 2020)	$	2,337	$	59
2021	4,297		119
2022	3,529		119
2023	3,303		119
2024	2,940		79
Thereafter	9,459		—
Total future minimum lease payments	25,865		495
Less: imputed interest	5,097		38
Total lease liabilities	20,768		457
Less: current portion	3,350		102
Long-term lease liabilities	$	17,418	$	355

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Description of Business - Additional Information (Details) member in Thousands, enrollee in Thousands, $ in Thousands				1 Months Ended	3 Months Ended	6 Months Ended
	Apr. 30, 2020 USD ($)	Aug. 30, 2019 USD ($)	Jul. 01, 1999	Sep. 30, 2019 USD ($) shares	Jun. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 enrollee	Jun. 30, 2020 primary_care_physician	Jun. 30, 2020 specialty_care_physician	Jun. 30, 2020 medical_center	Jun. 30, 2020 member	Jun. 30, 2020 plan	Jun. 30, 2020 clinic	Dec. 31, 2019	Nov. 16, 2015	Jun. 30, 2014
Description Of Business [Line Items]
Proceeds from sale of equity method investment						$ 52,743	$ 0
Value of non-cash consideration received						$ 36,179	$ 0
Accountable Health Care
Description Of Business [Line Items]
Consideration transferred		$ 25,100
AMG, Inc
Description Of Business [Line Items]
Consideration transferred				$ 1,600
Universal Care, Inc.
Description Of Business [Line Items]
Investment, ownership interest																48.90%
Proceeds from sale of equity method investment	$ 52,743
Additional cash consideration entitled to be received	$ 15,723
AP-AMH Medical Corporation | Affiliated Entity
Description Of Business [Line Items]
Amount of loan				$ 545,000
Term of receivable				10 years
Stated rate of note of loan receivable				10.00%
Interest rate in the event of default				10.75%
APC | Affiliated Entity
Description Of Business [Line Items]
Number of shares purchased by related party | shares				15,015,015
Stock subscription				$ 300,000
Proxy votes				9.99%
APC
Description Of Business [Line Items]
Fixed term of amended and restated management and administrative services agreement			30 years
APC | Accountable Health Care
Description Of Business [Line Items]
Interest acquired		25.00%
APC | AMG, Inc
Description Of Business [Line Items]
Value of shares transferred in acquisition				$ 400
APC | Apollo Medical Holdings, Inc
Description Of Business [Line Items]
Investment, ownership interest					32.28%	32.28%									32.50%
APC | Concourse Diagnostic Surgery Center, LLC
Description Of Business [Line Items]
Investment, ownership interest					45.01%	45.01%
APC | Universal Care, Inc.
Description Of Business [Line Items]
Ownership interest disposed	48.90%
Proceeds from sale of equity method investment	$ 69,200
Repayment of indebtedness received	16,500
Additional cash consideration entitled to be received	15,700				$ 15,700
APC | AP-AMH Medical Corporation | Affiliated Entity | Series A Preferred Stock
Description Of Business [Line Items]
Number of shares purchased by related party | shares				1,000,000
APC | Bright | Preferred Stock | Universal Care, Inc.
Description Of Business [Line Items]
Value of non-cash consideration received	$ 36,200
APC LSMA | Accountable Health Care
Description Of Business [Line Items]
Interest acquired		75.00%
APC LSMA | AMG, Inc
Description Of Business [Line Items]
Interest acquired				100.00%
Payments to acquire business				$ 1,200
APC LSMA | Maverick Medical Group, Inc
Description Of Business [Line Items]
Ownership interest					100.00%	100.00%
APC LSMA | Universal Care Acquisition Partners, LLC
Description Of Business [Line Items]
Ownership interest																	100.00%
Alpha Care Medical Group, Inc.
Description Of Business [Line Items]
Number of healthcare enrollees | enrollee								170
Accountable Health Care
Description Of Business [Line Items]
Number of employees (over)									400	700
Number of medical centers | medical_center											4
Number of members of federally qualified health plans | member												80
Number federally qualified health plans | plan													3
AMG, Inc
Description Of Business [Line Items]
Number of family practice clinics | clinic														3
Universal Care Acquisition Partners, LLC | APC | Universal Care, Inc.
Description Of Business [Line Items]
Investment, ownership interest	48.90%
Repayment of indebtedness received	$ 16,500
Universal Care Acquisition Partners, LLC | Bright | Universal Care, Inc.
Description Of Business [Line Items]
Ownership interest disposed	48.90%
Proceeds from sale of equity method investment	$ 69,200

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Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2020 USD ($) segment unit	Jun. 30, 2019 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of operating segments | segment		1
Number of reportable segments | segment		1
Amount deposit accounts exceeded FDIC insured limit	$ 290,900,000	$ 290,900,000
Amount of short-term marketable securities	117,656,000	$ 117,656,000			$ 116,539,000
Risk pool surplus or deficits, settlement period after risk pool performance year		18 months
Allowance for doubtful accounts	1,300,000	$ 1,300,000			2,900,000
Impairment of finite-lived intangible assets		0	$ 0
Impairment of long-lived assets		$ 0	0
Number of main reporting units | unit		3
Impairment of goodwill		$ 0	0
Impairment of indefinite-lived intangible assets		0	$ 0
Payments received, monthly		7,600,000
Payments received	22,900,000	45,500,000
Accrued contract liability recognized	20,500,000	42,400,000
Contract liabilities	3,061,000	$ 3,061,000			$ 8,892,000
Investment deposit				$ 4,000,000.0
Voting rights held (more than)		50.00%
Other Receivables, Final Settlement 2018 Performance Year
Summary Of Significant Accounting Policies [Line Items]
Recoverable claims paid	3,200,000	$ 3,200,000
Other Receivables
Summary Of Significant Accounting Policies [Line Items]
Recoverable claims paid	8,500,000	8,500,000
Accounts Payable and Accrued Expenses
Summary Of Significant Accounting Policies [Line Items]
Accrued contract liability recognized		400,000
Contract liability repaid, capitation received and not earned		$ 8,500,000
PMPM Managed Care Contract
Summary Of Significant Accounting Policies [Line Items]
Contract term		one year
Management Fee Income Contract
Summary Of Significant Accounting Policies [Line Items]
Contract term		10 years
CMS
Summary Of Significant Accounting Policies [Line Items]
Expected period of payment upon termination of agreement		30 days
Minimum
Summary Of Significant Accounting Policies [Line Items]
Short-term marketable securities, maturity period		4 months
Maximum
Summary Of Significant Accounting Policies [Line Items]
Short-term marketable securities, maturity period		24 months
Certificates of Deposit
Summary Of Significant Accounting Policies [Line Items]
Amount of short-term marketable securities	$ 117,600,000	$ 117,600,000

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Basis of Presentation and Summary of Significant Accounting Policies - Additional Information, Performance Obligation (Details) - Next Generation ACO Model Participation Agreement	Jun. 30, 2020	Dec. 31, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2017-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, 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]
Remaining performance obligation, period	2 years

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Basis of Presentation and Summary of Significant Accounting Policies - Disaggregation of Revenue by Each Payor Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Revenue	$ 165,169	$ 130,050	$ 330,274	$ 225,806
Commercial
Disaggregation of Revenue [Line Items]
Revenue	25,479	25,365	50,192	50,383
Medicare
Disaggregation of Revenue [Line Items]
Revenue	62,038	57,965	126,918	95,063
Medicaid
Disaggregation of Revenue [Line Items]
Revenue	68,450	36,277	134,897	61,647
Other third parties
Disaggregation of Revenue [Line Items]
Revenue	$ 9,202	$ 10,443	$ 18,267	$ 18,713

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Basis of Presentation and Summary of Significant Accounting Policies - Contributions to Revenue and Receivables by Payor (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Net Revenue | Payor A
Accounts Receivable And Net Revenue [Line Items]
Concentration risk	11.90%	13.70%	11.90%	15.80%
Net Revenue | Payor B
Accounts Receivable And Net Revenue [Line Items]
Concentration risk	10.30%	12.60%	10.30%	14.30%
Net Revenue | Payor C
Accounts Receivable And Net Revenue [Line Items]
Concentration risk		10.50%		11.70%
Net Revenue | Payor D
Accounts Receivable And Net Revenue [Line Items]
Concentration risk	17.50%	13.70%	17.50%
Net Revenue | Payor E
Accounts Receivable And Net Revenue [Line Items]
Concentration risk	12.40%		12.90%
Net Revenue | Payor G
Accounts Receivable And Net Revenue [Line Items]
Concentration risk	10.10%		10.30%
Receivables and Receivables-Related Parties | Payor D
Accounts Receivable And Net Revenue [Line Items]
Concentration risk			12.40%
Receivables and Receivables-Related Parties | Payor G
Accounts Receivable And Net Revenue [Line Items]
Concentration risk			33.50%		30.40%
Receivables and Receivables-Related Parties | Payor H
Accounts Receivable And Net Revenue [Line Items]
Concentration risk			35.10%		36.00%

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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	Jun. 30, 2020	Dec. 31, 2019
Assets
Money market funds	$ 108,195	$ 50,731
Marketable securities – certificates of deposit	117,611	116,469
Marketable securities – equity securities	45	70
Total	225,851	167,270
Level 1
Assets
Money market funds	108,195	50,731
Marketable securities – certificates of deposit	117,611	116,469
Marketable securities – equity securities	45	70
Total	225,851	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
Total	$ 0	$ 0

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Business Combinations and Goodwill - Additional Information (Details) - USD ($) $ in Thousands			1 Months Ended	6 Months Ended
	Aug. 30, 2019	May 31, 2019	Sep. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Business Acquisition [Line Items]
Cash paid				$ 0	$ 41,518
Accountable Health Care, IPA
Business Acquisition [Line Items]
Consideration transferred	$ 25,100
Liabilities assumed	15,400
Accountable Health Care, IPA | 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, IPA | Dr. Jay
Business Acquisition [Line Items]
Interest acquired	75.00%
Consideration transferred	$ 7,300
APC | Accountable Health Care, IPA
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

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Business Combinations and Goodwill - Identifiable Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands			6 Months Ended
	Aug. 30, 2019	May 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Assets acquired
Goodwill			$ 239,053		$ 238,505
Cash paid			$ 0	$ 41,518
Accountable Health Care, IPA | 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	23,566
Accounts payable	(3,759)
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		4,675
Network relationship intangible assets		22,636
Goodwill		28,585
Accounts payable		(2,795)
Deferred tax liabilities		(6,334)
Medical liabilities		(15,616)
Net assets acquired		45,056
Cash paid		$ 45,056

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Business Combinations and Goodwill - Summary of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Goodwill [Roll Forward]
Balance, January 1, 2020	$ 238,505
Adjustments	548
Balance, June 30, 2020	$ 239,053

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Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Accumulated Amortization	$ (81,739)	$ (73,517)
Total	94,790
Intangible Assets, Gross	176,529	176,529
Intangible Assets, Net	94,790	103,012
Network relationships
Finite-Lived Intangible Assets [Line Items]
Amortized intangible assets, Gross	143,930	143,930
Accumulated Amortization	(67,015)	(60,526)
Total	$ 76,915	$ 83,404
Network relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life	11 years	11 years
Network relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life	15 years	15 years
Management contracts
Finite-Lived Intangible Assets [Line Items]
Useful Life	15 years	15 years
Amortized intangible assets, Gross	$ 22,832	$ 22,832
Accumulated Amortization	(10,736)	(9,676)
Total	$ 12,096	$ 13,156
Member relationships
Finite-Lived Intangible Assets [Line Items]
Useful Life	12 years	12 years
Amortized intangible assets, Gross	$ 6,696	$ 6,696
Accumulated Amortization	(2,793)	(2,352)
Total	$ 3,903	$ 4,344
Patient management platform
Finite-Lived Intangible Assets [Line Items]
Useful Life	5 years	5 years
Amortized intangible assets, Gross	$ 2,060	$ 2,060
Accumulated Amortization	(1,064)	(858)
Total	$ 996	$ 1,202
Trade names/trademarks
Finite-Lived Intangible Assets [Line Items]
Useful Life	20 years	20 years
Amortized intangible assets, Gross	$ 1,011	$ 1,011
Accumulated Amortization	(131)	(105)
Total	$ 880	$ 906

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Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 4.1	$ 3.9	$ 8.2	$ 7.7

XML

Intangible Assets, Net - Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2020 (excluding the six months ended June 30, 2020)	$ 7,807
2021	14,524
2022	12,673
2023	10,842
2024	9,830
Thereafter	39,114
Total	$ 94,790

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Investments in Other Entities — Equity Method - Equity Method Investments (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Equity Method Investments [Roll Forward]
Beginning Balance			$ 28,427,000
Allocation of Income (Loss)	$ 834,000	$ (42,000)	2,888,000	$ (892,000)
Contribution			500,000
Sale			(4,998,000)
Ending Balance	26,817,000		26,817,000
LaSalle Medical Associates – IPA Line of Business
Equity Method Investments [Roll Forward]
Beginning Balance			6,397,000
Allocation of Income (Loss)			(428,000)
Contribution			0
Ending Balance	5,969,000		5,969,000
Pacific Medical Imaging & Oncology Center, Inc.
Equity Method Investments [Roll Forward]
Beginning Balance			1,396,000
Allocation of Income (Loss)			77,000
Contribution			0
Ending Balance	1,473,000		1,473,000
Universal Care, Inc.
Equity Method Investments [Roll Forward]
Beginning Balance			1,438,000
Allocation of Income (Loss)	900,000	$ 4,500,000	3,560,000	$ 5,500,000
Contribution			0
Sale			(4,998,000)
Ending Balance	0		0
Diagnostic Medical Group
Equity Method Investments [Roll Forward]
Beginning Balance			2,334,000
Allocation of Income (Loss)			(102,000)
Contribution			0
Ending Balance	2,232,000		2,232,000
531 W. College, LLC – related party
Equity Method Investments [Roll Forward]
Beginning Balance			16,698,000
Allocation of Income (Loss)			(231,000)
Contribution			500,000
Ending Balance	16,967,000		16,967,000
MWN, LLC – related party
Equity Method Investments [Roll Forward]
Beginning Balance			164,000
Allocation of Income (Loss)			12,000
Contribution			0
Ending Balance	$ 176,000		$ 176,000

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Investments in Other Entities — Equity Method - Additional Information (Details) patient in Thousands			1 Months Ended			3 Months Ended		6 Months Ended
	Apr. 30, 2020 USD ($)	Jul. 01, 2019 USD ($)	Jun. 30, 2018 USD ($)	May 31, 2018 USD ($) shares	Aug. 31, 2015 USD ($) shares	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020	Jun. 30, 2020 primary_care_physician	Jun. 30, 2020 specialty_care_physician	Jun. 30, 2020 medical_center	Jun. 30, 2020 provider	Jun. 30, 2020 patient	Dec. 31, 2019 USD ($)	Aug. 31, 2019 USD ($)	Apr. 23, 2019 USD ($)	Dec. 31, 2018 USD ($)	May 14, 2016	Nov. 16, 2015	Jul. 31, 2015 USD ($)	Dec. 31, 2012 USD ($)
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments						$ 834,000	$ (42,000)	$ 2,888,000	$ (892,000)
Investments in other entities – equity method						26,817,000		26,817,000								$ 28,427,000
Cash consideration paid for ownership interest								500,000	2,158,000
Proceeds from sale of equity method investment								52,743,000	0
Investments in privately held entities						37,075,000		37,075,000								896,000
Contribution								500,000
APC | MediPortal LLC
Schedule of Equity Method Investments [Line Items]
Membership interests purchased (in shares) | shares				270,000
Payments to purchase membership interests				$ 400,000
Membership interests acquired (in dollars per share) | shares				1.50
Ownership percentage				2.80%
Term of warrant				5 years
Number of warrants received (in shares) | shares				270,000
Term of option				5 years
Options to purchase additional membership interests (in shares) | shares				380,000
Number of warrants available to purchase, contingent upon the portal completion date (in shares) | shares				480,000
Accountable Health Care
Schedule of Equity Method Investments [Line Items]
Number of medical centers | medical_center													4
Number of employees (more than)											400	700
Network Medical Management, Inc. | AchievaMed, Inc.
Schedule of Equity Method Investments [Line Items]
Ownership percentage		10.00%
Percentage of voting common stock, within five years		50.00%
Duration of investment		5 years
Investment amount		$ 500,000
Related investment balance						500,000		500,000
Pacific6 Enterprises
Schedule of Equity Method Investments [Line Items]
Ownership interest																			33.30%
Health Source MSO Inc.
Schedule of Equity Method Investments [Line Items]
Ownership interest																			33.30%
LaSalle Medical Associates
Schedule of Equity Method Investments [Line Items]
Number of medical centers | medical_center													6
Number of employees (more than) | provider														2,300
Number of patients | patient															290
Income (loss) from equity method investments								(428,000)
Investments in other entities – equity method						5,969,000		5,969,000								6,397,000
Contribution								0
LaSalle Medical Associates | APC LSMA
Schedule of Equity Method Investments [Line Items]
Amount invested for interest																							$ 5,000,000.0
Ownership interest																							25.00%
LaSalle Medical Associates | APC
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments						200,000	(1,300,000)	(400,000)	(2,400,000)
Pacific Medical Imaging & Oncology Center, Inc.
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments								77,000
Investments in other entities – equity method						1,473,000		1,473,000								1,396,000
Contribution								0
Pacific Medical Imaging & Oncology Center, Inc. | APC LSMA
Schedule of Equity Method Investments [Line Items]
Amount invested for interest																						$ 1,200,000
Ownership interest																						40.00%
Pacific Medical Imaging & Oncology Center, Inc. | APC
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments						(10,200)	100,000	100,000	200,000
Investments in other entities – equity method						1,500,000		1,500,000								1,400,000
Pacific Medical Imaging & Oncology Center, Inc. | APC | Ancillary Service Contract
Schedule of Equity Method Investments [Line Items]
Fees paid						400,000	600,000	1,000,000.0	1,400,000
Universal Care, Inc.
Schedule of Equity Method Investments [Line Items]
Ownership interest																					48.90%
Income (loss) from equity method investments						900,000	4,500,000	3,560,000	5,500,000
Investments in other entities – equity method	$ 4,998,000					0		0								1,438,000
Proceeds from sale of equity method investment	52,743,000
Additional cash and non-cash consideration entitled to be received	15,723,000
Contribution								0
Universal Care, Inc. | Preferred Stock | Bright
Schedule of Equity Method Investments [Line Items]
Investments in privately held entities	$ 36,179,000
Universal Care, Inc. | APC
Schedule of Equity Method Investments [Line Items]
Ownership interest disposed	48.90%
Proceeds from sale of equity method investment	$ 69,200,000
Repayment of indebtedness received	16,500,000
Additional cash and non-cash consideration entitled to be received	15,700,000					15,700,000
Universal Care, Inc. | APC | Preferred Stock | Bright
Schedule of Equity Method Investments [Line Items]
Investments in privately held entities						36,200,000		36,200,000
Universal Care, Inc. | Universal Care Acquisition Partners, LLC
Schedule of Equity Method Investments [Line Items]
Contingent consideration, cash held in escrow	15,600,000
Contingent consideration, preferred shares	6,400,000
Contingent consideration, fair value	$ 22,000,000.0
Universal Care, Inc. | Universal Care Acquisition Partners, LLC | APC
Schedule of Equity Method Investments [Line Items]
Ownership interest	48.90%
Repayment of indebtedness received	$ 16,500,000
Universal Care, Inc. | Universal Care Acquisition Partners, LLC | Bright
Schedule of Equity Method Investments [Line Items]
Ownership interest disposed	48.90%
Proceeds from sale of equity method investment	$ 69,200,000
Universal Care, Inc. | Universal Care Acquisition Partners, LLC | Voting Common Stock A Two
Schedule of Equity Method Investments [Line Items]
Shares purchased (in shares) | shares					100,000
Cash consideration paid for ownership interest					$ 10,000,000.0
Percentage of voting common stock					50.00%
Universal Care, Inc. | Universal Care Acquisition Partners, LLC | Ancillary Service Contract | Voting Common Stock A Two
Schedule of Equity Method Investments [Line Items]
Ownership interest					48.90%
Diagnostic Medical Group
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments								(102,000)
Investments in other entities – equity method						2,232,000		2,232,000								2,334,000
Contribution								0
Diagnostic Medical Group | APC
Schedule of Equity Method Investments [Line Items]
Ownership interest																				40.00%
Income (loss) from equity method investments						(100,000)	200,000	(100,000)	400,000
513 W. College LLC
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments								(231,000)
Investments in other entities – equity method						16,967,000		16,967,000								16,698,000
Purchase price of real estate			$ 33,300,000
Contribution								500,000
513 W. College LLC | APC
Schedule of Equity Method Investments [Line Items]
Ownership interest			25.00%							50.00%
Income (loss) from equity method investments						(100,000)	$ 12,649	(200,000)	$ (34,319)
Initial capital contributions			$ 8,300,000
513 W. College LLC | College Street Investment LP
Schedule of Equity Method Investments [Line Items]
Ownership interest			50.00%
Initial capital contributions			$ 16,700,000
513 W. College LLC | Network Medical Management, Inc.
Schedule of Equity Method Investments [Line Items]
Amount invested for interest																		$ 8,300,000
Ownership interest			25.00%															25.00%
Initial capital contributions			$ 8,300,000
MWN, LLC – related party
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments								12,000
Investments in other entities – equity method						176,000		176,000								164,000
Contribution								0
MWN, LLC – related party | Network Medical Management, Inc.
Schedule of Equity Method Investments [Line Items]
Ownership interest																			33.30%
Income (loss) from equity method investments						(43,000)		12,000
Investments in other entities – equity method						$ 200,000		$ 200,000								$ 200,000
Initial capital contributions																			$ 3,000
Working capital contribution																	$ 300,000		30,000
MWN, LLC – related party | Pacific6 Enterprises
Schedule of Equity Method Investments [Line Items]
Initial capital contributions																			3,000
Working capital contribution																			30,000
MWN, LLC – related party | Health Source MSO Inc.
Schedule of Equity Method Investments [Line Items]
Initial capital contributions																			3,000
Working capital contribution																			$ 30,000

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Investments in Other Entities — Equity Method - Gain on Sale (Details) - USD ($)		3 Months Ended		6 Months Ended
	Apr. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]
Cash proceeds (excludes proceeds to settle indebtedness owed to APC from UCI)				$ 52,743,000	$ 0
Preferred shares in Bright Health, Inc.		$ 37,075,000		37,075,000		$ 896,000
Less: Carrying value of equity method investment on date of sale		(26,817,000)		(26,817,000)		(28,427,000)
Gain on sale of equity method investment		99,647,000	$ 0	99,647,000	$ 0
Universal Care, Inc.
Schedule of Equity Method Investments [Line Items]
Cash proceeds (excludes proceeds to settle indebtedness owed to APC from UCI)	$ 52,743,000
Beneficial interest in UCI	15,723,000
Less: Carrying value of equity method investment on date of sale	(4,998,000)	$ 0		$ 0		$ (1,438,000)
Gain on sale of equity method investment	99,647,000
Universal Care, Inc. | Bright | Preferred Stock
Schedule of Equity Method Investments [Line Items]
Preferred shares in Bright Health, Inc.	$ 36,179,000

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Investments in Other Entities — Equity Method - Summarized Balance Sheets and Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended		4 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Apr. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Assets
Cash and cash equivalents	$ 152,441	$ 52,726		$ 152,441	$ 52,726		$ 103,189
Receivables, net	17,588			17,588			11,004
Loan receivable	6,425			6,425			6,425
Restricted cash	0			0			75
Property and equipment, net	11,485			11,485			12,130
Total assets	833,217			833,217			728,713
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	152,507			152,507			105,423
Stockholders’ deficit	207,848	186,089		207,848	186,089	$ 197,961	192,335	$ 182,377	$ 181,544
Total liabilities and stockholders’ deficit	833,217			833,217			728,713
Statements of Operations
Revenue	165,169	130,050		330,274	225,806
Expenses	152,263	115,322		313,003	214,385
Income from operations	12,906	14,728		17,271	11,421
Other income	1,282	24		1,384	211
Income before benefit from income taxes	112,859	14,873		117,441	11,015
Benefit from income taxes	31,858	4,209		33,453	2,801
Net income	81,001	$ 10,664		83,988	8,214
LaSalle Medical Associates
Assets
Cash and cash equivalents	2,852			2,852			6,345
Receivables, net	6,751			6,751			5,124
Other current assets	880			880			3,526
Loan receivable	2,250			2,250			2,250
Restricted cash	688			688			683
Total assets	13,421			13,421			17,928
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	20,735			20,735			23,530
Stockholders’ deficit	(7,314)			(7,314)			(5,602)
Total liabilities and stockholders’ deficit	13,421			13,421			17,928
Statements of Operations
Revenue				92,113	93,434
Expenses				93,680	102,845
Net income				(1,567)	(9,411)
513 W. College LLC
Assets
Cash and cash equivalents	126			126			139
Other current assets	0			0			17
Other assets	70			70			70
Property and equipment, net	33,697			33,697			33,581
Total assets	33,893			33,893			33,807
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities	1,109			1,109			1,062
Stockholders’ deficit	32,784			32,784			32,745
Total liabilities and stockholders’ deficit	$ 33,893			33,893			33,807
Statements of Operations
Revenue				0	0
Expenses				579	538
Income from operations				(579)	(538)
Other income				21	385
Net income				$ (558)	(153)
Universal Care, Inc.
Assets
Cash and cash equivalents							33,890
Receivables, net							63,843
Other current assets							38,280
Loan receivable							882
Restricted cash							4,021
Total assets							140,916
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities							128,330
Other liabilities							33,133
Stockholders’ deficit							(20,547)
Total liabilities and stockholders’ deficit							$ 140,916
Statements of Operations
Revenue			$ 195,308		247,517
Expenses			189,028		239,389
Income before benefit from income taxes			6,280		8,128
Benefit from income taxes			0		(3,167)
Net income			$ 6,280		$ 11,295

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Loan Receivable and Loan Receivable – Related Parties - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Jun. 30, 2020	Apr. 30, 2020	Feb. 28, 2020	Dec. 31, 2019	Dec. 13, 2019	Jun. 28, 2019	Nov. 28, 2018	Jun. 29, 2018	Dec. 31, 2015	Nov. 16, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Prepaid expenses and other current assets		$ 11,188			$ 10,315
Universal Care, Inc.
Accounts, Notes, Loans and Financing Receivable [Line Items]
Ownership interest											48.90%
Universal Care Acquisition Partners, LLC | APC | Universal Care, Inc.
Accounts, Notes, Loans and Financing Receivable [Line Items]
Ownership interest			48.90%
Convertible Secured Promissory Note | Dr. Arteaga | LMA
Accounts, Notes, Loans and Financing Receivable [Line Items]
Ownership upon conversion of finance receivable							53.75%
Convertible Secured Promissory Note | Dr. Arteaga
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amount of loan		$ 6,400
Convertible Secured Promissory Note | Dr. Arteaga | APC
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amount of loan							$ 6,400
Interest rate on loan receivable		4.25%
Percentage of outstanding stock convertible							21.25%
Convertible Secured Promissory Note | Dr. Arteaga | APC and APC-LSMA | LMA
Accounts, Notes, Loans and Financing Receivable [Line Items]
Ownership upon conversion of finance receivable							46.25%
Convertible Secured Promissory Note | Dr. Arteaga | Prime Rate | APC
Accounts, Notes, Loans and Financing Receivable [Line Items]
Basis spread on variable rate		1.00%
Financing Receivable | APC | Universal Care, Inc.
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest rate on loan receivable	4.25%
Advance for working capital										$ 5,000
Additional advances						$ 4,000		$ 5,000	$ 2,500
Financing Receivable | Prime Rate | APC | Universal Care, Inc.
Accounts, Notes, Loans and Financing Receivable [Line Items]
Basis spread on variable rate	1.00%
Financing Receivable | Dr. Arteaga
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amount of loan				$ 2,200
Prepaid expenses and other current assets		$ 900
Financing Receivable | Dr. Jay Loan | APC | Universal Care, Inc.
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest rate on loan receivable					5.75%

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Accounts Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accounts payable	$ 10,425	$ 6,914
Capitation payable	2,754	2,813
Subcontractor IPA payable	3,083	3,360
Professional fees	2,325	1,837
Due to related parties	80	225
Accrued compensation	3,060	3,238
Contract liabilities	3,061	8,892
Total accounts payable and accrued expenses	$ 24,788	$ 27,279

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Medical Liabilities - Schedule of Medical Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Medical Liabilities [Roll Forward]
Medical liabilities, beginning of period	$ 58,725	$ 33,642
Components of medical care costs related to claims incurred:
Current period	165,571	93,833
Prior periods	233	2,688
Total medical care costs	165,804	96,521
Payments for medical care costs related to claims incurred:
Current period	(97,112)	(60,440)
Prior periods	(57,470)	(39,744)
Total paid	(154,582)	(100,184)
Acquired from Alpha Care	0	13,120
Adjustments	326	(156)
Medical liabilities, end of period	$ 70,273	$ 42,943

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Credit Facility, Bank Loan and Lines of Credit - Credit Facility (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Line of Credit Facility [Line Items]
Total debt	$ 245,250
Less: Current portion of debt	(9,500)
Less: Unamortized financing costs	(5,295)
Total	230,455
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

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Credit Facility, Bank Loan and Lines of Credit - Schedule of Maturities (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Debt Disclosure [Abstract]
2020 (excluding the six months ended June 30, 2020)	$ 7,125
2021	10,688
2022	14,250
2023	15,437
2024	197,750
Total	$ 245,250

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Credit Facility, Bank Loan and Lines of Credit - Additional Information (Details)				1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2018	Oct. 02, 2018 USD ($)	Sep. 05, 2018 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) financial_ratio	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) financial_ratio	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Sep. 10, 2019 USD ($)	Aug. 14, 2019 USD ($)	Aug. 01, 2019 USD ($)	Jul. 29, 2019 USD ($)	Jun. 11, 2019 USD ($)	Apr. 17, 2019 USD ($)	Sep. 01, 2018 USD ($)	Jun. 14, 2018 USD ($)
Debt Instrument [Line Items]
Amount outstanding					$ 245,250,000		$ 245,250,000
Interest expense					2,673,000	$ 311,000	5,541,000	$ 522,000
Loan proceeds					$ 230,455,000		$ 230,455,000
Credit Agreement
Debt Instrument [Line Items]
Number of key financial ratios | financial_ratio					2		2
Maximum consolidated leverage ratio (not greater than)					0.0375		0.0375
Consolidated leverage ratio, annual decrease					0.0025		0.0025
Consolidated leverage ratio minimum					0.0300		0.0300
Minimum consolidated interest coverage ratio (not less than)							0.0325
Default amount of debt instrument				$ 10,000,000.0
Average effective interest rate							3.93%	4.71%
Interest expense					$ 300,000	700,000	$ 0	$ 0
Credit Agreement | Preferred Bank
Debt Instrument [Line Items]
Amount outstanding					14,800,000		$ 14,800,000
Credit Agreement | Minimum
Debt Instrument [Line Items]
Required annual facility fee				0.20%
Basis spread on variable rate							1.00%
Credit Agreement | Minimum | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate							2.00%
Credit Agreement | Maximum
Debt Instrument [Line Items]
Required annual facility fee				0.35%
Basis spread on variable rate							2.00%
Credit Agreement | Maximum | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate							3.00%
Credit Agreement | First Eight Fiscal Quarters
Debt Instrument [Line Items]
Principal payment on credit agreement				$ 2,400,000
Credit Agreement | Following Eight Fiscal Quarters Thereafter
Debt Instrument [Line Items]
Principal payment on credit agreement				3,600,000
Credit Agreement | Following Three Fiscal Quarters Thereafter
Debt Instrument [Line Items]
Principal payment on credit agreement				$ 4,800,000
NMM Line of Credit Agreement
Debt Instrument [Line Items]
Default amount of debt instrument					50,000,000.0		$ 50,000,000.0
Shareholder approval percentage (not less than)							50.01%
Approved use of funds (not to exceed)					125,000,000.0		$ 125,000,000.0
Revolver Loan
Debt Instrument [Line Items]
Amount outstanding					$ 60,000,000		$ 60,000,000
interest rate at end of period					3.24%		3.24%
Revolver Loan | Credit Agreement
Debt Instrument [Line Items]
Revolving credit facility term				5 years
Amount outstanding				$ 60,000,000.0
Deferred financing costs				6,500,000
Revolver Loan | Credit Agreement | Line of Credit
Debt Instrument [Line Items]
Maximum loan availability				100,000,000.0
Letter of Credit | Credit Agreement | Preferred Bank
Debt Instrument [Line Items]
Amount available					$ 10,200,000		$ 10,200,000
Letter of Credit | Credit Agreement | Line of Credit
Debt Instrument [Line Items]
Maximum loan availability				25,000,000.0
Term loan A
Debt Instrument [Line Items]
Amount outstanding					$ 185,250,000		$ 185,250,000
interest rate at end of period					3.57%		3.57%
Term loan A | Credit Agreement | Line of Credit
Debt Instrument [Line Items]
Maximum loan availability				$ 190,000,000.0
Standby Letters of Credit | APC
Debt Instrument [Line Items]
Maximum loan availability					$ 300,000		$ 300,000
Term of facility							1 year
Standby Letters of Credit | APAACO | Preferred Bank
Debt Instrument [Line Items]
Maximum loan availability		$ 6,600,000									$ 14,800,000
Term of facility		1 year
Period of notification of termination		90 days
Standby Letters of Credit | Alpha Care Medical Group, Inc.
Debt Instrument [Line Items]
Term of facility							1 year
Standby Letters of Credit | Alpha Care Medical Group, Inc. | Preferred Bank
Debt Instrument [Line Items]
Maximum loan availability					$ 3,800,000		$ 3,800,000
Term of facility							1 year
Standby Letters of Credit | Credit Agreement | Minimum
Debt Instrument [Line Items]
Required annual facility fee							2.00%
Standby Letters of Credit | Credit Agreement | Maximum
Debt Instrument [Line Items]
Required annual facility fee							3.00%
Line of Credit | NMM Line of Credit Agreement | NMM | Preferred Bank
Debt Instrument [Line Items]
Maximum loan availability			$ 20,000,000.0										$ 2,200,000		$ 16,000,000.0
interest rate at end of period					3.375%		3.375%		4.875%
Term of converted loan			5 years
Term of facility			5 years
Line of Credit | NMM Line of Credit Agreement | NMM | Prime Rate | Preferred Bank
Debt Instrument [Line Items]
Basis spread on variable rate							0.125%
Line of Credit | NMM Business Loan Agreement | NMM | Preferred Bank
Debt Instrument [Line Items]
Maximum loan availability																$ 27,000,000.0	$ 20,000,000.0
Amount outstanding						$ 5,000,000.0		$ 5,000,000.0
interest rate at end of period	5.625%
Line of Credit | NMM Business Loan Agreement | NMM | Prime Rate | Preferred Bank
Debt Instrument [Line Items]
Basis spread on variable rate	0.125%
Line of Credit | APC Business Loan Agreement | APC | Preferred Bank
Debt Instrument [Line Items]
Maximum loan availability										$ 4,100,000		$ 43,800,000		$ 40,000,000.0			$ 10,000,000.0
interest rate at end of period					3.375%		3.375%		4.875%
Amount available					$ 0		$ 0		$ 0
Line of Credit | APC Business Loan Agreement | APC | Prime Rate | Preferred Bank
Debt Instrument [Line Items]
Basis spread on variable rate							0.125%

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Mezzanine and Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Class of Stock [Line Items]
Holdback shares not issued to former shareholders (in shares)		302,732
Stock options exercised (in shares)		120,000	111,000
Options exercised (in shares)		0	0
Options outstanding exercise price (in dollars per share)	$ 10.86	$ 10.86		$ 9.22
Share-based compensation		$ 1,910	$ 676
Warrants exercised (in shares)		273,900	41,624
Proceeds from warrants exercised		$ 2,600	$ 400
Treasury shares (in shares)	17,475,707	17,475,707		17,458,810
Allied Pacific of California Brokerage Account
Class of Stock [Line Items]
Treasury stock, value	$ 7,600	$ 7,600
APC
Class of Stock [Line Items]
Treasury shares (in shares)	17,307,214	17,307,214		17,290,317
Dividends declared		$ 29,600	10,000
CDSC
Class of Stock [Line Items]
Dividends declared		600	$ 1,200
Restricted stock awards
Class of Stock [Line Items]
Share-based compensation	$ 900	1,600
Unrecognized compensation expense	3,800	$ 3,800
Restricted stock awards
Class of Stock [Line Items]
Vesting period		3 years
Restricted stock awards granted (in shares)		97,447
Weighted average grant date fair value (in dollars per share)		$ 17.58
Grant date fair value of restricted stock to be recognized straight-line	$ 1,600	$ 1,600
Minimum
Class of Stock [Line Items]
Exercise price of exercises during period (in dollars per share)	$ 2.10	$ 2.10	$ 1.50
Exercise price of warrants exercised (in dollars per share)		9.00	9.00
Maximum
Class of Stock [Line Items]
Exercise price of exercises during period (in dollars per share)	5.00	5.00	5.79
Exercise price of warrants exercised (in dollars per share)		$ 11.00	$ 11.00
APC Stock Option
Class of Stock [Line Items]
Proceeds of options exercised		$ 300	$ 500
Board Members
Class of Stock [Line Items]
Options granted (in shares)		11,742
Options outstanding exercise price (in dollars per share)	$ 18.41	$ 18.41
Board Members | Stock options
Class of Stock [Line Items]
Vesting period		5 years

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Mezzanine and Stockholders' Equity - Schedule of Stock Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Shares
Options outstanding, beginning balance (in shares)	607,346
Options granted (in shares)	11,742
Options exercised (in shares)	(120,000)	(111,000)
Options forfeited (in shares)	(12,228)
Options outstanding, ending balance (in shares)	486,860		607,346
Options exercisable (in shares)	380,894
Weighted Average Exercise Price
Options outstanding, beginning balance (in dollars per share)	$ 9.22
Options granted (in dollars per share)	18.41
Options exercised (in dollars per share)	2.58
Options forfeited (in dollars per share)	17.57
Options outstanding, ending balance (in dollars per share)	10.86		$ 9.22
Options exercisable (in dollars per share)	$ 7.11
Weighted Average Remaining Contractual Term (Years)
Options outstanding	3 years 8 months 12 days		3 years 5 months 1 day
Options exercisable	2 years 8 months 26 days
Aggregate Intrinsic Value (in thousands)
Beginning balance	$ 5,600
Options exercised	1,800
Ending balance	2,900		$ 5,600
Options exercisable	$ 3,000

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Mezzanine and Stockholders' Equity - Stock Option Activity Under Black-Scholes Option Pricing Model (Details) - Board Members	6 Months Ended
	Jun. 30, 2020 $ / shares
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%

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Mezzanine and Stockholders' Equity - Summary of Warrant (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Shares
Warrants outstanding, beginning balance (in shares)	3,154,590
Warrants granted (in shares)	0
Warrants exercised (in shares)	(273,900)
Warrants expired/forfeited (in shares)	0
Warrants outstanding, ending balance (in shares)	2,880,690	3,154,590
Weighted Average Exercise Price
Warrants outstanding, beginning balance (in dollars per share)	$ 9.96
Warrants granted (in dollars per share)	0
Warrants exercised (in dollars per share)	9.32
Warrants expired/forfeited (in dollars per share)	0
Warrants outstanding, ending balance (in dollars per share)	$ 10.02	$ 9.96
Weighted Average Remaining Contractual Term (Years)
Warrants outstanding	1 year 7 months 9 days	2 years 3 days
Aggregate Intrinsic Value (in thousands)
Warrants outstanding, beginning balance	$ 26,700
Warrants granted	0
Warrants exercised	2,000
Warrants expired/forfeited	0
Warrants outstanding, ending balance	$ 18,700	$ 26,700

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Mezzanine and Stockholders' Equity - Warrants (Details) - $ / shares	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Class of Warrant or Right [Line Items]
Weighted Average Exercise Price Per Share (in dollars per share)	$ 10.02	$ 9.96
Warrant Exercise Price Range One
Class of Warrant or Right [Line Items]
Exercise Price Per Share (in dollars per share)	$ 9.00
Warrants Outstanding (in shares)	754,870
Weighted Average Remaining Contractual Life	3 months 14 days
Warrants Exercisable (in shares)	754,870
Weighted Average Exercise Price Per Share (in dollars per share)	$ 9.00
Warrant Exercise Price Range Two
Class of Warrant or Right [Line Items]
Exercise Price Per Share (in dollars per share)	$ 10.00
Warrants Outstanding (in shares)	1,313,345
Weighted Average Remaining Contractual Life	1 year 10 months 6 days
Warrants Exercisable (in shares)	1,313,345
Weighted Average Exercise Price Per Share (in dollars per share)	$ 10.00
Warrant Exercise Price Range Three
Class of Warrant or Right [Line Items]
Exercise Price Per Share (in dollars per share)	$ 11.00
Warrants Outstanding (in shares)	812,475
Weighted Average Remaining Contractual Life	2 years 5 months 8 days
Warrants Exercisable (in shares)	812,475
Weighted Average Exercise Price Per Share (in dollars per share)	$ 11.00
Warrant Exercise Price Range Four
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)	2,880,690
Weighted Average Remaining Contractual Life	1 year 7 months 9 days
Warrants Exercisable (in shares)	2,880,690
Weighted Average Exercise Price Per Share (in dollars per share)	$ 10.02
Warrant Exercise Price Range Four | Minimum
Class of Warrant or Right [Line Items]
Exercise Price Per Share (in dollars per share)	9.00
Warrant Exercise Price Range Four | Maximum
Class of Warrant or Right [Line Items]
Exercise Price Per Share (in dollars per share)	$ 11.00

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Commitments and Contingencies - Additional Information (Details) - USD ($)		6 Months Ended
	Apr. 03, 2018	Jun. 30, 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
Term of facility		1 year
Preferred Bank
Commitments And Contingencies [Line Items]
Amount outstanding			$ 8,200,000	$ 6,600,000

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Related-Party Transactions - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Apr. 30, 2020	Dec. 31, 2019 USD ($)	Nov. 28, 2018 USD ($) agreement	Jun. 28, 2018 USD ($)	Nov. 16, 2015 USD ($)
Related Party Transaction [Line Items]
Operating lease right-of-use assets	$ 20,219,000		$ 20,219,000			$ 14,248,000
Lease liabilities	20,768,000		20,768,000
Recognized risk pool revenue	5,815,000	$ 15,985,000	17,607,000	$ 26,835,000
NMM | Board Members
Related Party Transaction [Line Items]
Consulting services paid	0	27,000	100,000	100,000
NMM | LMA
Related Party Transaction [Line Items]
Revenue from related parties	4,200,000	8,400,000	5,200,000
APC | PMIOC | Service
Related Party Transaction [Line Items]
Payments to related parties	400,000	1,000,000.0	600,000	1,400,000
APC | DMG | Service
Related Party Transaction [Line Items]
Payments to related parties	900,000	2,600,000	1,800,000	3,800,000
Universal Care, Inc.
Related Party Transaction [Line Items]
Amount of subordinated note receivable agreement									$ 5,000,000.0
Universal Care Acquisition Partners, LLC
Related Party Transaction [Line Items]
Amount of subordinated note receivable agreement							$ 5,000,000.0	$ 2,500,000
Number of additional subordinated note receivable agreements | agreement							2
APC Shareholders | APC | Service
Related Party Transaction [Line Items]
Payments to related parties	9,000,000.0	7,100,000	16,300,000	16,400,000
Advance Diagnostic Surgery Center | APC | Service
Related Party Transaction [Line Items]
Payments to related parties	100,000	100,000
APC Shareholders and Officers | APC
Related Party Transaction [Line Items]
Payments to related parties	3,000,000.0	1,900,000	4,800,000	5,100,000
Medical Property Partners | NMM
Related Party Transaction [Line Items]
Payments to related parties	300,000	500,000	300,000	500,000
One MSO, Inc.
Related Party Transaction [Line Items]
Operating lease right-of-use assets	10,600,000		10,600,000
Lease liabilities	10,600,000		10,600,000
One MSO, Inc. | NMM
Related Party Transaction [Line Items]
Payments to related parties	400,000		700,000
Critical Quality Management Corp
Related Party Transaction [Line Items]
Payments to related parties	100,000	200,000
Numen LLC
Related Party Transaction [Line Items]
Operating lease right-of-use assets	1,400,000		1,400,000
Lease liabilities	1,400,000		1,400,000
Numen LLC | SCHC
Related Party Transaction [Line Items]
Payments to related parties	100,000	200,000	100,000	200,000
AHMC
Related Party Transaction [Line Items]
Recognized risk pool revenue	10,200,000	$ 21,000,000.0	10,200,000	$ 25,000,000.0
Amount outstanding under agreement	$ 53,700,000		$ 53,700,000			$ 40,400,000
Universal Care, Inc.
Related Party Transaction [Line Items]
Ownership interest									48.90%
LMA | NMM
Related Party Transaction [Line Items]
Ownership interest	25.00%	25.00%	25.00%	25.00%
PMIOC | APC Shareholders | APC | Service
Related Party Transaction [Line Items]
Ownership interest	40.00%	40.00%	40.00%	40.00%
DMG | APC Shareholders | APC | Service
Related Party Transaction [Line Items]
Ownership interest	40.00%	40.00%	40.00%	40.00%
One MSO, Inc. | Dr. Sim And Dr. Lam
Related Party Transaction [Line Items]
Ownership interest	50.00%		50.00%
APC | Universal Care, Inc. | Universal Care Acquisition Partners, LLC
Related Party Transaction [Line Items]
Ownership interest					48.90%

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Related-Party Transactions - Fees Incurred and Income Received (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Related Party Transaction [Line Items]
Net total	$ 5,815	$ 15,985	$ 17,607	$ 26,835
AHMC
Related Party Transaction [Line Items]
AHMC – Risk pool, capitation, claims payment, net	6,057	16,350	18,056	27,950
Net total	10,200	21,000	10,200	25,000
HSMSO
Related Party Transaction [Line Items]
Management fees	(189)	(265)	(321)	(915)
Aurion
Related Party Transaction [Line Items]
Management fees	$ (53)	$ (100)	$ (128)	$ (200)

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Earnings Per Share - Additional Information (Details) - shares	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
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

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Earnings Per Share - Earnings Per Share Computations (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Earnings per share – basic (in dollars per share)	$ 0.20	$ 0.10	$ 0.31	$ 0.11
Earnings per share – diluted (in dollars per share)	$ 0.19	$ 0.09	$ 0.30	$ 0.10
Weighted average shares of common stock outstanding – basic (in shares)	36,071,604	34,540,059	36,040,936	34,518,461
Weighted average shares of common stock outstanding – diluted (in shares)	37,285,585	37,962,555	37,296,913	37,896,837

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Earnings Per Share - Shares Included in Diluted Earnings Per Share Computations (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Line Items]
Weighted average shares of common stock outstanding – basic (in shares)	36,071,604	34,540,059	36,040,936	34,518,461
Weighted average shares of common stock outstanding – diluted (in shares)	37,285,585	37,962,555	37,296,913	37,896,837
Shares held back in merger to secure indemnification (as a percent)	10.00%	10.00%	10.00%	10.00%
Stock options
Earnings Per Share [Line Items]
Adjustments to weighted average shares of common stock (in shares)	169,402	363,593	173,299	368,273
Restricted stock awards
Earnings Per Share [Line Items]
Adjustments to weighted average shares of common stock (in shares)	2,795	0	5,876	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	0	1,519,805
Warrants
Earnings Per Share [Line Items]
Adjustments to weighted average shares of common stock (in shares)	1,041,784	1,539,098	1,076,802	1,490,298

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Variable Interest Entities (VIEs) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 152,441	$ 103,189	$ 52,726
Restricted cash	0	75
Investment in marketable securities	117,656	116,539
Receivables, net	17,588	11,004
Receivables, net – related party	59,328	48,136
Other receivables	15,919	16,885
Prepaid expenses and other current assets	11,188	10,315
Loans receivable	6,425	6,425
Loans receivable – related parties	0	16,500
Total current assets	380,545	329,068
Noncurrent assets
Intangible assets, net	94,790	103,012
Goodwill	239,053	238,505
Investments in other entities – equity method	26,817	28,427
Restricted cash	746	746
Operating lease right-of-use assets	20,219	14,248
Other assets	22,487	1,681
Total noncurrent assets	452,672	399,645
Total assets	833,217	728,713
Current liabilities
Accounts payable and accrued expenses	24,788	27,279
Fiduciary accounts payable	1,853	2,027
Medical liabilities	70,273	58,725	$ 42,943	$ 33,642
Dividend payable	431	271
Finance lease liabilities	102	102
Operating lease liabilities	3,350	2,990
Total current liabilities	152,507	105,423
Noncurrent liabilities
Deferred tax liability	13,654	18,269
Long-term lease liabilities	355	416
Operating lease liabilities, net of current portion	17,418	11,373
Total noncurrent liabilities	261,882	262,230
Total liabilities	414,389	367,653
Variable Interest Entity, Primary Beneficiary
Current assets
Cash and cash equivalents	113,790	87,110
Restricted cash	0	75
Investment in marketable securities	117,611	123,948
Receivables, net	15,687	9,300
Receivables, net – related party	55,889	42,976
Other receivables	734	744
Prepaid expenses and other current assets	7,752	7,403
Loans receivable	6,425	6,425
Loans receivable – related parties	0	16,500
Total current assets	317,888	294,481
Noncurrent assets
Land, property and equipment, net	9,085	9,547
Intangible assets, net	75,177	81,439
Goodwill	109,460	108,913
Investment in affiliates	285,569	318,315
Investment in privately held entities	36,584	1,615
Investments in other entities – equity method	26,864	28,427
Restricted cash	746	746
Operating lease right-of-use assets	7,017	4,751
Other assets	20,750	1,057
Total noncurrent assets	571,252	554,810
Total assets	889,140	849,291
Current liabilities
Accounts payable and accrued expenses	11,822	11,187
Fiduciary accounts payable	1,853	2,027
Medical liabilities	47,304	49,019
Income taxes payable	42,211	4,530
Amount due to affiliate	21,533	28,058
Dividend payable	431	271
Finance lease liabilities	102	102
Operating lease liabilities	1,319	1,088
Total current liabilities	126,575	96,282
Noncurrent liabilities
Deferred tax liability	9,490	14,059
Long-term lease liabilities	355	416
Operating lease liabilities, net of current portion	5,833	3,742
Total noncurrent liabilities	15,678	18,217
Total liabilities	$ 142,253	$ 114,499

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Leases - Additional information (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lessee, Lease, Description [Line Items]
Operating lease option to extend (up to)	10 years		10 years		10 years
Finance lease option to extend (up to)	10 years		10 years		10 years
Operating lease, termination period, if applicable					1 year
Finance lease, termination period, if applicable					1 year
Assets recorded under finance leases	$ 400	$ 500	$ 400		$ 400
Accumulated depreciation associated with finance leases	$ 300	$ 300	$ 35	$ 25	$ 61	$ 50
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term, operating	1 month		1 month		1 month
Remaining lease term, finance	1 month		1 month		1 month
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term, operating	5 years		5 years		5 years
Remaining lease term, finance	5 years		5 years		5 years

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Operating lease cost			$ 1,446	$ 1,240	$ 3,388	$ 2,343
Amortization of lease expense	$ 300	$ 300	35	25	61	50
Interest on lease liabilities			4	4	7	9
Sublease income			(226)	(106)	(360)	(206)
Total finance lease cost, net			$ 1,259	$ 1,163	$ 3,096	$ 2,196

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Leases - Other Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 1,333	$ 1,239	$ 2,880	$ 2,273
Operating cash flows from finance leases	4	4	7	9
Financing cash flows from finance leases	35	25	61	50
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$ 2,907	$ 6,441	$ 7,652	$ 15,417
Weighted Average Remaining Lease Term
Operating leases	7 years 21 days	6 years 10 months 13 days	7 years 21 days	6 years 10 months 13 days
Finance leases	4 years 2 months 1 day	5 years	4 years 2 months 1 day	5 years
Weighted Average Discount Rate
Operating leases	6.10%	6.18%	6.10%	6.18%
Finance leases	3.00%	3.00%	3.00%	3.00%

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Leases - Future Minimum Payments Under Non-cancelable Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Operating Leases
2020 (excluding the six months ended June 30, 2020)	$ 2,337
2021	4,297
2022	3,529
2023	3,303
2024	2,940
Thereafter	9,459
Total future minimum lease payments	25,865
Less: imputed interest	5,097
Total lease liabilities	20,768
Less: current portion	3,350	$ 2,990
Long-term lease liabilities	17,418	11,373
Finance Leases
2020 (excluding the six months ended June 30, 2020)	59
2021	119
2022	119
2023	119
2024	79
Thereafter	0
Total future minimum lease payments	495
Less: imputed interest	38
Total lease liabilities	457
Less: current portion	102	102
Long-term lease liabilities	$ 355	$ 416

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Label	Element	Value
Dividends Payable	us-gaap_DividendsPayableCurrentAndNoncurrent	$ 0
Dividends Payable	us-gaap_DividendsPayableCurrentAndNoncurrent	$ 160,000