Fair Value Measurements of Financial Instruments

12 Months Ended

Dec. 31, 2023

Fair Value Measurements of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2023 are presented below (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts*	$	4,842	$	—	$	—	$	4,842
Marketable securities – certificates of deposit	2,150		—		—		2,150
Marketable securities – equity securities	348		—		—		348
Total assets	$	7,340	$	—	$	—	$	7,340

Liabilities
AAMG contingent consideration	$	—	$	—	$	5,475	$	5,475
VOMG contingent consideration	—		—		17		17
DMG remaining equity interest purchase	—		—		8,542		8,542
Sun Labs remaining equity interest purchase	—		—		7,802		7,802
Interest rate collar	—		252		—		252
Total liabilities	$	—	$	252	$	21,836	$	22,088

* Included in cash and cash equivalents

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2022 are presented below (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts*	$	135,235	$	—	$	—	$	135,235
Marketable securities – equity securities	5,567		—		—		5,567
Contingent equity securities	—		—		1,900		1,900
Interest rate swaps	—		3,164		—		3,164
Total assets	$	140,802	$	3,164	$	1,900	$	145,866

Liabilities
APCMG contingent consideration	$	—	$	—	$	1,000	$	1,000
AAMG contingent consideration	—		—		5,851		5,851
VOMG contingent consideration	—		—		17		17
DMG remaining equity interest purchase	—		—		8,542		8,542
Sun Labs remaining equity interest purchase	—		—		5,849		5,849
Total liabilities	$	—	$	—	$	21,259	$	21,259

* Included in cash and cash equivalents

The change in the fair value of existing Level 3 liabilities is recognized in unrealized loss on investments and general and administrative expenses in the accompanying consolidated statements of income. As of December 31, 2023, the reconciliation of our Level 3 liabilities was as follows (in thousands):


	Amount
Balance at January 1, 2023	$	21,259
Change in fair value of existing Level 3 liabilities	1,577
APCMG contingent consideration paid	(1,000)
Balance at December 31, 2023	$	21,836

Investments in Marketable Securities

As of December 31, 2023 and 2022, certificates of deposit amounted to approximately $2.2 million and $0, respectively. Investments in certificates of deposit are classified as Level 1 investments in the fair value hierarchy.

As of December 31, 2023, equity securities held by the Company are primarily comprised of common stock of Nutex Health, Inc. (formerly known as Clinigence Holdings, Inc.) (“Nutex”). In September 2021, Astrana and Nutex entered into a stock purchase agreement in which Astrana purchased shares of common stock, warrants, and potentially additional shares of common stock if certain metrics were not met (such additional shares “contingent equity securities”) for $3.0 million. The common stock is included in investments in marketable securities in the accompanying consolidated balance sheets. In May 2022, the Company exercised the warrants and subsequently recognized the shares within investments in marketable securities in the accompanying consolidated balance sheet. In March 2023, the contingent equity securities were settled and the Company received additional Nutex common stock. The additional common stock received from the contingent equity securities is included in investments in marketable securities in the accompanying consolidated balance sheets.

As of December 31, 2023 and 2022, the equity securities were approximately $0.3 million and $5.6 million, respectively, in the accompanying consolidated balance sheets. In December 2023, APC sold all of its common stock in a payer partner. The components comprising total gains and losses on equity securities are as follows (in thousands) for the periods listed below:


	Twelve Months Ended December 31,
	2023		2022

Total losses recognized on equity securities	$	(6,629)	$	(19,169)
Less (loss) gains recognized on equity securities sold	(4,052)		2,272
Unrealized losses recognized on equity securities held at end of period	$	(2,577)	$	(21,441)

Derivative Financial Instruments

Interest Rate Swap Agreements and Collar Agreements

The Company is exposed to interest rate risk on its floating-rate debt. APC’s Excluded Assets entered into interest rate swap agreements to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts was to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. Refer to Note 10 - “Credit Facility, Bank Loans, and Lines of Credit,” for further information on the Company’s debt. Interest rate swap agreements are not designated as hedging instruments. Changes in the fair value on these contracts are recognized as unrealized gain or loss on investments in the accompanying consolidated statements of income and reflected in the accompanying consolidated statements of cash flows as unrealized gain or loss on interest rate swaps. The estimated fair value of the interest rate swap agreements was determined using Level 2 inputs. On December 1, 2023, APC’s Excluded Assets ended the interest rate swap agreements. As of December 31, 2022, the fair value was $3.2 million and was presented within other long-term assets in the accompanying consolidated balance sheets. For the years ended December 31, 2023 and 2022, APC recognized unrealized gains of $0.2 million and $4.2 million, respectively. The interest rate swaps were deemed Excluded Assets that were solely for the benefit of APC and its common shareholders.

The Company’s collar agreement is designed to limit the interest rate risk associated with the Company’s Revolver Loan. The principal objective of the collar agreement is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. Refer to Note 10 - “Credit Facility, Bank Loans, and Lines of Credit,” for further information on the Company’s

debt. Under the terms of the agreement, the ceiling is 5.0% and the floor is 2.34%. The collar agreement is not designated as a hedging instrument. Changes in the fair value on this contract is recognized as unrealized gain or loss on investments in the accompanying consolidated statements of income and reflected in the accompanying consolidated statements of cash flows as unrealized loss on investments. The estimated fair value of the collar was determined using Level 2 inputs. As of December 31, 2023 the fair value of the collar was $0.3 million and was presented within other long-term liabilities in the accompanying consolidated balance sheets. For the year ended December 31, 2023, the Company recognized an unrealized loss of $0.3 million.

Contingent Equity Securities

Astrana was entitled to additional common stock if Nutex did not pay AHM management fees exceeding a threshold by the end of December 31, 2022. The contingent equity securities are considered to be derivatives but are not designated as hedging instruments. Changes in the fair value on these contracts are recognized as unrealized gain or loss on investments in the accompanying consolidated statements of income and accompanying consolidated statements of cash flows. The Company determined the fair value of the contingent equity security using a probability-weighted model, which includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of recognizing management fees and assigned probabilities to each such scenario in determining fair value. During the year ended December 31, 2023, the metric was not achieved. Subsequently, the common stock received from the contingent equity securities were accounted for as investments in marketable securities (refer to the subsection above on investments in marketable securities and Note 2 - “Basis of Presentation and Summary of Significant Accounting Policies” for further information on the Company’s investments in marketable securities). As of December 31, 2022, the contingent equity securities were valued at $1.9 million and were presented within prepaid and other current assets in the accompanying consolidated balance sheets. For the year ended December 31, 2022, when the equity securities were still contingent, the Company recognized unrealized losses of $2.4 million.

Remaining equity interest purchase

In 2021, the Company entered into a financing obligation to purchase the remaining equity interest in Diagnostic Medical Group of Southern California (“DMG”) and Sun Clinical Laboratories (“Sun Labs”) within three years from the date the Company consolidated DMG and Sun Labs. The purchase of the remaining DMG equity value is considered a financing obligation with a carrying value of $8.5 million as of both December 31, 2023 and December 31, 2022. Changes in the fair value of the remaining equity purchase are presented in unrealized loss on investments in the accompanying consolidated statements of income. The purchase of the remaining Sun Labs equity value is considered a financing obligation with a carrying value of $7.8 million and $5.8 million as of December 31, 2023 and December 31, 2022, respectively. For the years ended December 31, 2023 and 2022, the change in the fair value of Sun Labs equity value obligation was $2.0 million and $1.7 million, respectively, and is presented in unrealized loss on investments in the accompanying consolidated statements of income. As the financing obligations are embedded in the non-controlling interest, the non-controlling interests are recognized in other liabilities as of December 31, 2023 and other long-term liabilities as of December 31, 2022 in the accompanying consolidated balance sheets.

Contingent considerations

VOMG

Upon consolidating VOMG as a VIE, the purchase price consisted of cash funded upon the close of transaction and additional cash consideration (“VOMG contingent consideration”) contingent on VOMG meeting financial metrics for fiscal years 2023 and 2024. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). The contingent consideration is included within other long-term liabilities in the accompanying consolidated balance sheets. The contingent consideration was valued at $17,000 as of both December 31, 2023 and December 31, 2022. Changes in the VOMG contingent consideration are presented in general and administrative expenses in the accompanying consolidated statements of income.

AAMG

Upon acquiring 100% of the equity interest in AAMG, the purchase price consisted of cash funded upon close of the transaction and additional consideration (“AAMG contingent consideration”) and stock consideration (“AAMG stock contingent consideration”) contingent on AAMG meeting revenue and capitated member metrics for fiscal years 2023 (“2023 metric”) and 2024 (“2024 metric”). If the contingent considerations are met, the settlement will be paid in the Company’s common stock. The total amount of stock that can be issued for the 2023 and 2024 metrics is 157,048 and 184,361, respectively. The Company determined the fair value of the contingent considerations using a probability-weighted model that includes significant

unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value.

The AAMG contingent consideration for the 2023 metric was valued at $2.6 million and presented within other liabilities in the accompanying consolidated balance sheets as of December 31, 2023. The AAMG contingent consideration for the 2024 metric was valued at $2.9 million and presented within other long-term liabilities in the accompanying consolidated balance sheets as of December 31, 2023. As of December 31, 2022, for capitated member metrics for fiscal years 2023 and 2024, the AAMG contingent consideration was valued at $5.9 million and was presented within other long-term liabilities in the accompanying consolidated balance sheets. Changes in the AAMG contingent consideration are presented in general and administrative expenses in the accompanying consolidated statements of income. The AAMG stock contingent consideration was valued at $5.6 million as of December 31, 2023 and 2022 and is included in additional paid-in capital in the accompanying consolidated balance sheets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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