Summary of Significant Accounting Policies (Policies)	6 Months Ended
Jun. 30, 2022
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2021, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other interim period or for any other future year. The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, included in the Company’s annual report on Form 10-K, filed with the SEC on February 28, 2022.
Risks and Uncertainties	Risks and Uncertainties COVID-19 As a result of the COVID-19 pandemic, the Company has experienced significant business disruptions affecting the availability and cost of materials, which could disrupt our supply chain and reduce margins. While the Company has continued to deliver its Zio service by operating with remote employees and essential employees on site, any government mandates could further impact the Company's ability to provide its Zio service effectively, and could impede the progress of all ongoing initiatives. Appropriate social distancing techniques and other measures at the Company's facilities have been implemented for employees who are required by job scope or who have chosen to return to the Company’s facilities. Government mandates related to the COVID-19 pandemic have impacted our claims and appeals and are expected to continue to impact payors' processing times. This increase in response times may be due, in part, to staffing shortages at the payors. The Company's remote work arrangements resulting from the COVID-19 pandemic and subsequent decision to pursue a sublease for its San Francisco headquarters resulted in an impairment of its right of use asset and related leasehold improvements and furniture, and the Company may incur additional impairment charges related to real property lease agreements. The Company is continuously reviewing its liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 pandemic. The Company believes it will have adequate liquidity over the next 12 months to operate its business and to meet its cash requirements. As of June 30, 2022, the Company is in compliance with its debt covenants. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. This impact is having a material, adverse impact on liquidity, capital resources, supply chain, operations and business and those of the third parties on which the Company relies, and could worsen over time. The extent to which the COVID-19 pandemic impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others. The full extent of potential delays or impacts on the business, financial condition, cash flows and results of operations remains unknown. Reimbursement Government payors may change their coverage and reimbursement policies, as well as payment amounts, in a way that would prevent or limit reimbursement for the Company’s Zio service, which would significantly harm the Company’s business. Government and other third-party payors require the Company to report the service for which it is seeking reimbursement by using a Current Procedural Terminology ("CPT") code-set maintained by the American Medical Association (“AMA”). For Zio XT, the Company had historically utilized temporary CPT codes (or Category III CPT codes), used for newly introduced technologies specific to its category of diagnostic monitoring. The process to convert temporary Category III CPT codes to permanent Category I CPT codes is governed by the AMA and CMS. Determinations of which products or services will be eligible for reimbursement by Medicare can be developed at the national level through a national coverage determination (“NCD”) issued by CMS or at the local level through a local coverage determination (“LCD”), issued by one or more of the regional Medicare Administrative Contractors (“MACs”), who are private contractors that process and pay claims on behalf of CMS for different geographic regions. In the absence of a specific NCD, as has historically been the case with the Zio XT service, the MAC with jurisdiction over a specific geographic region will have the discretion to issue an LCD. The Company’s Zio service may be eligible for reimbursement at the rates set by the regional MACs until CMS establishes national payment rates for the CPT codes that the Company uses to seek reimbursement for the Zio XT service. On October 25, 2019, the AMA’s CPT Editorial Panel established eight new Category I CPT codes that are applicable to the Zio XT service and took effect on January 1, 2021. Category I CPT codes 93241 through 93248 are split between two sets of four codes with rates tied to those codes for (i) wear-time of greater than 48 hours and up to 7 days, and (ii) greater than 7 days and up to 15 days. The Company primarily relies on CPT codes 93247 (for wear-time of greater than 7 days and up to 15 days) and 93243 (for wear-time of greater than 48 hours and up to 7 days) to seek reimbursement for its Zio XT service. In November 2021, CMS published the Calendar Year 2022 Medicare Physician Fee Schedule Final Rule (the “2022 Final Rule”). In the 2022 Final Rule, CMS did not establish national pricing for Calendar Year 2022 for Category I CPT codes 93241, 93243, 93245 and 93247, which include the two CPT codes upon which the Company primarily relies for its Zio XT service. Instead, CMS designated these for contractor pricing in Calendar Year 2022, which meant that prices would be set regionally by each MAC. In January 2022, Novitas Solutions, the MAC which covers the region where the Company’s independent diagnostic testing facility ("IDTF") in Houston, Texas is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $223 and $233, respectively. These updated rates were retroactive to January 1, 2022. These rates were higher than the rates posted by Novitas in 2021, but continue to be significantly below historical Medicare rates for the Company’s Zio XT service. In April 2022, NGS, the MAC which covers the region where the Company’s IDTF in Deerfield, Illinois is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $335 and $347, respectively. These updated rates were retroactive to January 1, 2022. These rates are higher than the historical Medicare rates for the Company’s Zio XT service. In July 2022, CMS published its Calendar Year 2023 Medicare Physician Fee Schedule Proposed Rule (the “2023 Proposed Rule”). In the 2023 Proposed Rule, CMS proposed national payment rates for the Category I CPT codes that the Company primarily uses to seek reimbursement for its Zio XT service. In the 2023 Proposed Rule, CMS proposed relative value units for CPT codes 93247 and 93243 and a Calendar Year 2023 “Conversion Factor” which the Company interprets, collectively with the Medicare payment reduction (sequestration) and the sequestration under the Statutory Pay-As-You-Go Act of 2010, to imply national payment rates of $215 and $204 for CPT codes 93247 and 93243 codes, respectively. Based on the proposed Calendar Year 2023 Geographic Practice Cost Index (“GPCI”) modifiers applicable to the locations of the Company’s Medicare-enrolled IDTFs in Deerfield, Illinois, Houston, Texas, and San Francisco, California, the Company estimates the applicable payment rates could range from $218 to $295 for CPT code 93247 and $207 to $280 for CPT code 93243. The 2023 Final Rule is expected to be announced by November 2022 for implementation on January 1, 2023. It is possible that CMS will adopt a lower national rate, a higher national rate, or continue applying contractor pricing. The Company remains engaged with CMS and all of the MACs, and is working with other industry participants to submit additional cost data on long-term ECG monitoring for consideration to establish appropriate national or local rates. The Company cannot provide certainty at this time on the potential outcome of the discussions with the CMS or MACs or on the timing of any action to be taken. Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, the Company is, and will continue to be, subject to changes to the level of Medicare coverage and reimbursement for its Zio service, and unfavorable coverage determinations at the national or local level could adversely affect its business and results of operations. Further, a reduction in coverage by Medicare could cause some commercial third-party payors to implement similar reductions in their coverage or level of reimbursement of the Zio service. Although a large majority of commercial customers have re-contracted the Zio XT service at pre-existing rates since the establishment of the Category I codes on January 1, 2021, if the Company is unsuccessful in improving the Medicare rates, the Company believes that commercial rates may begin to be more negatively impacted. As a result of the CPT code changes that took effect January 1, 2021, the number of claims from the first half of 2021, which contained differences between the submitted price and reimbursement rate and overall denials, increased significantly compared to the Company’s historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, however, the collection cycle for these claims is significantly longer than usual and may lead to higher write-offs of doubtful accounts for those periods and negatively impact the Company’s results of operations. If the Company is unable to achieve a level of revenues adequate to support its cost structure, or is unable to reduce its overall cost structure, this would raise substantial doubts about its ability to continue as a going concern. Supply Chain Constraints Economies worldwide have also seen indirect COVID-19 pandemic related disruptions, including supply chain impacts, material inflation, and labor constraints in certain markets and geographies. Such economic disruption has had an adverse effect on the Company's business environment as increased lead times and component shortages have resulted in higher inventory costs. While the Company has increased inventory safety stock levels to help mitigate the delays and disruptions in supply, the Company cannot be certain that any prolonged, intensified, or worsened effect from the COVID-19 pandemic would not further impact its supply chain.
Use of Estimates	Use of Estimates The preparation of the consolidated financial statements 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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contractual allowances, allowance for doubtful accounts, the useful lives of property and equipment, the recoverability of long-lived assets including the estimated usage of the printed circuit board assemblies (“PCBAs”), the incremental borrowing rate for operating leases, accounting for income taxes, impairment of right-of-use assets ("ROU assets"), and various inputs used in estimating stock-based compensation. Certain of these estimates are impacted by uncertainties surrounding COVID-19, such as revenue recognition, contractual allowances for revenue, allowance for doubtful accounts, and stock-based compensation. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that management believes are reasonable under the circumstances, including assumptions as to future events. Actual results may differ from those estimates.
Impairment of Long-Lived Assets	Impairment of Long-Lived Assets The Company annually reviews long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. Any impairments to right of use assets, leasehold improvements, or other assets as a result of a sublease or other similar action are initially recognized when a decision to take such action is made and recorded as an operating expense. Similar to other long-lived assets, management tests ROU assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For ROU assets, such circumstances may include subleases that do not fully recover the costs of the associated leases or commitments to sublease a property.
Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances	Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances Accounts receivable include amounts due to the Company from healthcare institutions, third-party payors, and government payors and their related patients, due to the Company's normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated allowance for doubtful accounts and contractual allowances. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on its assessment of the collectability of customer accounts and recognizes the provision as a component of selling, general and administrative expenses. The Company records a provision for contractual allowances based on the estimated differences between contracted amounts and expected collection rates. Such provisions are based on the Company's historical experience and are reported as a reduction of revenue. The Company regularly reviews the allowances by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company submitted the majority of Zio XT claims from the first and second quarter of 2021 on a delayed basis due to the transition from Category III CPT codes to Category I CPT codes and uncertainty over reimbursement rates. Claims were being held due to a combination of negotiations with payors and administrative delays in processing payments. Most of the held claims were released and submitted by the end of the second quarter of 2021. As of June 30, 2022, uncollected claims as a result of the CPT code transition were $10.7 million, net of contractual allowances. For the contracted portfolio, once submitted, the number of claims from the first half of 2021 which contained differences between the submitted price and reimbursement rate and overall denials increased significantly compared to our historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, and the collection cycle for these claims is significantly longer than usual. This makes the timing of the Company's collections more difficult to predict. While the Company believes it has properly estimated the impact to our contractual allowances and allowance for doubtful accounts, inherent uncertainty caused by the longer-collection cycle and claims adjudication process could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods.
Concentrations of Risk	Concentrations of Risk Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. Cash balances are deposited in financial institutions which, at times may be in excess of federally insured limits. Cash equivalents are invested in highly-rated money market funds. The Company invests in a variety of financial instruments, such as but not limited to, U.S. government securities, corporate notes and commercial paper, and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material losses on its deposits of cash and cash equivalents or investments. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across many geographies. The Company does not require collateral. The Company records an allowance for doubtful accounts based on the assessment of the collectability of customer accounts, considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.
Revenue Recognition	Revenue Recognition The Company’s revenue is generated primarily from the provision of its ambulatory cardiac rhythm monitoring service, the Zio XT service. The Zio XT service is an ambulatory cardiac rhythm monitoring service that has a patient wear period of up to 14 days and is billable when the monitoring reports are delivered to the healthcare provider, which is also when the service is complete, and the Company recognizes revenue. The time from when the patient has the Zio XT device applied to the time the report is posted is generally around 25 days. The Company has concluded that the Zio XT service is a single performance obligation on the basis that the customer cannot benefit from each component of the service on its own or together with other resources that are readily available to the customer. The Zio AT service is an ambulatory cardiac rhythm monitoring service that is provided during the patient wear period. During the patient wear period, the Zio AT monitoring system is intended to capture, analyze and report symptomatic and asymptomatic cardiac events and continuous ECG information. While continuously recording patient ECG data, both patient-triggered and automatically detected arrhythmia events are transmitted to a monitoring center for review and reporting according to physician-selected notification criteria. After wear, a final report is generated based on beat-to-beat information from the entire ECG recording. The Zio AT service revenue is recognized over the patient wear period and delivery of electronic Zio reports with two performance obligations. The Company recognizes as revenue the amount of consideration to which it expects to be entitled in exchange for performing the Zio service. The consideration to which the Company is entitled varies by portfolio, as further defined below, and includes estimates that require significant judgment by management. A unique aspect of the healthcare industry is multiple parties' involvement in the service transaction. In addition to any payment made by the patient, often a third-party, such as a commercial or governmental payor or healthcare institution, will pay the Company for some or all of the service on the patient’s behalf. Separate contractual arrangements exist between the Company and third-party payors that establish amounts the third-party payor will pay on behalf of a patient for covered services rendered. A small portion of the Company’s transactions are covered by third-party payors with whom there is neither a contractual agreement nor an established amount that the third-party payor will pay. In determining the collectability and transaction price for its service, the Company considers factors such as insurance claims which are adjudicated as allowable under the applicable policy and: (i) payment history from both payors and patient out-of-pocket costs; (ii) payor coverage; (iii) whether there is a contract between the payor or healthcare institution and the Company; (iv) historical amount received for the service; and (v) any current developments or changes that could impact reimbursement and healthcare institution payments. Certain of these factors are forms of variable consideration which are only included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. A summary of the payment arrangements with third-party payors and healthcare institutions is as follows: •Contracted third-party payors – The Company has contracts with negotiated prices for services provided to patients with commercial healthcare insurance coverage. •CMS – The Company has enrolled as an independent diagnostic testing facility with regional Medicare Administrative Contractors and will receive reimbursement per the relevant national or contractor-priced CPT code rates for the CMS-covered services rendered to the patient. •Non-contracted third-party payors – Non-contracted commercial and government payors often reimburse out-of-network rates provided under the relevant CPT codes on a case-by-case basis. The transaction price used for determining revenue recognition is based on factors including an average of the Company’s historical collection experience for its non-contracted services. This rate is reviewed at least quarterly. •Healthcare institutions – Healthcare institutions are typically hospitals or physician practices in which the Company has negotiated amounts for its monitoring services, including certain governmental agencies such as the Veterans Administration and Department of Defense. The Company is utilizing the portfolio approach practical expedient under ASC 606 for revenue recognition whereby services provided under each of the above payor types form a separate portfolio. The Company accounts for the contracts within each portfolio as a collective group rather than individual contracts. Based on history with these portfolios and the similar nature and characteristics of the patients within each portfolio, the Company has concluded that the financial statement effects are not materially different than if accounting for revenue on a contract-by-contract basis. For contracted and CMS portfolios, the Company recognizes revenue, net of contractual allowances, and recognizes an allowance for doubtful accounts for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and the Company has historical experience of collecting substantially all of these contracted rates. These contracts also impose a number of obligations regarding billing and other matters, and the Company’s noncompliance with a material term of such contracts may result in a denial of the claim. The Company accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue. The Company estimates the denied claims, which require management judgment. The estimated denied claims are based on historical information, and judgment includes the historical period utilized. The Company monitors the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur. Delays in claims submissions could lead to an increase in denials if the Company misses the payors’ filing deadlines and could result in a reduction in the Company’s receipt of payments. Historical cash collection indicates that it is probable that substantially all of the transaction price, less the estimate of denied claims, will be received. Contracted payors may require that the Company bill patient co-payments and deductibles and from time to time the Company may not be able to collect such amounts due to credit risk. The Company provides for estimates of uncollectible patient accounts receivable, based upon historical experience where judgment includes the historical period utilized, at the time revenue is recognized, with such provisions presented as bad debt expense within the selling, general and administrative line item of the consolidated statement of operations. Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense. As discussed in the Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances section above, the inherent uncertainty caused by longer-collection cycle and claims adjudication process related to delays in submission because of the CPT code transition in 2021 could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods. For non-contracted portfolios, the Company is providing an implicit price concession due to the lack of a contracted rate with the underlying payor, the result of which requires the Company to estimate the transaction price based on historical cash collections utilizing the expected value method. All subsequent adjustments to the transaction price are recorded as an adjustment to revenue. For healthcare institutions, the transaction price is determined based on negotiated rates, and the Company has historical experience collecting substantially all of these contracted rates. Historical cash collection indicates that it is probable that substantially all of the transaction price will be received. As such, the Company is not providing an implicit price concession but, rather, has chosen to accept the risk of default, and any subsequent uncollected amounts are recorded as bad debt expense.
Contract Liabilities	Contract Liabilities ASC 606 requires an entity to present a revenue contract as a contract liability when the Company has an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer, or an amount of consideration from the customer is due and unconditional (whichever is earlier). Certain of the Company’s customers pay the Company directly for the Zio XT service upon shipment of devices. Such advance payments are contract liabilities and are recorded as deferred revenue on the Condensed Balance Sheets and revenue is recognized when reports are delivered to the healthcare provider.
Contract Costs	Contract Costs Under ASC 340, the incremental costs of obtaining a contract with a customer are recognized as an asset. Incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company’s current commission programs are considered incremental. However, as a practical expedient, ASC 340 permits the Company to immediately expense contract acquisition costs, as the asset that would have resulted from capitalizing these costs will be amortized in one year or less.
Share-based Compensation	Stock-based Compensation The Company measures its stock-based awards made to employees based on the estimated fair values of the awards as of the grant date. The fair value of market condition awards is determined using the Monte-Carlo option pricing model and the fair value of stock options is determined using the Black-Scholes option pricing model. Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For restricted stock, the compensation cost for these awards is based on the closing price of the Company’s common stock on the date of grant, and recognized as compensation expense on a straight-line basis over the requisite service period. The Company recognizes compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant, net of estimated forfeitures. The Company estimates the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period.

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2021, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other interim period or for any other future year.

The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, included in the Company’s annual report on Form 10-K, filed with the SEC on February 28, 2022.

Risks and Uncertainties

COVID-19

As a result of the COVID-19 pandemic, the Company has experienced significant business disruptions affecting the availability and cost of materials, which could disrupt our supply chain and reduce margins. While the Company has continued to deliver its Zio service by operating with remote employees and essential employees on site, any government mandates could further impact the Company's ability to provide its Zio service effectively, and could impede the progress of all ongoing initiatives. Appropriate social distancing techniques and other measures at the Company's facilities have been implemented for employees who are required by job scope or who have chosen to return to the Company’s facilities.

Government mandates related to the COVID-19 pandemic have impacted our claims and appeals and are expected to continue to impact payors' processing times. This increase in response times may be due, in part, to staffing shortages at the payors.

The Company's remote work arrangements resulting from the COVID-19 pandemic and subsequent decision to pursue a sublease for its San Francisco headquarters resulted in an impairment of its right of use asset and related leasehold improvements and furniture, and the Company may incur additional impairment charges related to real property lease agreements.

The Company is continuously reviewing its liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 pandemic. The Company believes it will have adequate liquidity over the next 12 months

to operate its business and to meet its cash requirements. As of June 30, 2022, the Company is in compliance with its debt covenants.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. This impact is having a material, adverse impact on liquidity, capital resources, supply chain, operations and business and those of the third parties on which the Company relies, and could worsen over time. The extent to which the COVID-19 pandemic impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others. The full extent of potential delays or impacts on the business, financial condition, cash flows and results of operations remains unknown.

Reimbursement

Government payors may change their coverage and reimbursement policies, as well as payment amounts, in a way that would prevent or limit reimbursement for the Company’s Zio service, which would significantly harm the Company’s business. Government and other third-party payors require the Company to report the service for which it is seeking reimbursement by using a Current Procedural Terminology ("CPT") code-set maintained by the American Medical Association (“AMA”). For Zio XT, the Company had historically utilized temporary CPT codes (or Category III CPT codes), used for newly introduced technologies specific to its category of diagnostic monitoring. The process to convert temporary Category III CPT codes to permanent Category I CPT codes is governed by the AMA and CMS.

Determinations of which products or services will be eligible for reimbursement by Medicare can be developed at the national level through a national coverage determination (“NCD”) issued by CMS or at the local level through a local coverage determination (“LCD”), issued by one or more of the regional Medicare Administrative Contractors (“MACs”), who are private contractors that process and pay claims on behalf of CMS for different geographic regions. In the absence of a specific NCD, as has historically been the case with the Zio XT service, the MAC with jurisdiction over a specific geographic region will have the discretion to issue an LCD. The Company’s Zio service may be eligible for reimbursement at the rates set by the regional MACs until CMS establishes national payment rates for the CPT codes that the Company uses to seek reimbursement for the Zio XT service.

On October 25, 2019, the AMA’s CPT Editorial Panel established eight new Category I CPT codes that are applicable to the Zio XT service and took effect on January 1, 2021. Category I CPT codes 93241 through 93248 are split between two sets of four codes with rates tied to those codes for (i) wear-time of greater than 48 hours and up to 7 days, and (ii) greater than 7 days and up to 15 days. The Company primarily relies on CPT codes 93247 (for wear-time of greater than 7 days and up to 15 days) and 93243 (for wear-time of greater than 48 hours and up to 7 days) to seek reimbursement for its Zio XT service. In November 2021, CMS published the Calendar Year 2022 Medicare Physician Fee Schedule Final Rule (the “2022 Final Rule”). In the 2022 Final Rule, CMS did not establish national pricing for Calendar Year 2022 for Category I CPT codes 93241, 93243, 93245 and 93247, which include the two CPT codes upon which the Company primarily relies for its Zio XT service. Instead, CMS designated these for contractor pricing in Calendar Year 2022, which meant that prices would be set regionally by each MAC.

In January 2022, Novitas Solutions, the MAC which covers the region where the Company’s independent diagnostic testing facility ("IDTF") in Houston, Texas is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $223 and $233, respectively. These updated rates were retroactive to January 1, 2022. These rates were higher than the rates posted by Novitas in 2021, but continue to be significantly below historical Medicare rates for the Company’s Zio XT service. In April 2022, NGS, the MAC which covers the region where the Company’s IDTF in Deerfield, Illinois is located, updated reimbursement rates for CPT codes 93243 and 93247 for its jurisdiction to $335 and $347, respectively. These updated rates were retroactive to January 1, 2022. These rates are higher than the historical Medicare rates for the Company’s Zio XT service.

In July 2022, CMS published its Calendar Year 2023 Medicare Physician Fee Schedule Proposed Rule (the “2023 Proposed Rule”). In the 2023 Proposed Rule, CMS proposed national payment rates for the Category I CPT codes that the Company primarily uses to seek reimbursement for its Zio XT service. In the 2023 Proposed Rule, CMS proposed relative value units for CPT codes 93247 and 93243 and a Calendar Year 2023 “Conversion Factor” which the Company interprets, collectively with the Medicare payment reduction (sequestration) and the sequestration under the Statutory Pay-As-You-Go Act of 2010, to imply national payment rates of $215 and $204 for CPT codes 93247 and 93243 codes, respectively. Based on the proposed Calendar Year 2023 Geographic Practice Cost Index (“GPCI”) modifiers applicable to the locations of the Company’s Medicare-enrolled IDTFs in Deerfield, Illinois, Houston, Texas, and San Francisco, California, the Company estimates the applicable payment rates could range from $218 to $295 for CPT code 93247 and $207 to $280 for CPT code 93243.

The 2023 Final Rule is expected to be announced by November 2022 for implementation on January 1, 2023. It is possible that CMS will adopt a lower national rate, a higher national rate, or continue applying contractor pricing.

The Company remains engaged with CMS and all of the MACs, and is working with other industry participants to submit additional cost data on long-term ECG monitoring for consideration to establish appropriate national or local rates. The Company cannot provide certainty at this time on the potential outcome of the discussions with the CMS or MACs or on the timing of any action to be taken.

Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, the Company is, and will continue to be, subject to changes to the level of Medicare coverage and reimbursement for its Zio service, and unfavorable coverage determinations at the national or local level could adversely affect its business and results of operations.

Further, a reduction in coverage by Medicare could cause some commercial third-party payors to implement similar reductions in their coverage or level of reimbursement of the Zio service. Although a large majority of commercial customers have re-contracted the Zio XT service at pre-existing rates since the establishment of the Category I codes on January 1, 2021, if the Company is unsuccessful in improving the Medicare rates, the Company believes that commercial rates may begin to be more negatively impacted.

As a result of the CPT code changes that took effect January 1, 2021, the number of claims from the first half of 2021, which contained differences between the submitted price and reimbursement rate and overall denials, increased significantly compared to the Company’s historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, however, the collection cycle for these claims is significantly longer than usual and may lead to higher write-offs of doubtful accounts for those periods and negatively impact the Company’s results of operations.

If the Company is unable to achieve a level of revenues adequate to support its cost structure, or is unable to reduce its overall cost structure, this would raise substantial doubts about its ability to continue as a going concern.

Supply Chain Constraints

Economies worldwide have also seen indirect COVID-19 pandemic related disruptions, including supply chain impacts, material inflation, and labor constraints in certain markets and geographies. Such economic disruption has had an adverse effect on the Company's business environment as increased lead times and component shortages have resulted in higher inventory costs. While the Company has increased inventory safety stock levels to help mitigate the delays and disruptions in supply, the Company cannot be certain that any prolonged, intensified, or worsened effect from the COVID-19 pandemic would not further impact its supply chain.

Use of Estimates

The preparation of the consolidated financial statements 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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contractual allowances, allowance for doubtful accounts, the useful lives of property and equipment, the recoverability of long-lived assets including the estimated usage of the printed circuit board assemblies (“PCBAs”), the incremental borrowing rate for operating leases, accounting for income taxes, impairment of right-of-use assets ("ROU assets"), and various inputs used in estimating stock-based compensation. Certain of these estimates are impacted by uncertainties surrounding COVID-19, such as revenue recognition, contractual allowances for revenue, allowance for doubtful accounts, and stock-based compensation. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that management believes are reasonable under the circumstances, including assumptions as to future events. Actual results may differ from those estimates.

Impairment of Long-Lived Assets

The Company annually reviews long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset.

Any impairments to right of use assets, leasehold improvements, or other assets as a result of a sublease or other similar action are initially recognized when a decision to take such action is made and recorded as an operating expense. Similar to other long-lived assets, management tests ROU assets for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For ROU assets, such circumstances may include subleases that do not fully recover the costs of the associated leases or commitments to sublease a property.

Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances

Accounts receivable include amounts due to the Company from healthcare institutions, third-party payors, and government payors and their related patients, due to the Company's normal business activities. Accounts receivable is reported on the consolidated balance sheets net of an estimated allowance for doubtful accounts and contractual allowances.

The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on its assessment of the collectability of customer accounts and recognizes the provision as a component of selling, general and administrative expenses. The Company records a provision for contractual allowances based on the estimated differences between contracted amounts and expected collection rates. Such provisions are based on the Company's historical experience and are reported as a reduction of revenue.

The Company regularly reviews the allowances by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.

The Company submitted the majority of Zio XT claims from the first and second quarter of 2021 on a delayed basis due to the transition from Category III CPT codes to Category I CPT codes and uncertainty over reimbursement rates. Claims were being held due to a combination of negotiations with payors and administrative delays in processing payments. Most of the held claims were released and submitted by the end of the second quarter of 2021. As of June 30, 2022, uncollected claims as a result of the CPT code transition were $10.7 million, net of contractual allowances. For the contracted portfolio, once submitted, the number of claims from the first half of 2021 which contained differences between the submitted price and reimbursement rate and overall denials increased significantly compared to our historical experience as a result of CPT code transition issues with the payors. The Company continues to work with the payors to collect on these claims, and the collection cycle for these claims is significantly longer than usual. This makes the timing of the Company's collections more difficult to predict. While the Company believes it has properly estimated the impact to our contractual allowances and allowance for doubtful accounts, inherent uncertainty caused by the longer-collection cycle and claims adjudication process could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods.

Concentrations of Risk

Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. Cash balances are deposited in financial institutions which, at times may be in excess of federally insured limits. Cash equivalents are invested in highly-rated money market funds. The Company invests in a variety of financial instruments, such as but not limited to, U.S. government securities, corporate notes and commercial paper, and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material losses on its deposits of cash and cash equivalents or investments.

Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their dispersion across many geographies. The Company does not require collateral. The Company records an allowance for doubtful accounts based on the assessment of the collectability of customer accounts, considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.

Revenue Recognition

The Company’s revenue is generated primarily from the provision of its ambulatory cardiac rhythm monitoring service, the Zio XT service. The Zio XT service is an ambulatory cardiac rhythm monitoring service that has a patient wear period of up to 14 days and is billable when the monitoring reports are delivered to the healthcare provider, which is also when the service is complete, and the Company recognizes revenue. The time from when the patient has the Zio XT device applied to the time the report is posted is generally around 25 days. The Company has concluded that the Zio XT service is a single performance obligation on the basis that the customer cannot benefit from each component of the service on its own or together with other resources that are readily available to the customer.

The Zio AT service is an ambulatory cardiac rhythm monitoring service that is provided during the patient wear period. During the patient wear period, the Zio AT monitoring system is intended to capture, analyze and report symptomatic and asymptomatic cardiac events and continuous ECG information. While continuously recording patient ECG data, both patient-triggered and automatically detected arrhythmia events are transmitted to a monitoring center for review and reporting according to physician-selected notification criteria. After wear, a final report is generated based on beat-to-beat information from the entire ECG recording. The Zio AT service revenue is recognized over the patient wear period and delivery of electronic Zio reports with two performance obligations.

The Company recognizes as revenue the amount of consideration to which it expects to be entitled in exchange for performing the Zio service. The consideration to which the Company is entitled varies by portfolio, as further defined below, and includes estimates that require significant judgment by management. A unique aspect of the healthcare industry is multiple parties' involvement in the service transaction. In addition to any payment made by the patient, often a third-party, such as a commercial or governmental payor or healthcare institution, will pay the Company for some or all of the service on the patient’s behalf. Separate contractual arrangements exist between the Company and third-party payors that establish amounts the third-party payor will pay on behalf of a patient for covered services rendered.

A small portion of the Company’s transactions are covered by third-party payors with whom there is neither a contractual agreement nor an established amount that the third-party payor will pay. In determining the collectability and transaction price for its service, the Company considers factors such as insurance claims which are adjudicated as allowable under the applicable policy and: (i) payment history from both payors and patient out-of-pocket costs; (ii) payor coverage; (iii) whether there is a contract between the payor or healthcare institution and the Company; (iv) historical amount received for the service; and (v) any current developments or changes that could impact reimbursement and healthcare institution payments. Certain of these factors are forms of variable consideration which are only included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

A summary of the payment arrangements with third-party payors and healthcare institutions is as follows:

•Contracted third-party payors – The Company has contracts with negotiated prices for services provided to patients with commercial healthcare insurance coverage.

•CMS – The Company has enrolled as an independent diagnostic testing facility with regional Medicare Administrative Contractors and will receive reimbursement per the relevant national or contractor-priced CPT code rates for the CMS-covered services rendered to the patient.

•Non-contracted third-party payors – Non-contracted commercial and government payors often reimburse out-of-network rates provided under the relevant CPT codes on a case-by-case basis. The transaction price used for determining revenue recognition is based on factors including an average of the Company’s historical collection experience for its non-contracted services. This rate is reviewed at least quarterly.

•Healthcare institutions – Healthcare institutions are typically hospitals or physician practices in which the Company has negotiated amounts for its monitoring services, including certain governmental agencies such as the Veterans Administration and Department of Defense.

The Company is utilizing the portfolio approach practical expedient under ASC 606 for revenue recognition whereby services provided under each of the above payor types form a separate portfolio. The Company accounts for the contracts within each portfolio as a collective group rather than individual contracts. Based on history with these portfolios and the similar nature and characteristics of the patients within each portfolio, the Company has concluded that the financial statement effects are not materially different than if accounting for revenue on a contract-by-contract basis.

For contracted and CMS portfolios, the Company recognizes revenue, net of contractual allowances, and recognizes an allowance for doubtful accounts for uncollectible patient accounts receivable. The transaction price is determined based on negotiated rates, and the Company has historical experience of collecting substantially all of these contracted rates. These contracts also impose a number of obligations regarding billing and other matters, and the Company’s noncompliance with a material term of such contracts may result in a denial of the claim. The Company accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price recognized as revenue. The Company estimates the denied claims, which require management judgment. The estimated denied claims are based on historical information, and judgment includes the historical period utilized. The Company monitors the estimated denied claims against the latest available information, and subsequent changes to the estimated denied claims are recorded as an adjustment to revenue in the periods during which such changes occur. Delays in claims submissions could lead to an increase in denials if the Company misses the payors’ filing deadlines and could result in a reduction in the Company’s receipt of payments. Historical cash collection indicates that it is probable that substantially all of the transaction price, less the estimate of denied claims, will be received. Contracted payors may require that the Company bill patient co-payments and deductibles and from time to time the Company may not be able to collect such amounts due to credit risk. The Company provides for estimates of uncollectible patient accounts receivable, based upon historical experience where judgment includes the historical period utilized, at the time revenue is recognized, with such provisions presented as bad debt expense within the selling, general and administrative line item of the consolidated statement of operations. Adjustments to these estimates for actual experience are also recorded as an adjustment to bad debt expense.

As discussed in the Accounts Receivable, Allowance for Doubtful Accounts and Contractual Allowances section above, the inherent uncertainty caused by longer-collection cycle and claims adjudication process related to delays in submission because of the CPT code transition in 2021 could result in additional provisions for contractual allowances and doubtful accounts which would negatively impact the Company's results of operations in future periods.

For non-contracted portfolios, the Company is providing an implicit price concession due to the lack of a contracted rate with the underlying payor, the result of which requires the Company to estimate the transaction price based on historical

cash collections utilizing the expected value method. All subsequent adjustments to the transaction price are recorded as an adjustment to revenue.

For healthcare institutions, the transaction price is determined based on negotiated rates, and the Company has historical experience collecting substantially all of these contracted rates. Historical cash collection indicates that it is probable that substantially all of the transaction price will be received. As such, the Company is not providing an implicit price concession but, rather, has chosen to accept the risk of default, and any subsequent uncollected amounts are recorded as bad debt expense.

Contract Liabilities

ASC 606 requires an entity to present a revenue contract as a contract liability when the Company has an obligation to transfer goods or services to a customer for which the Company has received consideration from the customer, or an amount of consideration from the customer is due and unconditional (whichever is earlier).

Certain of the Company’s customers pay the Company directly for the Zio XT service upon shipment of devices. Such advance payments are contract liabilities and are recorded as deferred revenue on the Condensed Balance Sheets and revenue is recognized when reports are delivered to the healthcare provider.

Contract Costs

Under ASC 340, the incremental costs of obtaining a contract with a customer are recognized as an asset. Incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.

The Company’s current commission programs are considered incremental. However, as a practical expedient, ASC 340 permits the Company to immediately expense contract acquisition costs, as the asset that would have resulted from capitalizing these costs will be amortized in one year or less.

Share-based Compensation

Stock-based Compensation

The Company measures its stock-based awards made to employees based on the estimated fair values of the awards as of the grant date. The fair value of market condition awards is determined using the Monte-Carlo option pricing model and the fair value of stock options is determined using the Black-Scholes option pricing model. Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For restricted stock, the compensation cost for these awards is based on the closing price of the Company’s common stock on the date of grant, and recognized as compensation expense on a straight-line basis over the requisite service period.

The Company recognizes compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant, net of estimated forfeitures. The Company estimates the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period.