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REVENUE RECOGNITION
 12 Months Ended
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]  
REVENUE RECOGNITION REVENUE RECOGNITION
The Company earns revenue from our capitated arrangements and other revenue arrangements. Other revenue is comprised of care coordination and management arrangements, subscription license arrangements, fee for services and other arrangements. We disaggregate revenue from contracts with customers by service type within our consolidated statements of operations.
Capitated Revenue and Accounts Receivable
Capitated revenue consists primarily of capitated fees for medical services provided by us under capitated arrangements directly made with various Medicare Advantage managed care payors or the Centers for Medicare and Medicaid Services (“CMS”). The Company receives a fixed fee per patient under what is typically known as a “risk contract.” Risk contracting, or full risk capitation, refers to a model in which the Company receives from the third-party payor a fixed payment per patient per month (“PPPM” payment) for a defined patient population, and the Company is then responsible for providing healthcare services required by that patient population. The Company is responsible for incurring or paying for the cost of healthcare services required by that patient population in addition to those provided by the Company. Fees are recorded gross in revenues because the Company is acting as a principal in arranging, providing and controlling the managed healthcare services provided to the eligible enrolled members. Neither the Company nor any of its affiliates is a registered insurance company because state law in the states in which it operates does not require such registration for risk-bearing providers.
The Company’s payor contracts generally have a term of one year or longer, but the contracts between the enrolled members (our customers) and the payor are one calendar year or less. In general, the Company considers all contracts with customers (enrolled members) as a single performance obligation to stand ready to provide healthcare services. The Company identified that contracts with customers for capitation arrangements have similar performance obligations and therefore groups them into one portfolio. This performance obligation is satisfied over time as the Company stands ready to fulfill its obligation to enrolled members.
Our revenues are based upon the estimated PPPM amounts we expect to be entitled to receive from Medicare Advantage managed care payors and CMS. Under our managed care contracts, the PPPM rates are determined as a percent of the premium the Medicare Advantage plan receives from CMS for our at-risk members. Those premiums are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the patients enrolled. Under our contract with CMS, the PPPM rates are determined as a percentage of the premium, also adjusted for the cost of care in a local market and the average utilization of services, for our at-risk members.
CMS pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more, and those with lower acuity patients receive less. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via this risk adjustment model, our PPPM payments will change in unison with how our payor partners’ premiums change with CMS. The Company determined the transaction price for these contracts is variable as it primarily includes PPPM fees which can fluctuate throughout the contract based on the acuity of each individual enrollee. Our capitated accounts receivable balances are carried at amounts the Company deems collectible. Accordingly, an allowance is provided based on credit losses expected over the contractual term. Accounts receivable are written off when they are deemed uncollectible. As of December 31, 2022 and December 31, 2021, no allowances were deemed necessary. The ultimate collectability of accounts receivable may differ from amounts estimated.
For the years ended December 31, 2022 and 2021, respectively, we estimate that we will receive an additional $67.1 million and $54.0 million for acuity-related adjustments in subsequent periods. In certain contracts, PPPM fees also include adjustments for items such as performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors. There were no material PPPM adjustments related to performance incentives or penalties for quality-related metrics for the years ended December 31, 2022, 2021, and 2020.
The capitated revenues are recognized based on the estimated PPPM transaction price to transfer the service for a distinct increment of the series (i.e. month) and is recognized net of projected acuity adjustments and performance incentives/penalties because the Company is able to reasonably estimate the ultimate PPPM payment of these contracts. We recognize revenue in the month in which eligible members are entitled to receive healthcare benefits during the contract term. Subsequent changes in PPPM fees and the amount of revenue to be recognized by the Company are reflected
through subsequent period adjustments to properly recognize the ultimate capitation amount. As the period between the time of service and time of payment is typically one year or less, the Company elected the practical expedient under ASC 606-10-32-18 and did not adjust for the effects of a significant financing component.
Certain third-party payor contracts include a Medicare Part D payment related to pharmacy claims, which is subject to risk sharing through accepted risk corridor provisions. Under certain agreements the fund risk allocation is established where the Company, as the contracted provider, receives only a portion of the risk and the associated surplus or deficit. The Company estimates and recognizes an adjustment to Part D capitated revenues related to these risk corridor provisions, based upon pharmacy claims experience to date, as if the annual risk contract were to terminate at the end of the reporting period. Medicare Part D comprised 2%, 2% and 2% of capitated revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Medicare Part D comprised 3%, 2% and 3% of medical claims expense for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company had agreements in place with the payors listed below, and payor sources of capitated revenue for each period were as follows:
For the Years Ended
December 31, 2022December 31, 2021December 31, 2020
Humana32 %36 %45 %
Wellcare/Meridian17 %17 %15 %
Cigna-HealthSpring6 %9 %11 %
Other45 %38 %29 %
Other Revenue, Accounts Receivable and Contract Liabilities
Other revenue is comprised of ancillary fees earned under contracts with certain managed care organizations for the provision of certain care coordination service and management services, fee-for-service revenue, license subscriptions and fees and CARES Act grant income. The composition of other revenue for each period was as follows ($ in millions):
For the Years Ended
December 31, 2022December 31, 2021December 31, 2020
Care coordination and care management services$12.2 $24.7 $24.3 
License subscription and other fees9.7 1.9 — 
CARES Act grant income— — 2.2 
Fee for service13.1 9.0 5.0 
Total other revenue$35.0 $35.6 $31.5 
The Company has entered into multi-year agreements with Humana and its affiliates to provide services at certain centers to members covered by Humana. The agreements contain an administrative payment from Humana in exchange for the Company providing certain care coordination services during the term of the contract (“Care Coordination payment”). The Care Coordination payments are recognized in other revenue ratably over the length of the terms stated in the contracts and are refundable to Humana on a pro-rata basis if the Company ceases to provide services at the centers within the length of the term specified in the contracts. We have identified a single performance obligation to stand ready to provide care coordination services to our patients, which constitutes a series of distinct service increments. As of December 31, 2022 and 2021, the Company’s contract liabilities related to these payments totaled $37.6 million and $33.9 million, respectively. The short-term portion is recorded in other liabilities and the long-term portion is included in other long-term liabilities in the consolidated balance sheets.
Care management services are provided to enrolled members of certain contracted managed care organizations regardless of whether those members are Oak Street Health patients. Similar to the other care management services provided to the Company’s centers, the Company provides delegated services and other administrative services to plans in order to assist with the management of its Medicare population, therefore, we have identified a single performance obligation to stand ready to provide care management services, which constitutes a series of distinct service increments.
Also included in the year ended December 31, 2021 care coordination and care management total above are revenues recognized related to the Accountable Care Organization (“ACO”) Medicare Shared Savings Program (“Shared Savings Program”). The Shared Savings Program offers providers an opportunity to create an ACO. An ACO agrees to be held accountable for the quality, cost and experience of care of an assigned Medicare fee-for-service beneficiary population. Within the Shared Savings Program, CMS enters into agreements with ACOs. ACOs may share savings with CMS when they lower growth in Medicare Parts A and B fee-for-service expenditures relative to their unique targets (i.e., benchmarks) while meeting quality of care performance standards, or in certain instances, owe losses to CMS when they have higher growth in Medicare Parts A and B fee-for-service expenditures relative to their benchmark. The Company received $4.9 million from CMS related to the Shared Savings Program for the year ended December 31, 2021.
The Company acquired RubiconMD Holdings, Inc. (“RMD”) on October 20, 2021 (see Note 5). RMD is a healthcare technology firm specializing in an online eConsult platform which enables primary care providers to easily access same-day insights from top specialists in order to provide better care for the patients. RMD primarily generates revenue through subscription licenses for its customers to access its eConsult platform. We have identified the performance obligation to be standing ready to provide access to our customers to the eConsult platform. Subscription license revenue is recognized when the performance obligation is met over time by either the straight-line method or when services are performed over the terms of the applicable contract. Other receivables include amounts due to us from our customers to utilize the e-Consult platform. The receivable balances are carried at amounts the Company deems collectible. Accordingly, an allowance is provided based on credit losses expected. Accounts receivable are written off when they are deemed uncollectible. As of December 31, 2022 and 2021, the Company has recorded immaterial allowances.
Fee-for-service revenue is primarily derived from healthcare services rendered to patients. The services provided by the Company have no fixed duration and can be terminated by the patient or the Company at any time, therefore each treatment is its own standalone contract. Services ordered by a healthcare provider during an office visit are not separately identifiable, and therefore have been combined into a single performance obligation for each contract. The Company recognizes revenue as its performance obligation is completed on the date of service. Fee-for-service revenue is recognized in the period in which services are provided at estimated net realizable amounts from patients, third-party payors and others. Other receivables include amounts due to us from Medicare plans for fee-for-service patients. The receivable balances are carried at amounts the Company deems collectible. Accordingly, an allowance is provided based on credit losses expected. Accounts receivable are written off when they are deemed uncollectible. As of December 31, 2022 and 2021, the Company has recorded immaterial allowances.
Remaining Performance Obligations
As our material performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize revenue. The Company had no material unsatisfied performance obligations at the end of the reporting periods as our patients typically are under no obligation to continue receiving services at our facilities.