Basis of Presentation, Summary of Significant Accounting Policies, and Recent Accounting Pronouncements (Policies) |
6 Months Ended |
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Jun. 30, 2023 | |
Basis of Presentation, Summary of Significant Accounting Policies, and Recent Accounting Pronouncements | |
Basis of Presentation | (a)Basis of Presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the Company’s interim consolidated financial position for the periods indicated. The interim results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K filed with the SEC on March 10, 2023 (the “2022 Form 10-K”).
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Segment Reporting | (b)Segment Reporting The Company previously operated its business through two segments, CareVention HealthCare and MedWise HealthCare. During the first quarter of 2022, the Company announced plans to evaluate non-core assets, refocus its corporate strategy, and increase stockholder value. As a result, the Company commenced plans to sell the SinfoníaRx, DoseMe, and PrescribeWellness Businesses (as defined below), which the Company acquired in September 2017, January 2019, and March 2019, respectively. The Company completed the sales of its unincorporated PrescribeWellness business (the “PrescribeWellness Business”), DoseMe business (the “DoseMe Business”), and SinfoníaRx business (the “SinfoníaRx Business”) in August 2022, January 2023, and March 2023, respectively. The completed sales of these businesses represented a strategic business shift, having a significant effect on the Company’s operations and financial results. As a result, the Company determined that these businesses met such requirements to be classified as held for sale and discontinued operations as of March 31, 2022, and subsequently continued to meet the requirements through their respective sale dates. Accordingly, unless otherwise indicated, the accompanying consolidated financial statements reflect the assets, liabilities, revenue, and expenses related to these businesses as discontinued operations for all periods presented. Unless otherwise noted, amounts and disclosures throughout the notes to the consolidated financial statements relate to the Company’s continuing operations. The PrescribeWellness, DoseMe, and SinfoníaRx Businesses collectively comprised the majority of the Company’s MedWise HealthCare segment. As a result of the sales of these businesses, the Company reevaluated its operating segments with respect to the CareVention HealthCare segment and the remaining MedWise HealthCare segment. Subsequent to the sales of these businesses, the Company’s chief operating decision maker (“CODM”), who is the Chief Executive Officer, evaluates performance and allocates resources based on the consolidated results of the Company. Therefore, the Company consolidated its two operating segments to one segment by merging the CareVention HealthCare segment and the remaining MedWise HealthCare segment. The Company now operates its business as one segment effective as of March 31, 2023. Prior comparative periods have been revised to conform with the current period segment presentation. See Note 3 for further information on the Company’s discontinued operations and the Company’s sales of the PrescribeWellness, DoseMe, and SinfoníaRx Businesses. |
Assets and Liabilities Held for Sale and Discontinued Operations | (c)Assets and Liabilities Held for Sale and Discontinued Operations A long-lived asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable within a year. A long-lived asset (or disposal group) classified as held for sale is initially measured at the lower of its carrying amount or fair value less costs to sell. An impairment loss is recognized for any initial or subsequent write-down of the long-lived asset (or disposal group) to fair value less costs to sell. A gain or loss not previously recognized by the date of the sale of the long-lived asset (or disposal group) is recognized at the date of derecognition. Long-lived assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Long-lived assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet. Additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations are included in Note 3. |
Cloud Computing Arrangements | (d)Cloud Computing Arrangements Costs to implement cloud computing arrangements that are hosted by third-party vendors are capitalized when incurred during the application development phase. Capitalized implementation costs are included in prepaid expenses and other assets on the Company’s consolidated balance sheets, and are amortized on a straight-line basis over the reasonably certain term of the hosting arrangement, beginning when the service is ready for its intended use. As of June 30, 2023 and December 31, 2022, capitalized implementation costs were $2,178 and $2,158, respectively. Accumulated amortization for these arrangements was $775 and $590 as of June 30, 2023 and December 31, 2022, respectively. Amortization expense for the three months ended June 30, 2023 and 2022, was $63 and $52, respectively. Amortization expense for the six months ended June 30, 2023 and 2022, was $185 and $105, respectively. |
Vendor Financing Arrangements | (e)Vendor Financing Arrangements On February 24, 2022, the Company expanded its existing relationship with a third-party service provider for business process outsourcing and technology services for its third-party administration services and electronic health records solutions. As a result, the third-party provider hired approximately 180 employees from the Company, hired to fill existing open positions, and augmented with additional resources to meet client demand. The agreement term is seven years and includes total estimated fees of $115,300. The arrangement includes extended payment terms for cloud computing implementation costs, internally developed software support, and business process support. In order to determine the present value of the commitment, the Company used an imputed interest rate of 9.5%, which was reflective of its estimated uncollateralized borrowing rate at signing. As of June 30, 2023 and December 31, 2022, the outstanding principal balance of the financing arrangement was $6,500 and $5,169, respectively, with an unamortized discount of $1,546 and $1,239, respectively, which was included in accrued expenses and other liabilities and other long-term liabilities on the Company’s consolidated balance sheets. On October 1, 2022, the Company entered into a purchase arrangement with a third-party software support and service provider to purchase software licenses for total fees of $1,065. The purchased software licenses were delivered to the Company on the purchase date. The arrangement allows the Company to pay the fees over 36 monthly installment payments. The Company used an imputed interest rate of 10.0%, which was reflective of its estimated collateralized borrowing rate on the purchase date. As of June 30, 2023 and December 31, 2022, the outstanding principal balance of the financing arrangement was $749 and $916, respectively, with an unamortized discount of $129 and $138, respectively, which was included in accrued expenses and other liabilities and other long-term liabilities on the Company’s consolidated balance sheets. Imputed interest expense from vendor financing arrangements was $118 and $30 for the three months ended June 30, 2023 and 2022, respectively, and $222 and $36 for the six months ended June 30, 2023 and 2022, respectively. |
Allowance for Credit Losses | (f)Allowance for Credit Losses The Company maintains an allowance for credit losses to provide for expected credit losses on its divestiture-related notes receivable. The allowance for credit losses is based on the Company’s analysis of the expected future cash flows, as well as an assessment of the debtor’s credit quality. All losses are charged to the allowance when the loss occurs or when a determination is made that such a loss is likely and can be reasonably estimated. Recoveries are credited to the allowance at the time of recovery. The Company evaluates its allowance for credit losses quarterly. As of June 30, 2023, the allowance for credit losses on the divestiture-related notes receivable was $149. See Note 7 for additional information on the Company’s divestiture-related notes receivable. |
Concentrations of Credit Risk | (g)Concentrations of Credit Risk The Company is subject to concentrations of credit risk related to cash, cash equivalents, restricted cash, accounts receivable, and client claims receivable. While the Company maintains its cash, cash equivalents and restricted cash with financial institutions with high credit ratings, it often maintains these deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any realized losses on cash, cash equivalents or restricted cash to date. The Company’s medication fulfillment services clients are sponsors of the federal Medicare Part D plan (prescription drug coverage plan) and, therefore, subject to the payment regulations established by the Centers for Medicare & Medicaid Services (“CMS”). Under CMS guidelines, Medicare Part D sponsors are required to remit payment for claims within 14 calendar days of the date on which an electronically submitted claim is received and within 30 days of the date on which non-electronically-submitted claims are received. The Company extends credit to clients based upon such terms, as well as management’s evaluation of creditworthiness, and generally collateral is not required. The Company’s clients also include health plans and other healthcare providers. Credit associated with these accounts is extended based upon management’s evaluation of creditworthiness and is monitored on an on-going basis. As of June 30, 2023 and December 31, 2022, no client represented more than 10% of net accounts receivable. As of June 30, 2023, one client represented 18% of client claims receivable. As of December 31, 2022, one client represented 14% of client claims receivable. One client accounted for 13% and 16% of total revenue for the three months ended June 30, 2023 and 2022, respectively, and 13% and 17% of total revenue for the six months ended June 30, 2023 and 2022, respectively.
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Recent Accounting Pronouncement | (h)Recent Accounting Pronouncement In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under FASB Accounting Standards Codification Topic 606 (Revenue from Contracts with Customers) in order to align the recognition of a contract liability with the definition of performance obligation. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021-08 is effective for financial statements issued for fiscal years beginning after December 15, 2022; early adoption is permitted. The Company adopted ASU 2021-08 on January 1, 2023 and determined that it did not have a significant impact on the consolidated financial statements. |