10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2020

OR

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

For the transition period from                      to                     

Commission file number 001-38961

Change Healthcare Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	82-2152098
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
424 Church Street, Suite 1400
Nashville, TN	37219
(Address of Principal Executive Offices)	(Zip Code)

(615) 932-3000

(Registrant’s Telephone Number, Including Area Code)

3055 Lebanon Pike, Suite 1000, Nashville, TN 37214

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	CHNG	The Nasdaq Stock Market LLC
6.00% Tangible Equity Units	CHNGU	The Nasdaq Stock Market LLC

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

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

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

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

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

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

Number of shares of common stock outstanding on January 26, 2021: 304,771,882

TABLE OF CONTENTS

Part I. Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
Part II. Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
Signatures

2

Part I. Financial Information

Item 1. Financial Statements

Change Healthcare Inc.

Consolidated Statements of Operations

(unaudited and amounts in thousands, except share and per share amounts)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2020			2019			2020			2019
Revenue
Solutions revenue	$	735,264		$	—		$	2,089,589		$	—
Postage revenue		49,877			—			145,672			—
Total revenue		785,141			—			2,235,261			—
Operating expenses
Cost of operations (exclusive of depreciation and amortization below)		332,373			—			977,568			—
Research and development		58,323			—			168,110			—
Sales, marketing, general and administrative		161,959			1,115			499,039			2,504
Customer postage		49,877			—			145,672			—
Depreciation and amortization		151,143			—			436,552			—
Accretion and changes in estimate with related parties, net		956			(1,191	)		10,414			47,172
Gain on sale of businesses		(32,217	)		—			(60,487	)		—
Total operating expenses		722,414			(76	)		2,176,868			49,676
Operating income (loss)		62,727			76			58,393			(49,676	)
Non-operating (income) expense
Interest expense, net		61,439			1			185,733			1
Contingent consideration		—			—			(3,000	)		—
Loss on extinguishment of debt		6,145			—			7,634			—
Loss from Equity Method Investment in the Joint Venture		—			8,764			—			104,497
(Gain) loss on forward purchase contract		—			(74,084	)		—			(71,649	)
Other, net		(2,491	)		(580	)		(1,443	)		(1,245	)
Total non-operating (income) expense		65,093			(65,899	)		188,924			31,604
Income (loss) before income tax provision (benefit)		(2,366	)		65,975			(130,531	)		(81,280	)
Income tax provision (benefit)		(4,562	)		15,240			(31,411	)		(564	)
Net income (loss)	$	2,196		$	50,735		$	(99,120	)	$	(80,716	)
Net income (loss) per share:
Basic	$	0.01		$	0.35		$	(0.31	)	$	(0.67	)
Diluted	$	0.01		$	0.35		$	(0.31	)	$	(0.67	)
Weighted average common shares outstanding:
Basic		321,013,595			143,392,295			320,570,092			120,657,859
Diluted		324,815,524			146,201,860			320,570,092			120,657,859

See accompanying notes to consolidated financial statements.

3

Change Healthcare Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited and amounts in thousands)

	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2020			2019		2020			2019
Net income (loss)	$	2,196		$	50,735	$	(99,120	)	$	(80,716	)
Other comprehensive income (loss):
Foreign currency translation adjustment		11,526			1,728		23,100			3,537
Changes in fair value of interest rate caps, net of taxes		(81	)		1,313		(6,261	)		(5,428	)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture, net of taxes		—			134		—			1,307
Other comprehensive income (loss)		11,445			3,175		16,839			(584	)
Total comprehensive income (loss)	$	13,641		$	53,910	$	(82,281	)	$	(81,300	)

See accompanying notes to consolidated financial statements.

4

Change Healthcare Inc.

Consolidated Balance Sheets

(unaudited and amounts in thousands, except share and per share amounts)

	December 31,			March 31,
	2020			2020
Assets
Current assets:
Cash & cash equivalents	$	137,357		$	410,405
Accounts receivable, net		697,948			740,105
Contract assets, net		125,509			132,704
Prepaid expenses and other current assets		127,442			117,967
Total current assets		1,088,256			1,401,181
Property and equipment, net		183,843			206,196
Operating lease right-of-use assets, net		99,258			—
Goodwill		4,105,413			3,795,325
Intangible assets, net		4,302,594			4,365,806
Investment in business purchase option		—			146,500
Other noncurrent assets, net		368,448			192,372
Total assets	$	10,147,812		$	10,107,380
Liabilities
Current liabilities:
Accounts payable	$	59,664		$	68,169
Accrued expenses		502,992			390,294
Deferred revenue		393,823			302,313
Due to related parties, net		11,606			20,234
Current portion of long-term debt		37,019			278,779
Current portion of operating lease liabilities		30,813			—
Total current liabilities		1,035,917			1,059,789
Long-term debt, excluding current portion		4,780,828			4,710,294
Long-term operating lease liabilities		80,789			—
Deferred income tax liabilities		618,397			615,904
Tax receivable agreement obligations due to related parties		99,614			177,826
Tax receivable agreement obligations		228,294			164,633
Other long-term liabilities		70,235			93,487
Total liabilities		6,914,074			6,821,933
Commitments and contingencies
Stockholders’ Equity
Common Stock (par value, $.001), 9,000,000,000 and 9,000,000,000 shares authorized and 304,656,863 and 303,428,142 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively		305			303
Preferred stock (par value, $.001), 900,000,000 shares authorized and no shares issued and outstanding at both December 31, 2020 and March 31, 2020		—			—
Additional paid-in capital		4,253,567			4,222,580
Accumulated other comprehensive income (loss)		9,467			(7,372	)
Accumulated deficit		(1,029,601	)		(930,064	)
Total stockholders’ equity		3,233,738			3,285,447
Total liabilities and stockholders’ equity	$	10,147,812		$	10,107,380

See accompanying notes to consolidated financial statements.

5

Change Healthcare Inc.

Consolidated Statements of Stockholders’ Equity

(unaudited and amounts in thousands, except share and per share amounts)

												Accumulated
						Additional						Other			Total
	Common Stock					Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares			Amount		Capital			Deficit			Income (Loss)			Equity
Balance at March 31, 2019		75,474,654		$	75	$	1,153,509		$	(17,841	)	$	(3,256	)	$	1,132,487
Cumulative effect of accounting change of the Joint Venture-ASC 606		—			—		—			35,797			—			35,797
Cumulative effect of accounting change of the Joint Venture-ASU 2018-02		—			—		—			(422	)		422			—
Equity compensation expense		—			—		5,862			—			—			5,862
Net income (loss)		—			—		—			(37,517	)		—			(37,517	)
Foreign currency translation adjustment of the Joint Venture		—			—		—			—			226			226
Change in fair value of interest rate caps of the Joint Venture, net of taxes		—			—		—			—			(5,431	)		(5,431	)
Balance at June 30, 2019		75,474,654		$	75	$	1,159,371		$	(19,983	)	$	(8,039	)	$	1,131,424
Issuance of Change Healthcare Inc. common stock upon initial public offering		49,285,713			49		608,630			—			—			608,679
Effect of initial public offering issuance costs on Joint Venture equity		—			—		(4,160	)		—			—			(4,160	)
Issuance of tangible equity units		—			—		232,929			—			—			232,929
Equity compensation expense		—			—		8,585			—			—			8,585
Issuance of Change Healthcare Inc. common stock upon exercise of equity awards		175,439			—		1,139			—			—			1,139
Net income (loss)		—			—		—			(93,935	)		—			(93,935	)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		—			—		—			—			1,173			1,173
Foreign currency translation adjustment of the Joint Venture		—			—		—			—			1,583			1,583
Change in fair value of interest rate cap, net of taxes of the Joint Venture		—			—		—			—			(1,310	)		(1,310	)
Balance at September 30, 2019		124,935,806		$	124	$	2,006,494		$	(113,918	)	$	(6,593	)	$	1,886,107
Equity compensation expense		—			—		9,148			—			—			9,148
Issuance of Change Healthcare Inc. common stock upon exercise of equity awards		91,842			—		966			—			—			966
Net income (loss)		—			—		—			50,735			—			50,735
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		—			—		—			—			134			134
Foreign currency translation adjustment of the Joint Venture		—			—		—			—			1,728			1,728
Change in fair value of interest rate cap, net of taxes of the Joint Venture		—			—		—			—			1,313			1,313
Balance at December 31, 2019		125,027,648		$	124	$	2,016,608		$	(63,183	)	$	(3,418	)	$	1,950,131
Balance at March 31, 2020		303,428,142		$	303	$	4,222,580		$	(930,064	)	$	(7,372	)	$	3,285,447
Cumulative effect of accounting change-ASU 2016-13		—			—		—			(417	)		—			(417	)
Equity compensation expense		—			—		8,780			—			—			8,780
Issuance of common stock under equity compensation plans		341,230			1		2,143			—			—			2,144
Net income (loss)		—			—		—			(58,694	)		—			(58,694	)
Foreign currency translation adjustment		—			—		—			—			6,353			6,353
Change in fair value of interest rate caps, net of taxes		—			—		—			—			(4,184	)		(4,184	)
Other		—			—		(75	)		—			—			(75	)
Balance at June 30, 2020		303,769,372		$	304	$	4,233,428		$	(989,175	)	$	(5,203	)	$	3,239,354
Equity compensation expense		—			—		12,372			—			—			12,372
Issuance of common stock under equity compensation plans		911,961			—		408			—			—			408
Employee tax withholding on vesting of equity compensation awards		(254,764	)		—		(3,131	)		—			—			(3,131	)
Net income (loss)		—			—		—			(42,622	)		—			(42,622	)
Foreign currency translation adjustment		—			—		—			—			5,221			5,221
Change in fair value of interest rate caps, net of taxes		—			—		—			—			(1,996	)		(1,996	)
Other		—			—		(356	)		—			—			(356	)
Balance at September 30, 2020		304,426,569		$	304	$	4,242,721		$	(1,031,797	)	$	(1,978	)	$	3,209,250
Equity compensation expense		—			—		9,673			—			—			9,673
Issuance of common stock under equity compensation plans		249,288			1		1,606			—			—			1,607
Employee tax withholding on vesting of equity compensation awards		(18,994	)		—		(294	)		—			—			(294	)
Net income (loss)		—			—		—			2,196			—			2,196
Foreign currency translation adjustment		—			—		—			—			11,526			11,526
Change in fair value of interest rate caps, net of taxes		—			—		—			—			(81	)		(81	)
Other		—			—		(139	)		—			—			(139	)
Balance at December 31, 2020		304,656,863		$	305	$	4,253,567		$	(1,029,601	)	$	9,467		$	3,233,738

See accompanying notes to consolidated financial statements.

6

Change Healthcare Inc.

Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)

	Nine Months Ended
	December 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(99,120	)	$	(80,716	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss from Equity Method Investment in the Joint Venture		—			104,497
Depreciation and amortization		436,552			—
Amortization of capitalized software developed for sale		550			—
Accretion and changes in estimate, net		8,429			—
Equity compensation		34,858			—
Deferred income tax expense (benefit)		(33,905	)		(564	)
Amortization of debt discount and issuance costs		24,587			403
Contingent consideration		(3,000	)		—
Gain on sale of businesses		(60,487	)		—
Loss on extinguishment of debt		7,634			—
(Gain) loss on forward purchase contract		—			(71,649	)
Non-cash lease expense		21,930			—
Other, net		7,681			1,526
Changes in operating assets and liabilities:
Accounts receivable, net		28,331			—
Contract assets, net		5,201			—
Prepaid expenses and other		(69,609	)		(1,335	)
Accounts payable		(15,785	)		—
Accrued expenses and other liabilities		68,708			47,255
Deferred revenue		124,679			—
Due to the Joint Venture, net		—			583
Net cash provided by (used in) operating activities		487,234			—
Cash flows from investing activities:
Capitalized expenditures		(182,929	)		—
Acquisitions, net of cash acquired		(439,483	)		—
Proceeds from sale of businesses		117,124			—
Investment in the Joint Venture		—			(610,784	)
Investment in debt and equity securities of the Joint Venture		—			(278,875	)
Other, net		1,100			7,332
Net cash provided by (used in) investing activities		(504,188	)		(882,327	)
Cash flows from financing activities:
Payments on Revolving Facility		(250,000	)		—
Payments on Term Loan Facility		(265,000	)		—
Proceeds from issuance of Senior Notes		325,000			—
Payments under tax receivable agreements		(20,691	)		—
Receipts (payments) on derivative instruments		(22,255	)		—
Employee tax withholding on vesting of equity compensation awards		(3,425	)		—
Payments on deferred financing obligations		(9,081	)		—
Payment of senior amortizing notes		(11,599	)		(7,332	)
Proceeds from exercise of equity awards		4,158			2,105
Proceeds from initial public offering, net of issuance costs		—			608,679
Proceeds from issuance of equity component of tangible equity units, net of issuance costs		—			232,929
Proceeds from issuance of debt component of tangible equity units		—			47,367
Other, net		(6,650	)		(1,421	)
Net cash provided by (used in) financing activities		(259,543	)		882,327
Effect of exchange rate changes on cash and cash equivalents		3,449			—
Net increase (decrease) in cash and cash equivalents		(273,048	)		—
Cash and cash equivalents at beginning of period		410,405			3,409
Cash and cash equivalents at end of period	$	137,357		$	3,409

See accompanying notes to consolidated financial statements.

7

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

1. Nature of Business and Organization

Change Healthcare Inc. (the “Company”, “our” or “we”) is an independent healthcare technology company, focused on accelerating the transformation of the healthcare system through the power of our healthcare platform. We provide data and analytics-driven solutions to improve clinical, financial and patient engagement outcomes in the U.S. healthcare system. Our platform and comprehensive suite of software, analytics, technology-enabled services and network solutions drive improved results in the complex workflows of healthcare system payers and providers by enhancing clinical decision making, simplifying billing, collection and payment processes, and enabling a better patient experience.

We are a Delaware corporation originally formed on June 22, 2016, to initially hold an equity investment in Change Healthcare LLC (the “Joint Venture”), a joint venture between the Company and McKesson Corporation (“McKesson”).

Amendment of Certificate of Incorporation

Effective June 26, 2019 and in contemplation of our initial public offering of common stock, we amended the certificate of incorporation to effect a 126.4 for 1 stock split for all previously issued shares of common stock, to increase the authorized number of common stock, and to authorize shares of preferred stock. Following this amendment, the authorized shares include 9,000,000,000 shares of common stock (par value $.001 per share), one share of Class X stock (par value $.001 per share), and 900,000,000 shares of preferred stock (par value $.001 per share). As a result of the Merger (defined below), the Class X Stock is no longer available for issuance.

Initial Public Offering

Effective July 1, 2019, we completed our initial public offering of 49,285,713 shares of common stock and a concurrent offering of 5,750,000 tangible equity units (“TEUs”) for net proceeds of $608,679 and $278,875, respectively.

McKesson Exit

On March 10, 2020, McKesson completed a split-off of its interest in the Joint Venture through an exchange offer of its common stock for shares of PF2 SpinCo, Inc, a Delaware corporation and wholly owned subsidiary of McKesson (“SpinCo”). Immediately following consummation of the exchange offer, SpinCo was merged with and into Change Healthcare Inc. (the “Merger”). As a result, McKesson no longer owns any voting or economic interest in the Joint Venture. Prior to the Merger, we accounted for our investment in the Joint Venture under the equity method of accounting. Subsequent to the Merger, we own 100% of Change Healthcare LLC, and as a result, consolidate the financial statements of Change Healthcare LLC.

COVID-19 Considerations

On March 11, 2020, the World Health Organization declared the current coronavirus (“COVID-19”) outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the U.S., federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures led to weakened conditions in many sectors of the economy, including a decline in healthcare transaction volumes that are integral to our business.

We experienced, and expect to continue to experience, an adverse impact on our financial results as a result of COVID-19. However, we are not presently aware of events or circumstances arising from COVID-19 that would require us to revise the carrying value of our assets or liabilities, nor do we expect the impact of COVID-19 to cause us to be unable to comply with our debt covenants or meet our contractual obligations.

2. Significant Accounting Policies

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) Guidelines, Rules and Regulations and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. All intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements.

8

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Business Combinations

We recognize the consideration transferred (i.e., purchase price) in a business combination, as well as the acquired business’ identifiable assets, liabilities and noncontrolling interests at their acquisition date fair value. The excess of the consideration transferred over the fair value of the identifiable assets, liabilities and noncontrolling interest, if any, is recorded as goodwill. Any excess of the fair value of the identifiable assets acquired and liabilities assumed over the consideration transferred, if any, is generally recognized within earnings as of the acquisition date.

The fair values of the consideration transferred, assets, liabilities and noncontrolling interests are estimated based on one or a combination of income, cost or market approaches as determined based on the nature of the asset or liability and the level of inputs available (i.e., quoted prices in an active market, other observable inputs or unobservable inputs). To the extent our initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are reported for those items which are incomplete.

In conjunction with business combinations, we generally recognize goodwill attributable to the assembled workforce and expected synergies among the operations of the acquired entities and our existing operations. Goodwill is generally deductible for federal income tax purposes when a business combination is treated as an asset purchase and is generally not deductible for federal income tax purposes when a business combination is treated as a stock purchase. See Note 4, Business Combinations.

Allowance for Credit Losses

The allowance for credit losses of $24,003 and $22,360 at December 31, 2020 and March 31, 2020, respectively, were primarily based on historical credit loss experience, current conditions and adjustments for certain asset-specific risk characteristics. The following table summarizes activity related to the allowance for credit losses:

	Nine Months Ended December 31,
	2020			2019
Balance at beginning of period	$	22,360		$	—
Cumulative effect of accounting change-ASU 2016-13		417			—
Acquisitions and Dispositions (1)		(3,534	)		—
Provisions		11,623			—
Write-offs		(6,863	)		—
Balance at end of period	$	24,003		$	—

⁽¹⁾ Amount relates primarily to the acquisitions of eRx and PDX and sales of Connected Analytics and Capacity Management. See Note 4, Business Combinations and Note 5, Dispositions.

Leases

We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains an operating or finance lease, at the commencement date, we record a right-of-use asset and a corresponding lease liability based on the present value of the minimum lease payments.

As most of our leases do not provide an implicit borrowing rate, to determine the present value of lease payments, we use the portfolio approach and determine our hypothetical secured borrowing rate based on information available at lease commencement. Further, we make certain estimates and judgements regarding the lease term and lease payments, noted below.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, we are reasonably certain to exercise the option.

Certain of our lease agreements include rental payments that are adjusted periodically for inflation or passage of time. These step payments are included within our present value calculation as they are known adjustments at commencement. Some of our lease agreements include variable payments that are excluded from our present value calculation. For example, some of our equipment leases include a component which varies based on the asset’s use.

9

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Additionally, we have lease agreements that include lease and non-lease components, such as equipment leases, which are generally accounted for as a single lease component. For these leases, lease payments include all fixed payments stated within the contract. For other leases, such as office space, lease and non-lease components are accounted for separately. Our lease agreements do not contain any material residual value guarantees that would impact our lease payments.

Recently Adopted Accounting Pronouncements

Financial Instruments: Credit Losses

In April 2020, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-13, as amended by ASU No. 2018-19, which requires that a financial asset (or group of financial assets) measured at amortized cost be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance also requires us to pool assets with similar risk characteristics and consider current economic conditions when estimating losses. We adopted this standard using the modified retrospective approach and recorded a cumulative effect to retained earnings of $417 as of April 1, 2020.

Fair Value Measurements

In April 2020, we adopted FASB ASU No. 2018-13, which modifies the disclosure requirements for fair value measurements. Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements. See Note 10, Fair Value Measurements.

Hosting Arrangement Implementation Costs

In April 2020, we adopted FASB ASU No. 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update also requires that the effects of such capitalized costs be classified in the same respective caption in the statement of operations, balance sheet and cash flows as the underlying hosting arrangement. We adopted this standard prospectively beginning April 1, 2020. This adoption did not have a material impact on our financial statements for the three and nine months ended December 31, 2020.

Leases

In April 2020, we adopted FASB ASU No. 2016-02, which created Topic 842 – Leases (“ASC 842”). The standard generally requires that all lease obligations be recognized on the balance sheet at the present value of the remaining lease payments with a corresponding right-of-use asset. In July 2018, the FASB issued ASU No. 2018-11 which provides companies with the option to apply this cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

Upon adoption, we elected the transition “practical expedients” permitting us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Additionally, we elected the practical expedient to not separate lease and non-lease components for equipment lease agreements.

We adopted ASC 842 using the modified retrospective approach and recorded right-of-use assets of $111,815 and lease liabilities of $125,331, primarily related to operating leases. The recognition of the right-of-use assets in combination with our previously recorded prepaid rent balances resulted in no requirement to adjust the opening balance of retained earnings. Our accounting for finance leases remains substantially unchanged. Adoption of ASC 842 did not materially impact our consolidated statement of operations and had no impact on our consolidated statement of cash flows. See Note 8, Leases, for additional information.

London Interbank Offered Rate (LIBOR) Reform

In March 2020, the FASB issued ASU No. 2020-04, which created Topic 848 – Reference Rate Reform. ASU No. 2020-04 contains optional practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts which may be elected over time as activities occur. Among other things, the ASU intends to ease the transition from LIBOR to an alternative reference rate. During the first quarter of fiscal year 2021, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impacts of ASU No. 2020-04 and may apply other elections as reference rate reform activities progress.

10

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Accounting Pronouncements Not Yet Adopted

None that are expected to have a material impact on our financial statements.

3. Revenue Recognition

We generate most of our solutions revenue by using technology solutions (generally Software as a Service (“SaaS”)) to provide services to our customers that automate and simplify business and administrative functions for payers, providers, pharmacies, and channel partners and through the licensing of software, software systems (consisting of software, hardware and maintenance support) and content.

We recognize revenue when the customer obtains control of the good or service through satisfying a performance obligation by transferring the promised good or service to the customer.

Principal Revenue Generating Products and Services

Hosted solutions and SaaS—We enter into arrangements whereby we provide the customer access to a Company-owned software solution, which are generally marketed under annual and multi-year arrangements. The customer is only provided “access” (not a license) to the software application. In these arrangements, the customer does not purchase equipment nor does the customer take physical possession of the software. The related revenue is recognized ratably over the contracted term. For fixed fee arrangements, revenue recognition begins after set-up and implementation are complete. For per-transaction fee arrangements, revenue is recognized as transactions are processed beginning on the service start date. Revenue for hosted solutions and SaaS, which is included in solutions revenue, is generated by the Software and Analytics, Network Solutions, and Technology-Enabled Services segments.

Transaction processing services—We provide transaction processing (such as claims processing) services to hospitals, pharmacies and health systems via a cloud-based (SaaS) platform. The promised service is to stand ready to process transactions for our customers over the contractual period on an as needed basis. Revenue related to these services is recognized over time as transactions are processed and the revenue is recognized over the individual days in which the services are performed. Revenue is recognized as solutions revenue in the Software and Analytics, Network Solutions, and Technology-Enabled Services segments, with the exception of revenue related to postage that is generated through the delivery of certain of these services. Postage revenue is discussed below and is separately presented on the consolidated statement of operations. Any fixed annual fees and implementation fees are recognized ratably over the contract period.

Contingent fee services—We provide services to customers in which the transaction price is contingent on future occurrences, such as savings generated or amounts collected on behalf of our customers through the delivery of services. In some cases, we perform services in advance of invoicing the customer, thereby creating a contract asset. Revenue in these arrangements is estimated and constrained until we determine that it is probable a significant revenue reversal will not occur, and variable consideration is allocated to the performance obligation for which we earn a contingent fee. We use the expected value method when estimating variable consideration, as we have a large number of contracts with similar characteristics and consider a portfolio of data from other similar contracts to form our estimate of expected value. Revenue for contingent fee services, which is included in solutions revenue, is generated by the Software and Analytics and Technology-Enabled Services segments.

Content license subscriptions and time-based software—Our content license subscriptions and time-based software arrangements provide a license to use a software for a specified period of time. At the end of the contractual period, the customer either renews the license for an additional term or ceases to use the software. Software licenses are typically delivered to the customer with functionality that allows the customer to benefit from the software on its own or together with readily available resources. As contracts for these solutions generally do not price individual components separately, we allocate the transaction price to the license and ongoing support performance obligations based on standalone selling price, primarily determined by historical value relationships between licenses and ongoing support and updates. Revenue allocated to content license subscriptions and time-based software license agreements is generally recognized at the point-in-time of delivery of the license or the content update upon transfer of control of the underlying license to the customer. Generally, software implementation fees are recognized over the implementation period through an input measure of progress method. Revenue allocated to maintenance and support is recognized ratably over the period covered by the agreements, as passage of time represents a faithful depiction of the transfer of these services. In some cases, software arrangements provide licenses to several software applications that are highly integrated with the implementation services and software updates and cannot function separately. The bundle is a single performance obligation since the individually promised goods and services are not distinct in the context of the contract because the related implementation services significantly modify and customize the software and the updates provided to the integrated software solution are critical to the software’s utility. The related revenue is recognized on a straight-line basis, ratably over the contractual term due to the frequency and criticality of the updates throughout the license period. Revenue for content license subscriptions and time-based software, which is included in solutions revenue, is generated by the Software and Analytics segment.

11

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Perpetual software licenses—Our perpetual software arrangements provide a license for a customer to use software in perpetuity. Software licenses are typically delivered to the customer with functionality from which the customer can benefit from the license on its own or together with readily available resources. Perpetual software arrangements are recognized at the time of delivery or through an input measure of progress method over the installation period if the arrangements require significant production or modification or customization of the software. Contracts accounted for through an input measure of progress method are generally measured based on the ratio of labor hours incurred to date to total estimated labor hours to be incurred. Software implementation fees are recognized as the work is performed or under the input method for perpetual software. Hardware revenue is generally recognized upon delivery. Maintenance is recognized ratably over the term of the agreement as passage of time represents a faithful depiction of the transfer of these services. License, implementation, hardware and maintenance revenue for these arrangements, which is included in solutions revenue, is generated by the Software and Analytics and Network Solutions segments.

Professional services—We provide training and consulting services to our customers, and the services may be fixed fee or time and materials based. Consulting services that fall outside of the standard implementation services vary depending on the scope and complexity of the service requested by the customer. Consulting services are deemed to be capable of being distinct from other products and services, and the services are satisfied either at a point of time or over time based on delivery and are recognized as solutions revenue in the Software and Analytics and Technology-Enabled Services segments. Training services are usually provided as an optional service to enhance the customer’s experience with a software product or provides additional education surrounding the general topic of the solution. Training services are capable of being distinct from other products and services. We treat training services as a distinct performance obligation, and those services are satisfied at a point of time and recognized as solutions revenue in the Software and Analytics and Technology-Enabled Services segments.

Postage Revenue

Postage revenue is the result of providing delivery services to customers in our payment and communication solutions. Postage revenue is generally billed as a pass-through cost to our customers. The service is part of a combined performance obligation with the printing and handling services provided to the customer because the postage services are not distinct within the context of the contract. We present Postage Revenue separately from Solutions Revenue on the consolidated statements of operations as doing so makes the financial statements more informative for the users. The revenue related to the combined performance obligation of the postage, printing, and handling service is recognized as the transactions are processed, and the revenue is recognized over the individual days in which the services are performed.

Contract Balances

We generally recognize a contract asset when revenue is recognized in advance of invoicing on a customer contract, unless the right to payment for that revenue is unconditional (i.e. requiring no further performance and only the passage of time). If a right to payment is determined to meet the criteria to be considered ‘unconditional’, then we will recognize a receivable.

We did not recognize any impairment loss on accounts receivable or contract assets during the three and nine months ended December 31, 2020. Change Healthcare Inc. did not have accounts receivable prior to the Merger.

We record deferred revenue when billings or payments are received from customers in advance of our performance. Deferred revenue is generally recognized when transfer of control to customers occurs. The deferred revenue balance is driven by multiple factors, including the frequency of renewals, invoice timing, invoice duration and fair value adjustments as a result of the Merger. As of December 31, 2020, we expect 94% of the deferred revenue balance to be recognized in one year or less, and approximately $245,760 of the beginning period balance was recognized during the nine months ended December 31, 2020.

Costs to Obtain or Fulfill a Contract

At December 31, 2020, we had capitalized costs to obtain a contract of $4,339 in prepaid and other current assets and $27,502 in other noncurrent assets. At December 31, 2020, we had capitalized costs to fulfill a contract of $3,287 in prepaid and other current assets and $18,072 in other noncurrent assets. Amortization of such capitalized costs to obtain or fulfill a contract were immaterial for the three and nine months ended December 31, 2020. Change Healthcare Inc. did not have costs to obtain or fulfill a contract prior to the Merger, and therefore did not record amortization of such capitalized costs during the three and nine months ended December 31, 2019.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts includes deferred revenue and other revenue yet to be recognized from non-cancellable contracts. As of December 31, 2020, the total remaining performance obligations approximated $1,507,154, of which approximately 49% is expected to be recognized over the next twelve months, and the remaining 51% thereafter.

12

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

In this balance, we do not include the value of unsatisfied performance obligations related to those contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed. Additionally, this balance does not include revenue related to performance obligations that are part of a contract with an original expected duration of one year or less. Lastly, this balance does not include variable consideration allocated to the individual goods or services in a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Examples includes variable fees associated with transaction processing and contingent fee services.

Disaggregated Revenue

We disaggregate the revenue from contracts with customers by operating segment as we believe doing so best depicts how the nature, amount, timing and uncertainty of revenues are affected by economic factors. See Note 19, Segment Reporting, for the total revenue disaggregated by operating segment for the three and nine months ended December 31, 2020.

In addition to disaggregating revenue by operating segment, we disaggregate revenue between revenue that is recognized over time and revenue that is recognized at a point in time. Approximately 98% and 96% of revenue was recognized over time and approximately 2% and 4% of revenue was recognized at a point in time for the three and nine months ended December 31, 2020, respectively.

4. Business Combinations

Fiscal Year 2021 Transactions

eRx Network Holdings, Inc.

On May 1, 2020, we exercised our option to purchase and completed the acquisition of 100% of the ownership interest in eRx Network Holdings, Inc. (“eRx”), a leading provider in comprehensive, innovative and secure data-driven solutions for pharmacies. At the time of the acquisition, all outstanding eRx equity awards were canceled and holders of eRx stock options and vested eRx stock appreciation rights were able to elect to receive consideration in the form of a cash payment or vested stock appreciation rights of the Company. See Note 17, Incentive Compensation Plans, for additional information.

Prior to the acquisition, we held an option to purchase eRx which we accounted for as an equity investment. Therefore, our acquisition of eRx was accounted for as a business combination achieved in stages under the acquisition method in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). Accordingly, we remeasured our business purchase option to fair value and recognized a loss of $6,000 which is recorded in Other, net on our consolidated statement of operations.

The following table summarizes information related to this acquisition as of the acquisition date. The fair values of the assets acquired and the liabilities assumed were determined based on information available to the Company using primarily an income-based approach. During the second and third quarters of fiscal year 2021, we continued to make purchase price allocation adjustments to refine the fair value of assets acquired and liabilities assumed, including goodwill. These refinements primarily included an increase to the determined fair value of customer relationships and deferred tax liabilities and a decrease to the determined fair value of technology-based intangible assets. There were no material impacts to the consolidated statement of operations as a result of the adjustments. We consider our accounting for the assets acquired and liabilities assumed in the eRx acquisition to be complete.

	eRx
Cash paid at closing	$	249,359
Fair value of eRx purchase option		140,500
Fair value of vested stock appreciation rights		5,097
Cash paid for canceled eRx equity awards		5,891
Total Consideration Fair Value at Acquisition Date	$	400,847
Allocation of the Consideration Transferred:
Cash	$	54,108
Accounts receivable, net of allowance of $326		12,747
Prepaid expenses and other current assets		609
Goodwill		225,156

13

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Identifiable intangible assets:
Customer relationships (life 17 years)		131,200
Internally developed technology (life 9-12 years)		29,700
Other noncurrent assets		20
Accounts payable		(2,543	)
Accrued expenses and other current liabilities		(10,933	)
Deferred income tax liabilities		(39,217	)
Total consideration transferred	$	400,847

The goodwill recognized, all of which is assigned to the Network Solutions segment, is primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. The goodwill is not expected to be deductible for tax purposes. See Note 6, Goodwill.

Acquisition costs related to the purchase of eRx were not material.

PDX, Inc.

On June 1, 2020, we completed the cash purchase of 100% of the ownership interest in PDX, Inc. (“PDX”), a company focused on delivering patient centric and innovative technologies for pharmacies and health systems. We accounted for this transaction as a business combination using the acquisition method.

The fair values of the assets acquired and the liabilities assumed were determined based on information available to the Company using primarily an income-based approach. During the second quarter of fiscal year 2021, we continued to make purchase price allocation adjustments to refine the fair value of assets acquired, including goodwill. These refinements primarily included an increase to the determined fair value of customer relationships and decreases to the determined fair values of technology-based intangible assets and deferred revenue. There were no material impacts to the consolidated statement of operations as a result of the adjustments. Additional information is being gathered to finalize the amounts with respect to deferred taxes. Accordingly, the measurement of the deferred tax assets acquired and deferred tax liabilities assumed may change upon finalization of the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date. We consider our accounting for the other assets acquired and liabilities assumed in the PDX acquisition to be complete.

After customary working capital adjustments, transaction fees and other adjustments, the total consideration fair value at the acquisition date was $198,291. The following table summarizes the allocation of consideration transferred:

	PDX
Cash	$	755
Accounts receivable, net of allowance of $1,092		5,739
Prepaid expenses and other current assets		2,251
Property and equipment		840
Goodwill		98,830
Identifiable intangible assets:
Customer relationships (life 18 years)		74,300
Technology-based intangible assets (life 10-11 years)		25,300
Other noncurrent assets		690
Accounts payable		(3,882	)
Deferred revenue, current		(2,946	)
Accrued expenses and other current liabilities		(3,364	)
Other noncurrent liabilities		(222	)
Total consideration transferred	$	198,291

The goodwill recognized, all of which is assigned to the Network Solutions segment, is primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. The goodwill is expected to be deductible for tax purposes. See Note 6, Goodwill.

Acquisition costs related to the purchase of PDX were not material.

14

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Nucleus.io

In August 2020, we completed the acquisition of Nucleus.io, a leader in the development of advanced, fully enabled, cloud-native imaging and workflow technology. We acquired Nucleus.io for total consideration of $35,120 and accounted for the acquisition as a business combination. The consideration transferred was primarily allocated to technology-based intangible assets of $11,700 and goodwill of $22,341. The goodwill recognized is assigned to the Software and Analytics segment. The preliminary values of the consideration transferred, assets acquired and liabilities assumed in the acquisition, including the related tax effects, are subject to change upon receipt of a final valuation and working capital settlement.

Fiscal Year 2020 Transactions

The Merger

On March 10, 2020, the Company combined with SpinCo in a two-step all-stock “Reverse Morris Trust” transaction that involved a separation of SpinCo from McKesson followed by the merger of SpinCo with and into the Company, with the Company as the surviving company. As a result of the Merger, the Joint Venture became a wholly owned subsidiary of the Company.

McKesson accepted 15,426,537 shares of its own common stock, par value $0.01 in exchange for all 175,995,192 issued and outstanding shares of SpinCo common stock, par value $0.001 per share (the “SpinCo Common Stock”). All shares of SpinCo Common Stock were then converted into an equal number of shares of common stock of the Company, par value $0.001, which the Company issued to the former holders of SpinCo Common Stock, together with cash in lieu of any fractional shares.

Prior to the Merger, we accounted for our investment in the Joint Venture under the equity method of accounting. Therefore, the acquisition of control of the Joint Venture was accounted for as a business combination achieved in stages under the acquisition method in accordance with ASC 805. Accordingly, we remeasured our previously held equity interest in the Joint Venture to fair value by reference to the publicly traded price of the common shares issued to SpinCo shareholders in exchange for the remaining 58% equity interest in the Joint Venture. Upon remeasurement, we recognized a loss on investment of $230,229. The loss represents the amount by which the carrying value of our investment in the Joint Venture exceeded the fair value of our 42% interest immediately prior to the Merger.

The fair values of the assets acquired and the liabilities assumed were determined based on information available to the Company. Additional information is being gathered to finalize the provisional measurements with respect to deferred taxes. Accordingly, the measurement of the deferred tax assets acquired and deferred tax liabilities assumed may change upon finalization of the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date. During the first quarter of fiscal year 2021, we increased the estimated fair value of our deferred tax liability by $1,604 which also impacted goodwill. During the third quarter of fiscal year 2021, we made additional adjustments decreasing our deferred tax liability and goodwill by $4,692. There were no impacts to the consolidated statement of operations as a result of the adjustments. We consider our accounting for the other assets acquired and liabilities assumed in the Merger to be complete.

The following table summarizes information related to this acquisition as of the acquisition date:

Net Assets acquired
Cash	$	330,665
Accounts receivable, net of allowance of $22,059		718,895
Contract assets		132,704
Prepaid and other current assets		115,265
Investment in business purchase option		146,500
Property and equipment, net		206,751
Goodwill		4,357,560
Other noncurrent assets		169,539
Identified intangible assets:
Customer relationships (life 12-16 years)		3,056,000
Tradenames (life 18 years)		146,000
Technology-based intangible assets (life 6-12 years)		1,188,000
Drafts and accounts payable		(60,637	)
Accrued expenses		(559,456	)
Deferred revenue, current		(292,528	)
Current portion of long-term debt		(28,969	)

15

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Other current liabilities		(22,732	)
Long-term debt, excluding current portion		(4,713,565	)
Deferred income tax liabilities		(574,988	)
Tax receivable agreement obligations with related parties		(176,586	)
Other long-term liabilities		(102,675	)
Net Assets acquired	$	4,035,743
Summary of purchase consideration:
Fair value of shares issued to SpinCo shareholders
(175,995,192 shares at $12.47 per share):
Common Stock, $0.001 par value	$	176
Additional paid-in capital		2,194,484
Fair value of Joint Venture equity interest previously held		1,589,040
Fair value of Joint Venture equity interest previously held through TEUs		216,764
Settlement of dividend receivable		42,778
Repayment of advances to member		(7,499	)
Purchase consideration	$	4,035,743

The goodwill recognized in the Merger is primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries in which we operate. The majority of the goodwill is not expected to be deductible for tax purposes.

Acquisition costs related to the Merger were not material.

5. Dispositions

Connected Analytics

On May 1, 2020, we completed the sale of our Connected Analytics business, which was included in our Software and Analytics segment, for total consideration of $55,000, subject to a customary working capital adjustment, including a $25,000 note receivable from the buyer which was recorded within Other noncurrent assets, net on the consolidated balance sheet. The net book value of the Connected Analytics business prior to the sale was $22,619 which includes primarily net accounts receivable of $16,325, goodwill of $21,705 and deferred revenue of $17,133. In connection with this transaction, we recognized a pre-tax gain on disposal of $24,170 which is included within Gain on sale of businesses on the consolidated statement of operations. In July 2020, we received $25,000 plus interest from the buyer in satisfaction of the outstanding note receivable.

Capacity Management

On December 2, 2020, we completed the sale of our Capacity Management business, which was included in our Software and Analytics segment, for total consideration of $67,500, subject to a customary working capital adjustment. The net book value of the Capacity Management business prior to the sale was $31,599 which includes primarily net accounts receivable of $14,999, goodwill of $26,944 and deferred revenue of $15,230. In connection with this transaction, we recognized a pre-tax gain on disposal of $32,655 which is included within Gain on sale of businesses on the consolidated statement of operations.

6. Goodwill

The following table presents the changes in the carrying amount of goodwill:

	Software and         Analytics			Network         Solutions			Technology-         Enabled Services			Total
Balance at March 31, 2020	$	1,770,118		$	1,645,831		$	379,376		$	3,795,325
Acquisitions (1)		22,341			323,986			—			346,327
Dispositions		(51,136	)		—			—			(51,136	)
Effects of foreign currency		17,926			—			—			17,926
Adjustments (2)		(1,637	)		(1,081	)		(311	)		(3,029	)
Balance at December 31, 2020	$	1,757,612		$	1,968,736		$	379,065		$	4,105,413

⁽¹⁾ Amounts relate primarily to the acquisitions of eRx, PDX and Nucleus.io. See Note 4, Business Combinations.

⁽²⁾ Amounts relate to fair value adjustments to the assets acquired and liabilities assumed in the Merger. See Note 4, Business Combinations.

16

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

7. Equity Method Investment in Change Healthcare LLC

Prior to the Merger, the Company accounted for its investment in the Joint Venture using the equity method of accounting. During the three and nine months ended December 31, 2019, the Company recorded a proportionate share of the loss from this investment of $8,764 and $104,497, respectively, which included transaction and integration expenses incurred by the Joint Venture and basis adjustments, including amortization expenses, associated with equity method intangible assets. These amounts are in Loss from Equity Method Investment in the Joint Venture in the consolidated statements of operations.

Following completion of the Merger, we consolidate the Joint Venture and no longer account for our ownership interest as an equity method investment. Summarized statement of operations information of the Joint Venture prior to the Merger is as follows:

	Three Months Ended December 31, 2019		Nine Months Ended December 31, 2019
Total revenue	$	808,226	$	2,459,593
Cost of operations (exclusive of depreciation and amortization)	$	339,413	$	998,943
Customer postage	$	55,693	$	171,288
Net income (loss)	$	31,191	$	102,973

8. Leases

We lease office space, other facilities, office equipment for internal use, vehicles and bulk invoice pricing and mailing related equipment for customer solutions. Our lease portfolio includes both operating and finance leases with original terms ranging from one to 15 years.

Statement of Operations Information

The components of lease cost are as follows:

	Statement of Operations Location	Three Months Ended December 31, 2020			Nine Months Ended December 31, 2020
Operating lease cost	(1)	$	9,951		$	32,109
Finance lease cost
Amortization expense	Depreciation and amortization		110			312
Interest expense	Interest expense, net		35			102
Short-term lease cost	(1)		261			747
Variable lease cost	(1)		1,524			5,275
Sublease income	Other, net		(172	)		(834	)
Total lease cost		$	11,709		$	37,711

⁽¹⁾ Cost classification varies depending on the leased asset. Costs are primarily included within sales, marketing, general and administrative and cost of operations.

Balance Sheet Information

Right-of-use assets and lease liabilities are as follows:

	Balance Sheet Location		December 31, 2020
Right-of-use assets
Operating leases		Operating lease right-of-use assets, net	$	99,258
Finance leases		Property and equipment, net		1,975
Total right-of-use assets			$	101,233
Lease liabilities
Current liabilities
Operating leases		Current portion of operating lease liabilities	$	30,813
Finance leases		Current portion of long-term debt		577
Noncurrent liabilities
Operating leases		Long-term operating lease liabilities		80,789
Finance leases		Long-term debt, excluding current portion		1,373
Total lease liabilities			$	113,552

17

Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Cash Flow Information

Supplemental cash flow information is as follows:

	Nine Months Ended December 31, 2020
	Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	31,331	$	102
Financing cash flows	$	—	$	490
Non-cash activities
Right-of-use assets obtained in exchange for lease liabilities (1)	$	11,846	$	363

⁽¹⁾ Amounts exclude the impact of adopting ASC 842. See Note 2, Significant Accounting Policies.

Maturity of Lease Liabilities

Maturities of lease liabilities by fiscal year as of December 31, 2020 are as follows:

	Operating Leases		Finance Leases		Total
Remainder of 2021	$	10,022	$	183	$	10,205
2022		36,697		664		37,361
2023		27,580		485		28,065
2024		19,037		468		19,505
2025		14,011		390		14,401
2026 and thereafter		25,501		—		25,501
Total lease liabilities, undiscounted		132,848		2,190		135,038
Less: Imputed interest		21,246		240		21,486
Total lease liabilities	$	111,602	$	1,950	$	113,552

Maturities of lease liabilities by fiscal year as of March 31, 2020 were as follows:

	Operating Leases		Finance Leases		Total
2021	$	40,476	$	468	$	40,944
2022		34,750		468		35,218
2023		23,761		468		24,229
2024		15,393		468		15,861
2025		10,780		390		11,170
2026 and thereafter		15,850		—		15,850
Total lease liabilities, undiscounted	$	141,010	$	2,262	$	143,272

Other Information

Other information related to our leases as of December 31, 2020 is as follows:

	Operating Leases		Finance Leases
Weighted-average remaining lease term		4.79 years		3.70 years
Weighted-average discount rate		7.39%		6.53%

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

9. Interest Rate Cap Agreements

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage exposures to a wide variety of business and operational risks through management of core business activities. We manage economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage differences in the amount, timing and duration of known or expected cash receipts and known or expected cash payments principally related to existing borrowings.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate cap agreements as part of our interest rate risk management strategy. Payments and receipts related to interest rate cap agreements are included in cash flows from financing activities in the consolidated statements of cash flows.

In August 2018, the Joint Venture executed annuitized interest rate cap agreements with notional amounts of $500,000, accreting to $1,500,000 to limit the exposure of the variable component of interest rates under the Term Loan Facility or future variable rate indebtedness to a maximum of 1.0%. The interest rate cap agreements became effective August 31, 2018, accreted to $1,500,000 in March 2020 and expire December 31, 2021. Upon completion of the Merger, these agreements were redesignated as cash flow hedges of the Company.

In March 2020, we executed additional annuitized interest rate cap agreements with notional amounts totaling $1,000,000 to limit the exposure of the variable component of the interest rates under the Term Loan Facility or future variable rate indebtedness to a maximum of 1.0%. Each interest rate cap agreement became effective March 31, 2020 and expires March 31, 2024.

At December 31, 2020, each of our outstanding interest rate cap agreements were designated as cash flow hedges of interest rate risk and were determined to be highly effective.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. We estimate that $2,005 will be reclassified as an increase to interest expense within one year.

Fair Value

The fair value of derivative instruments at December 31, 2020 and March 31, 2020 is as follows:

	Fair Values of Derivative Financial Instruments
	Asset (Liability)
	Balance Sheet Location		December 31, 2020			March 31, 2020
Derivative financial instruments designated as hedging instruments:
Interest rate cap agreements		Accrued expenses		(28,985	)		(28,131	)
Interest rate cap agreements		Other long-term liabilities		(3,288	)		(19,277	)
Total			$	(32,273	)	$	(47,408	)

See Note 10, Fair Value Measurements, for additional information.

Effect of Derivative Instruments on the Statement of Operations

The effect of the derivative instruments on the consolidated statements of operations is as follows:

	Three Months Ended December 31,					Nine Months Ended December 31,
	2020			2019		2020			2019
Derivative financial instruments in cash flow hedging relationships:
Gain/(loss) related to derivative financial instruments recognized in other comprehensive income (loss)	$	(383	)	$	—	$	(7,119	)	$	—
Gain/(loss) related to portion of derivative financial instruments reclassified from accumulated other comprehensive income (loss) to interest expense	$	302		$	—	$	858		$	—

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Credit Risk-Related Contingent Features

We have agreements with each of our derivative counterparties providing that if we default on any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then we also could be declared in default on our derivative obligations.

As of December 31, 2020, the termination value of derivative financial instruments in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, was $32,953. If we had breached any of these provisions at December 31, 2020, we could have been required to settle our obligations under the agreements at this termination value. We do not offset any derivative financial instruments and the derivative financial instruments are not subject to collateral posting requirements.

10. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis consist of derivative financial instruments and contingent consideration obligations. The following tables summarize these items, aggregated by the level in the fair value hierarchy within which those measurements fall:

	Balance at			Quoted i n Identical Markets		Significant Other Observable Inputs			Significant Unobservable Inputs
Description	December 31, 2020			(Level 1)		(Level 2)			(Level 3)
Interest rate cap agreements	$	(32,273	)	$	—	$	(32,273	)	$	—
Contingent consideration obligation		—			—		—			—
Total	$	(32,273	)	$	—	$	(32,273	)	$	—

				Quoted in		Significant Other			Significant
Description	Balance at March 31, 2020			Identical Markets (Level 1)		Observable Inputs (Level 2)			Unobservable Inputs (Level 3)
Interest rate cap agreements	$	(47,408	)	$	—	$	(47,408	)	$	—
Contingent consideration obligation		(3,000	)		—		—			(3,000	)
Total	$	(50,408	)	$	—	$	(47,408	)	$	(3,000	)

Derivative Financial Instruments

The valuation of our derivative financial instruments is determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair value of the interest rate cap agreements is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) using the overnight index swap rate as the discount rate.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we considered the impact of netting and any applicable credit enhancements and measured the credit risk of our derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs to evaluate the likelihood of both our own default and counterparty default. As of December 31, 2020, we determined that the credit valuation adjustments are not significant to the overall valuation of the derivatives. As a result, the derivative valuations are classified in Level 2 of the fair value hierarchy.

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Contingent Consideration

Prior to December 31, 2020, the valuation of our contingent consideration obligations was determined using a discounted cash flow method that involved a Monte Carlo simulation. This analysis reflects the contractual terms of the purchase agreements (i.e., minimum and maximum payments, length of earn-out periods, manner of calculating amounts due, etc.) and utilizes assumptions with regard to future cash flows that were determined using a Monte Carlo simulation which were then discounted to present value using an appropriate discount rate. Significant increases with respect to assumptions as to future revenue would have resulted in a higher fair value measurement while an increase in the discount rate would have resulted in a lower fair value measurement. The measurement period ended December 31, 2020, and the Company determined no obligations remained. As such, the contingent consideration liability was reduced to zero as of December 31, 2020.

The table below presents a reconciliation of the fair value of the liabilities that use significant unobservable inputs (Level 3):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020			2019
Balance at beginning of period	$	—	$	—	$	(3,000	)	$	—
Gain/(loss) included in contingent consideration		—		—		3,000			—
Balance at end of period	$	—	$	—	$	—		$	—

Assets and Liabilities Measured at Fair Value upon Initial Recognition

The carrying amounts and fair values of financial instruments held as of December 31, 2020 and March 31, 2020 were as follows:

	December 31, 2020				March 31, 2020
	Carrying         Amount		Fair Value		Carrying         Amount		Fair Value
Cash and cash equivalents	$	137,357	$	137,357	$	410,405	$	410,405
Accounts receivable	$	697,948	$	697,948	$	740,105	$	740,105
Investment in business purchase option	$	—	$	—	$	146,500	$	146,500
Senior Credit Facilities (Level 2)	$	3,447,156	$	3,529,963	$	3,682,457	$	3,452,687
Senior Notes (Level 2)	$	1,317,689	$	1,348,188	$	997,772	$	950,000
Debt component of tangible equity units (Level 2)	$	24,268	$	24,801	$	35,431	$	34,806

Additionally, the assets acquired and liabilities assumed as part of business acquisitions were recorded at fair value upon initial recognition. See Note 4, Business Combinations, for additional information.

11. Long-Term Debt

Our long-term indebtedness is comprised of a senior secured term loan facility (the “Term Loan Facility”), a revolving credit facility (the “Revolving Facility”; together with the Term Loan Facility, the “Senior Credit Facilities”), and 5.75% senior notes due 2025 (the “Senior Notes”).

Long-term debt as of December 31, 2020 and March 31, 2020, consisted of the following:

	December 31, 2020			March 31, 2020
Senior Credit Facilities
$5,100,000 Term Loan Facility, due March 1, 2024, net of unamortized discount of $96,094 and $125,793 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 4.42% and 4.42%, respectively)	$	3,447,156		$	3,682,457
$785,000 Revolving Facility, expiring July 3, 2024, and bearing interest at a variable interest rate (1)		—			250,000
Senior Notes
$1,325,000 5.75% Senior Notes due March 1, 2025, net of unamortized discount of $7,311 and $2,228 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 5.90% and 5.80%, respectively)		1,317,689			997,772
Tangible Equity Unit Senior Amortizing Note
$47,367 Senior Amortizing Notes due June 30, 2022, net of unamortized discount of $405 and $842 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 7.44% and 7.44%, respectively)		24,268			35,431
Other		28,734			23,413
Less current portion		(37,019	)		(278,779	)
Long-term debt	$	4,780,828		$	4,710,294

⁽¹⁾ The weighted average interest rate at March 31, 2020 was 3.25%.

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Senior Credit Facilities

In June 2020, we repaid our outstanding Revolving Facility balance of $250,000. The Revolving Facility has a total borrowing capacity of $785,000 less outstanding letters of credit which totaled $6,194 and $5,118 at December 31, 2020 and March 31, 2020, respectively, leaving $778,806 and $529,882 available for borrowing, respectively.

Senior Notes Issuance

In April 2020, we issued an additional $325,000 aggregate principal amount of 5.75% Senior Notes due 2025 (the “Notes”) and incurred issuance costs of $5,364. The Notes were issued as part of the same series as the $1,000,000 Senior Notes issued in February 2017.

Term Loan Repayments

In the second quarter of fiscal year 2021, we repaid $50,000 on our Term Loan Facility and recognized a loss on extinguishment of $1,489 in our consolidated statement of operations. In the third quarter of fiscal year 2021, we repaid an additional $215,000 and recognized a loss on extinguishment of $6,145 in our consolidated statement of operations.

12. Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020			2019
Numerator:
Net income (loss)	$	2,196	$	50,735	$	(99,120	)	$	(80,716	)
Denominator:
Weighted average common shares outstanding		304,547,891		124,962,970		304,104,388			108,371,642
Minimum shares issuable under purchase contracts		16,465,704		18,429,325		16,465,704			12,286,217
Total weighted average shares outstanding		321,013,595		143,392,295		320,570,092			120,657,859
Basic net income (loss) per share	$	0.01	$	0.35	$	(0.31	)	$	(0.67	)
Diluted net income per share:
Numerator:
Net income (loss)	$	2,196	$	50,735	$	(99,120	)	$	(80,716	)
Denominator:
Number of shares used in basic computation		321,013,595		143,392,295		320,570,092			120,657,859
Weighted average effect of dilutive securities
Dilutive shares issuable under purchase contracts		—		1,450,910		—			—
Time-Vesting Options		932,344		1,059,868		—			—
Restricted Share Units		2,753,810		289,537		—			—
Deferred Stock Units		95,624		9,250		—			—
Employee Stock Purchase Program Shares		20,151		—		—			—
		324,815,524		146,201,860		320,570,092			120,657,859
Diluted net income (loss) per share	$	0.01	$	0.35	$	(0.31	)	$	(0.67	)

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Due to their antidilutive effect, the following securities have been excluded from diluted net income (loss) per share:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Dilutive shares issuable under purchase contracts		—		—		1,579,991		1,712,220
Time-Vesting Options		—		—		766,432		1,290,327
Restricted Share Units		—		—		2,360,586		605,830
Deferred Stock Units		—		—		81,983		6,167

13. Tax Receivable Agreements

Upon the consummation of the Merger, we assumed obligations related to certain tax receivable agreements (collectively, the “tax receivable agreements”) entered into by the Joint Venture with its current and former owners. Depending on whether the respective tax receivable agreements were assumed as part of the Merger or became effective after the Merger, the liabilities related to the tax receivable agreements are subject to differing accounting models as explained below.

Under the tax receivable agreements assumed in connection with the Merger, we are obligated to make payments to certain former stockholders as well as to affiliates of The Blackstone Group, Inc., some of whom are considered related parties. The cash payments made are equal to 85% of the applicable cash savings realized or expected to be realized for the applicable tax receivable agreements. The tax receivable agreements were measured at their fair value as part of the Merger and are recognized at their initial fair value plus recognized accretion to date on the consolidated balance sheet. Accretion recorded during the period pertaining to related party payments is recorded separately to Accretion and changes in estimate with related parties, net, whereas non-related party accretion is recorded within Sales, marketing, general and administrative in the consolidated statement of operations. As the payments are due to both current and former owners, we have separately presented the estimated aggregated payments due to related parties in future fiscal years in the table below.

McKesson Tax Receivable Agreement

In connection with the closing of the Merger, we along with the Joint Venture, the subsidiaries of McKesson that served as members of the Joint Venture (“McK Members”), and McKesson entered into a tax receivable agreement (the “McKesson Tax Receivable Agreement”). The McKesson Tax Receivable Agreement generally requires payment to affiliates of McKesson of 85% of certain cash tax savings realized (or, in certain circumstances, deemed to be realized) in periods ending on or after the date on which McKesson ceases to own at least 20% of the Joint Venture as a result of (i) certain amortizable tax basis in assets transferred to the Joint Venture at the Contribution Agreement Closing and (ii) imputed interest deductions and certain other tax attributes arising from payments under the McKesson Tax Receivable Agreement. Following the McKesson exit and based on anticipated amortization allocations, we recorded an obligation for the McKesson Tax Receivable estimated payments, which represents a loss contingency under ASC 450 and is included in the other long-term liabilities on the consolidated balance sheet. Future changes in this value will be reflected within pretax income or loss.

Based on facts and circumstances at December 31, 2020, we estimate the aggregate payments due under our tax receivable agreements in future fiscal years to be as follows:

	Related Party Tax Receivable Agreements			McKesson Tax Receivable Agreement			Other Tax Receivable Agreements			Total
Remainder of 2021	$	—		$	—		$	—		$	—
2022		11,606			128			10,788			22,522
2023		11,349			35,992			10,722			58,063
2024		23,421			7,368			13,549			44,338
2025		50,772			23,836			20,004			94,612
Thereafter		83,221			92,192			61,192			236,605
Gross expected payments		180,369			159,516			116,255			456,140
Less: Amounts representing discount		(69,149	)		—			(36,561	)		(105,710	)
Total tax receivable agreement obligation		111,220			159,516			79,694			350,430
Less: Current portion due (included in accrued expenses)		(11,606	)		(128	)		(10,788	)		(22,522	)
Tax receivable agreement long-term obligation	$	99,614		$	159,388		$	68,906		$	327,908

The timing and/or amount of aggregate payments due may vary based on a number of factors, including the amount of net operating losses and income tax rates.

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

14. Income Taxes

The following table summarizes income tax information:

	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
Income tax provision (benefit)	$	(4,562	)	$	15,240		$	(31,411	)	$	(564	)
Effective tax rate		192.8	%		23.1	%		24.1	%		0.7	%

Three and Nine Months Ended December 31, 2020 and 2019

Fluctuations in our reported income tax rates from the statutory rate are primarily due to the impacts of our acquisition and divestiture activity, benefits recognized as a result of certain incentive tax credits resulting from research and experimental expenditures, and discrete items recognized in the three and nine months ended December 31, 2020. For the three and nine months ended December 31, 2019, fluctuations in our reported income tax rates from the statutory rate are primarily due to benefits recognized as a result of certain incentive tax credits resulting from research and experimental expenditures and the impacts of discrete items.

15. Legal Proceedings

We are subject to various claims with customers and vendors, pending and potential legal actions for damages, investigations relating to governmental laws and regulators and other matters arising out of the normal conduct of our business.

Government Subpoenas and Investigations

From time to time, we receive subpoenas or requests for information from various government agencies. We generally respond to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and can result in considerable costs. Such subpoenas and requests also can lead to the assertion of claims or the commencement of civil or criminal proceedings against us and other members of the health care industry, as well as to settlements.

Other Matters

In the ordinary course of business, we are involved in various claims and legal proceedings. While the ultimate resolution of these matters has yet to be determined, we do not believe that it is reasonably possible that their outcomes will have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

16. Accumulated Other Comprehensive Income (Loss)

The following is a summary of the accumulated other comprehensive income (loss) activity for the nine months ended December 31, 2020 and 2019. Prior to the Merger, the activity in accumulated other comprehensive income (loss) reflects the proportionate share of the Joint Venture’s accumulated other comprehensive income (loss), net of taxes.

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

	Available For Sale Debt Security		Foreign Currency Translation Adjustment			Cash Flow Hedge			Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2019	$	—	$	(1,565	)	$	(1,691	)	$	(3,256	)
Cumulative effect of accounting change of the Joint Venture-ASU 2018-02		—		—			422			422
Change associated with foreign currency translation		—		226			—			226
Change associated with current period hedging		—		—			(5,117	)		(5,117	)
Reclassification into earnings		—		—			(314	)		(314	)
Balance at June 30, 2019	$	—	$	(1,339	)	$	(6,700	)	$	(8,039	)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		1,173		—			—			1,173
Change associated with foreign currency translation		—		1,583			—			1,583
Change associated with current period hedging		—		—			(1,509	)		(1,509	)
Reclassification into earnings		—		—			199			199
Balance at September 30, 2019	$	1,173	$	244		$	(8,010	)	$	(6,593	)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		134		—			—			134
Change associated with foreign currency translation		—		1,728			—			1,728
Change associated with current period hedging		—		—			289			289
Reclassification into earnings		—		—			1,024			1,024
Balance at December 31, 2019	$	1,307	$	1,972		$	(6,697	)	$	(3,418	)
Balance at March 31, 2020	$	—	$	(7,084	)	$	(288	)	$	(7,372	)
Change associated with foreign currency translation		—		6,353			—			6,353
Change associated with current period hedging		—		—			(4,459	)		(4,459	)
Reclassification into earnings		—		—			275			275
Balance at June 30, 2020	$	—	$	(731	)	$	(4,472	)	$	(5,203	)
Change associated with foreign currency translation		—		5,221			—			5,221
Change associated with current period hedging		—		—			(2,277	)		(2,277	)
Reclassification into earnings		—		—			281			281
Balance at September 30, 2020	$	—	$	4,490		$	(6,468	)	$	(1,978	)
Change associated with foreign currency translation		—		11,526			—			11,526
Change associated with current period hedging		—		—			(383	)		(383	)
Reclassification into earnings		—		—			302			302
Balance at December 31, 2020	$	—	$	16,016		$	(6,549	)	$	9,467

Effective April 1, 2019, the Joint Venture adopted FASB ASU No. 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The adoption of this update resulted in a reclassification between accumulated other comprehensive income (loss) and accumulated earnings (deficit).

17. Incentive Compensation Plans

Long Term Incentive Plan Awards

In connection with the Omnibus Incentive Plan, during the nine months ended December 31, 2020, we granted to our employees and directors one or a combination of time-vesting restricted stock units, cash settled restricted stock units, and performance stock units under vesting terms that generally vary from one to four years from the date of grant.

Restricted Stock Units (“RSUs”) – We granted 107,520 and 5,832,321 RSUs during the three and nine months ended December 31, 2020, respectively. The RSUs are subject to either a graded vesting schedule over four years or a one-year cliff vesting schedule, depending on the terms of the specific award. Upon vesting, the RSUs are exchanged for shares of common stock.

Cash Settled Restricted Stock Units (“CSRSUs”) – We granted zero and 172,524 CSRSUs during the three and nine months ended December 31, 2020, respectively. The CSRSUs vest 100% upon the one-year anniversary of the date of grant. Upon vesting, we are required to pay cash in settlement of such CSRSUs based on their fair value at the date such CSRSUs vest.

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Performance Stock Units (“PSUs”) – We granted 1,177,152 PSUs during the three and nine months ended December 31, 2020. The PSUs consist of two tranches, one for which vesting varies based on the Company’s compounded annual revenue growth rate over a three year period in comparison to a target percentage and one for which vesting varies based on the Company’s compounded annual Adjusted EBITDA growth rate over a three year period in comparison to a target percentage. The awards earned upon satisfaction of the performance conditions become vested on the third anniversary of the vesting commencement date of the award. The Company recognizes compensation expense for the PSUs based on the number of awards that are considered probable to vest. Recognition of expense is based on the probability of achievement of performance targets and is periodically reevaluated.

We recognized compensation expense related to these awards granted during the three and nine months ended December 31, 2020 of $5,518 and $10,971, respectively. At December 31, 2020, aggregate unrecognized compensation expense related to these awards was $73,859.

eRx Awards

Upon completion of the eRx acquisition all outstanding eRx equity awards were canceled. Holders of eRx stock options and vested eRx stock appreciation rights were able to elect to receive consideration in the form of a cash payment or vested stock appreciation rights of the Company. For those individuals with unvested eRx equity awards, we elected to issue replacement awards with vesting and exercisability terms generally identical to the existing eRx awards which were replaced. These replacement awards granted under the Omnibus Incentive Plan consisted of unvested restricted share units (“eRx RSUs”) and unvested stock appreciation rights (“eRx SARs”) with terms identical to the original eRx awards. The awards vest subject to the employee’s continued employment through the date when Blackstone has sold at least 25% of the maximum number of shares held by it (i.e., a liquidity event) and achieved specified rates of return that vary by award. Upon vesting, we are required to pay cash in settlement of such eRx awards based on their fair value at the date of such vesting. During the three and nine months ended December 31, 2020, we recognized compensation expense related to eRx awards granted under the Omnibus Incentive Plan of $208 and $1,675, respectively. At December 31, 2020, aggregate unrecognized compensation expense related to these awards was $1,185.

18. Related Party Transactions

eRx Option Agreement

Prior to the creation of the Joint Venture, we entered into an option agreement to acquire eRx (the “Option Agreement”). Under the terms of the Option Agreement, the option to acquire eRx would only become exercisable at any such time that McKesson owns (directly or indirectly), in the aggregate, less than 5% of the outstanding units of the Joint Venture. Subsequent to the Merger, the Option became exercisable and was exercised on May 1, 2020. See Note 4, Business Combinations, for additional information.

Transition Services Agreements

In connection with the creation of the Joint Venture, we entered into transition services agreements with eRx. Under the agreements, we provided certain transition services to eRx in exchange for specified fees. Prior to the acquisition of eRx, we recognized $283 and $0 in transition fee income during the nine months ended December 31, 2020 and 2019, respectively. We recognized $0 in transition fee income during the three months ended December 31, 2020 and 2019. The amounts received are included in Other, net in the consolidated statement of operations.

Employer Healthcare Program Agreement with Equity Healthcare

Effective January 1, 2014, we entered into an employer health program agreement with Equity Healthcare LLC (“Equity Healthcare”), an affiliate of Blackstone, whereby Equity Healthcare provides certain negotiating, monitoring and other services in connection with our health benefit plans. In consideration for Equity Healthcare’s services, we pay a fee of $1.00 per participating employee per month.

Term Loans Held by Related Party

Certain investment funds managed by GSO Capital Partners LP (the “GSO-managed funds”) held a portion of the term loans under our Senior Credit Facilities. GSO Advisor Holdings LLC (“GSO Advisor”) is the general partner of GSO Capital Partners LP and Blackstone, indirectly through its subsidiaries, holds all of the issued and outstanding equity interests of GSO Advisor. As of December 31, 2020 and March 31, 2020, the GSO-managed funds held $168,200 and $151,301, respectively, in principal amount of the Senior Credit Facilities (none of which is classified within current portion of long-term debt).

Transactions with Blackstone Portfolio Companies

We provide various services to, and purchase services from, certain Blackstone portfolio companies under contracts that were executed in the normal course of business. The following is a summary of revenue recognized/amounts paid related to service provided to/from Blackstone portfolio companies:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Revenue recognized related to services provided	$	934	$	—	$	2,815	$	—
Amount paid related to services received	$	3,883	$	—	$	13,341	$	—

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

19. Segment Reporting

Management views the Company’s operating results based on three reportable segments: (a) Software and Analytics, (b) Network Solutions and (c) Technology-Enabled Services.

Software and Analytics

The Software and Analytics segment provides solutions for revenue cycle management, provider network management, payment accuracy, value-based payments, clinical decision support, consumer engagement, risk adjustment and quality performance, and imaging and clinical workflow.

Network Solutions

The Network Solutions segment provides solutions for financial, administrative, clinical and pharmacy transactions, electronic payments and aggregation and analytics of clinical and financial data.

Technology-Enabled Services

The Technology-Enabled Services segment provides solutions for financial and administrative management, value-based care, communication and payment, pharmacy benefits administration and healthcare consulting.

Postage and Eliminations

Postage and eliminations includes pass-through postage costs, as well as eliminations to remove inter-segment revenue and expenses and consolidating adjustments to classify certain rebates paid to channel partners as a reduction of revenue. These administrative costs are excluded from the adjusted EBITDA measure for each respective reportable segment.

Segment Results

Revenue and adjusted EBITDA for each of the reportable segments for the three and nine months ended December 31, 2020 are shown below. Information is reflected in the manner utilized by management to make operating decisions, assess performance and allocate resources. Such amounts include allocations of corporate shared services functions that are essential to the core operations of the reportable segments. Segment assets and related depreciation expenses are not presented to management for purposes of operational decision making, and therefore are not included in the accompanying tables.

	Three Months Ended			Nine Months Ended
	December 31, 2020			December 31, 2020
Segment Revenue
Software and Analytics	$	372,212		$	1,118,661
Network Solutions		192,588			519,509
Technology-Enabled Services		222,514			642,037
Postage and Eliminations (1)		22,006			73,142
Purchase Accounting Adjustment (2)		(24,179	)		(118,088	)
Net Revenue	$	785,141		$	2,235,261
Segment Adjusted EBITDA
Software and Analytics	$	120,779		$	382,103
Network Solutions		103,847			268,858
Technology-Enabled Services		8,798			11,158
Adjusted EBITDA	$	233,424		$	662,119
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Income (loss) before income tax provision (benefit)	$	(2,366	)	$	(130,531	)
Amortization of capitalized software developed for sale		460			550
Depreciation and amortization		151,143			436,552

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Change Healthcare Inc.

Notes to Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Interest expense		61,439			185,733
Equity compensation		10,944			34,858
Acquisition accounting adjustments		20,601			103,826
Acquisition and divestiture-related costs		2,661			10,119
Integration and related costs		9,688			27,581
Strategic initiatives, duplicative and transition costs		4,324			13,169
Severance costs		2,591			10,467
Accretion and changes in estimate, net		(2,759	)		8,429
Impairment of long-lived assets and other		658			14,418
Gain on sale of businesses		(32,217	)		(60,487	)
Contingent consideration		—			(3,000	)
Loss on extinguishment of debt		6,145			7,634
Other non-routine, net		112			2,801
Adjusted EBITDA	$	233,424		$	662,119

⁽¹⁾ Revenue for the Postage and Eliminations segment includes postage revenue of $49,877 and $145,672 for the three and nine months ended December 31, 2020, respectively.

⁽²⁾ Amount reflects the impact to deferred revenue resulting from the Merger which reduced revenue recognized during the period.

Prior to the Merger, the Company had minimal operations outside of the investment in the Joint Venture and the Company’s standalone operating results were not utilized by management to make operating decisions, assess performance, or allocate resources. As such, the Company reported its results as a single reportable segment for the three and nine months ended December 31, 2019.

20. Subsequent Events

On January 5, 2021, the Company entered into a definitive agreement and plan of merger with UnitedHealth Group Incorporated (“UnitedHealth Group”) under which UnitedHealth Group will acquire all outstanding shares of the Company (“the transaction”). The agreement calls for the acquisition of the Company’s common stock for $25.75 per share in cash and is expected to close in the second half of 2021, subject to Company shareholders’ approval, regulatory approvals and other customary closing conditions. No accounting adjustments related to this transaction were recorded in the three months ended December 31, 2020. Agreements related to the transaction are included as exhibits to this Quarterly Report on Form 10-Q.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended March 31, 2020, as well as the unaudited consolidated financial statements and the related notes presented in Item 1 of this Quarterly Report for the quarter ended December 31, 2020 (“Quarterly Report”).

In addition to historical data, the discussion contains forward-looking statements about the business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed below in Cautionary Notice Regarding Forward-Looking Statements and Part II, Item 1A, Risk Factors.

Overview

We are a leading independent healthcare technology company, focused on accelerating the transformation of the healthcare system through the power of our healthcare platform. We provide data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system.

Our platform and comprehensive suite of software, analytics, technology enabled services and network solutions drive improved results in the complex workflows of healthcare system payers and providers by enhancing clinical decision making, simplifying billing, collection and payment processes, and enabling a better patient experience.

Our healthcare platform supports one of the largest clinical and financial healthcare networks in the U.S. With insights gained from our pervasive network, extensive applications and analytics portfolio and our services operations, we have designed analytics solutions that include industry-leading and trusted franchises supported by extensive intellectual property and regularly updated content.

Recent Developments

Sale Transaction – UnitedHealth Group Incorporated

On January 5, 2021, we entered into an Agreement and Plan of Merger (the “UHG Agreement”) with UnitedHealth Group Incorporated, a Delaware corporation (“UnitedHealth Group”), and UnitedHealth Group’s wholly owned subsidiary Cambridge Merger Sub Inc., a Delaware corporation. Pursuant to the UHG Agreement, UnitedHealth Group has agreed to acquire all of the outstanding shares of the Company’s common stock for $25.75 per share in cash, as set forth in the UHG Agreement.

The UHG Agreement contains representations, warranties and covenants of the parties customary for transactions of this type. Until the earlier of the termination of the UHG Agreement and the consummation of the transaction, the Company has agreed to operate its business and the business of its subsidiaries in the ordinary course and has agreed to certain other operating covenants, as set forth more fully in the UHG Agreement. The Company also has agreed not to solicit alternative acquisition proposals but may, under certain circumstances, engage in negotiations with persons making alternative acquisition proposals and terminate the UHG Agreement to enter into an alternative acquisition agreement that constitutes a “superior proposal.”

The UHG Agreement contains certain termination rights for both UnitedHealth Group and the Company and further provides that, upon termination of the UHG Agreement under certain circumstances, including if the Company terminates the UHG Agreement to accept a superior proposal, or where our Board of Directors changes its recommendation in favor of the transaction and UnitedHealth Group subsequently terminates the UHG Agreement due to such change of recommendation, the Company may be required to pay UnitedHealth Group a termination fee of $300.0 million.

Term Loan Repayments

In the third quarter of fiscal year 2021, we repaid an additional $215.0 million and recognized a loss on extinguishment of $6.1 million in our consolidated statement of operations. In the second quarter of fiscal year 2021, we repaid $50.0 million on our Term Loan Facility and recognized a loss on extinguishment of $1.5 million in our consolidated statement of operations. See Note 11, Long-Term Debt, for additional information.

Capacity Management

In December 2020, we completed the sale of our Capacity Management business, which was included in our Software and Analytics segment, for total consideration of $67.5 million, subject to a customary working capital adjustment. In connection with this transaction, we recognized a pre-tax gain on disposal of $32.7 million. See Note 5, Dispositions for additional information.

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Nucleus.io

In August 2020, we completed the acquisition of Nucleus.io, a leader in the development of advanced, fully enabled, cloud-native imaging and workflow technology. We acquired Nucleus.io for total consideration of $35.1 million and accounted for the acquisition as a business combination. See Note 4, Business Combinations for additional information.

Senior Credit Facilities

In June 2020, we repaid our outstanding Revolving Facility balance of $250.0 million. See Note 11, Long-Term Debt, for additional information.

PDX, Inc.

In June 2020, we completed the purchase of PDX, Inc. (“PDX”), a company focused on delivering patient centric and innovative technologies for pharmacies and health systems. We acquired 100% of the ownership interest for a purchase price of $208.0 million and accounted for this transaction as a business combination. See Note 4, Business Combinations for additional information.

eRx Network Holdings, Inc.

In May 2020, we exercised our option to purchase and completed the acquisition of eRx Network Holdings, Inc. (“eRx”), a leading provider in comprehensive, innovative and secure data-driven solutions for pharmacies. We acquired 100% of the ownership interest for $212.9 million plus cash on the balance sheet and accounted for this transaction as a business combination. See Note 4, Business Combinations for additional information.

Connected Analytics

In May 2020, we completed the sale of our Connected Analytics business, which was included in our Software and Analytics segment, for total consideration of $55.0 million, subject to a customary working capital adjustment, including a $25.0 million note receivable from the buyer. In connection with this transaction, we recognized a pre-tax gain on disposal of $24.2 million. In July 2020, we received $25.0 million plus interest from the buyer in satisfaction of the outstanding note receivable. See Note 5, Dispositions for additional information.

Senior Notes Issuance

In April 2020, we issued $325.0 million aggregate principal amount of 5.75% Senior Notes due 2025 (the “Notes”). The Notes were issued as part of the same series as the $1,000.0 million Senior Notes issued in February 2017. See Note 11, Long-Term Debt, for additional information.

Key Components of Our Results of Operations

Prior to the Merger described below, the Company had minimal operations outside of the investment in the Joint Venture, and the Company’s standalone operating results were not utilized by management to make operating decisions, assess performance, or allocate resources. As such, the prior period did not include meaningful operating results and only a single reportable segment for the three and nine months ended December 31, 2019.

Qualified McKesson Exit

Prior to the Merger, we accounted for our investment in the Joint Venture using the equity method of accounting. Subsequent to the Merger, we own 100% of the Joint Venture and its results of operations. As a result, our consolidated results in periods prior to the Merger are not comparable to our results following the Merger.

Change Healthcare Inc. accounted for the Merger as a business combination achieved in stages in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations.

As a result of the accounting for these transactions and the change in basis of accounting, our consolidated results in periods following the Merger are not comparable to the consolidated results of the Joint Venture in periods prior to the Merger. The following are certain of the more significant changes resulting from the Merger that affect the comparability of financial results and operations:

• Increased tangible and intangible assets resulting from adjusting the basis of the assets to their fair value, which also results in increased depreciation and amortization expense.

• Decrease in long-term debt as a result of adjustments to state the long-term debt at its fair value.

• Decreased deferred revenue as a result of recognizing deferred revenue only to the extent that contractual obligations remain to be fulfilled. These decreases result in decreased solutions revenue.

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• Income previously attributable to the Joint Venture and not subject to U.S. federal income taxes and most state and local income taxes is now subject to such taxes, resulting in an increase in Change Healthcare Inc.’s effective tax rate compared with the historical effective tax rate of the Joint Venture.

Segments

We report our financial results in the following three reportable segments: Software and Analytics, Network Solutions and Technology-Enabled Services.

• The Software and Analytics segment provides solutions for revenue cycle management, provider network management, payment accuracy, value-based payments, clinical decision support, consumer engagement, risk adjustment and quality performance, and imaging and clinical workflow.

• The Network Solutions segment provides solutions for financial, administrative, clinical and pharmacy transactions, electronic payments and aggregation and analytics of clinical and financial data.

• The Technology-Enabled Services segment provides solutions for financial and administrative management, value-based care, communication and payment, pharmacy benefits administration and healthcare consulting.

During the first quarter of fiscal year 2021, management decided to allocate all administrative and certain other corporate expenses to the respective reportable segments. Prior to the Merger, the Company had minimal operations outside of the investment in the Joint Venture, and the Company’s standalone operating results were not utilized by management to make operating decisions, assess performance, or allocate resources. As such, the Company reported its results as a single reportable segment for the three and nine months ended December 31, 2019. For reference, the financial results of the Joint Venture’s reportable segments for fiscal years 2019 and 2020 have been recast to reflect the allocation of administrative and corporate expenses described above and are included in Exhibit 99.1.

Factors Affecting Results of Operations

The following are certain key factors that affect, will affect, or have recently affected, our results of operations:

Macroeconomic and Industry Trends

The spread of COVID-19, both globally and in the U.S., has driven lower healthcare utilization as a result of the significant reduction in, or in some cases elimination of, elective medical procedures and healthcare visits, without a corresponding increase in COVID-19 related transactions. A portion of our business is tied to overall volume of activity in the healthcare system, and therefore, we have been adversely impacted by this industry trend. Further, weakened economic conditions or a recession could reduce the amounts patients are willing or able to spend on healthcare services. As a result, patients may elect to delay or forgo seeking healthcare services. Additionally, higher unemployment rates compared to the prior fiscal year are likely to cause commercial payer membership to decline and continue to impact healthcare utilization and transaction volumes.

In response to COVID-19, we initiated a number of actions with our employees’ health being our first priority. We also focused on serving our customers and introducing new products and services to address their previously unexpected but now urgent needs related to COVID-19. To ensure our business continuity and the safety and welfare of our team members, we moved the majority of our employees to work from home, shifted to a virtual meeting environment, suspended all non-critical business travel, and expanded telehealth and COVID-19 related paid time off coverage to all employees. We also completed a comprehensive review of our cost structure to balance costs with interim variability in our revenue and have actively aligned our staffing level, primarily in our Technology-Enabled Services segment to address lower interim volume. Starting in March 2020, we initiated hiring freezes, began contractor reductions and made other staffing reductions, primarily in the form of furloughs to provide us with greater flexibility to scale back up as volumes recover. We have also evaluated our real estate portfolio, closing or right-sizing certain office locations as we plan for an increased number of our employees to continue to work from home. These actions somewhat offset the negative impacts of COVID-19 described above in the first nine months of fiscal year 2021, and we expect to continue to see the impact of these actions throughout the remainder of the fiscal year.

While lower healthcare utilization will impact our results negatively this year, we cannot predict the length of time it may take for normal healthcare volumes to return and the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted by COVID-19. However, we continue to assess its impact on our business and are actively managing our response as the pandemic evolves. We believe the solutions we provide our customers will be as important, if not more, post-COVID-19.

Acquisitions and Divestitures

Prior to entering into the UHG Agreement, we actively evaluated opportunities to improve and expand our business through targeted acquisitions that are consistent with our strategy. While the UHG Agreement does not prohibit us from engaging in all types of acquisitions, we anticipate such activity to be more limited prior to the expected closing of the transaction. On occasion, and consistent with the UHG Agreement, we may also dispose of certain components of our business that no longer fit within our overall strategy. Because of the acquisition and divestiture activity as well as the shifting revenue mix of our business due to this activity, our results of operations may not be directly comparable among periods. See Note 4, Business Combinations, and Note 5, Dispositions, for details of recent activity.

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Results of Operations

Three and Nine Months Ended December 31, 2020

(amounts in millions) (1)	Three Months Ended December 31, 2020			Nine Months Ended December 31, 2020
Revenue
Solutions revenue	$	735.3		$	2,089.6
Postage revenue		49.9			145.7
Total revenue		785.1			2,235.3
Operating expenses
Cost of operations (exclusive of depreciation and amortization below)	$	332.4		$	977.6
Research and development		58.3			168.1
Sales, marketing, general and administrative		162.0			499.0
Customer postage		49.9			145.7
Depreciation and amortization		151.1			436.6
Accretion and changes in estimate with related parties, net		1.0			10.4
Gain on sale of businesses		(32.2	)		(60.5	)
Total operating expenses	$	722.4		$	2,176.9
Operating income (loss)	$	62.7		$	58.4
Non-operating (income) expense
Interest expense, net		61.4			185.7
Contingent consideration		—			(3.0	)
Loss on extinguishment of debt		6.1			7.6
Other, net		(2.5	)		(1.4	)
Total non-operating (income) expense	$	65.1		$	188.9
Income (loss) before income tax provision (benefit)		(2.4	)		(130.5	)
Income tax provision (benefit)		(4.6	)		(31.4	)
Net income (loss)	$	2.2		$	(99.1	)

⁽¹⁾ As a result of displaying amounts in millions, rounding differences may exist in the table above.

Revenue

Solutions revenue

Solutions revenue was $735.3 million and $2,089.6 million for the three and nine months ended December 31, 2020, respectively. Factors affecting solutions revenue are described in the various segment discussions below.

Postage revenue

Postage revenue was $49.9 million and $145.7 million for the three and nine months ended December 31, 2020, respectively. See “Customer Postage” below for additional information.

Operating Expenses

Cost of operations (exclusive of depreciation and amortization)

Cost of operations was $332.4 million and $977.6 million for the three and nine months ended December 31, 2020, respectively. Cost of operations reflects lower staffing and materials costs associated with decreased utilization as a result of COVID-19, partially offset by incremental costs associated with recent acquisitions.

Research and development

Research and development expense was $58.3 million and $168.1 million for the three and nine months ended December 31, 2020, respectively. Research and development expense includes incremental costs associated with recent acquisitions partially offset by deferred hiring and other related costs impacted by COVID-19.

Sales, marketing, general and administrative

Sales, marketing, general and administrative expense was $162.0 million and $499.0 million for the three and nine months ended December 31, 2020, respectively. Sales, marketing, general and administrative expense for the three months ended December 31, 2020 reflects lower costs related to operational efficiencies and productivity. Sales, marketing, general and administrative expense for the nine months ended December 31, 2020 primarily reflects lower costs related to reduced healthcare benefits and deferred hiring as a result of COVID-19 as well as operational efficiencies and productivity.

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Customer postage

Customer postage was $49.9 million and $145.7 million for the three and nine months ended December 31, 2020, respectively. Customer postage is affected by changes in print volumes within communication and payment solutions. Because customer postage is a pass-through cost to our customers, changes in volume of customer postage generally have no effect on operating income.

Depreciation and amortization

Depreciation and amortization expense was $151.1 million and $436.6 million for the three and nine months ended December 31, 2020, respectively. Depreciation and amortization were generally affected by routine amortization of tangible and intangible assets existing at March 31, 2020 which was impacted by fair value adjustments resulting from the Merger, as well as the routine amortization and depreciation of additions to property, equipment, software and intangible assets since that date.

Accretion and changes in estimate with related parties, net

Accretion and changes in estimate with related parties, net was $1.0 million and $10.4 million for the three and nine months ended December 31, 2020, respectively. Accretion is routinely affected by changes in the expected timing or amount of cash flows which may result from various factors, including changes in tax rates.

Gain on sale of businesses

Gain on sale of businesses was $32.2 million and $60.5 million for the three and nine months ended December 31, 2020, respectively, which primarily represents the gain recorded as a result of the sales of Connected Analytics in May 2020 and Capacity Management in December 2020.

Non-Operating Income and Expense

Interest expense, net

Interest expense, net was $61.4 million and $185.7 million for the three and nine months ended December 31, 2020, respectively. We have interest rate cap agreements in place to limit our exposure to rising interest rates and such agreements, together with our fixed rate notes, effectively fixed interest rates for approximately 79% of our total indebtedness at December 31, 2020.

Contingent consideration

Contingent consideration reflects changes in the fair value of our earnout obligation to the former owners of an acquired business. The earnout obligation ended as of December 31, 2020, and the contingent consideration liability has been reduced to zero.

Loss on extinguishment of debt

Loss on extinguishment of debt was $6.1 million and $7.6 million for the three and nine months ended December 31, 2020, respectively, which is related to the write-off of unamortized discounts associated with repayments of our Term Loan Facility.

Other, net

Other, net primarily reflects mark to market adjustments on our investments.

Income Taxes

Our effective tax rate for the three and nine months ended December 31, 2020 was 192.8% and 24.1%, respectively. Fluctuations in our reported income tax rates from the statutory rate are primarily due to the impacts of our acquisition and divestiture activity, benefits recognized as a result of certain incentive tax credits resulting from research and experimental expenditures, and discrete items.

Solutions Revenue and Adjusted EBITDA

	Three Months Ended		Nine Months Ended
(amounts in millions) (1)	December 31, 2020		December 31, 2020
Solutions revenue (2)
Software and Analytics	$	372.2	$	1,118.7
Network Solutions	$	192.6	$	519.5
Technology-Enabled Services	$	222.5	$	642.0
Adjusted EBITDA
Software and Analytics	$	120.8	$	382.1
Network Solutions	$	103.8	$	268.9
Technology-Enabled Services	$	8.8	$	11.2

⁽¹⁾ As a result of displaying amounts in millions, rounding differences may exist in the table above.

⁽²⁾ Includes inter-segment revenue and excludes deferred revenue purchase accounting adjustments.

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Software and Analytics

Software and Analytics revenue for the three and nine months ended December 31, 2020 reflects the negative impact of COVID-19 and the impact of the Connected Analytics and Capacity Management divestitures. The Connected Analytics and Capacity Management divestures had a combined revenue impact for the three and nine months ended December 31, 2020 of $17.3 million and $46.0 million, respectively. This negative impact was partially offset by new sales and organic revenue growth. Software and Analytics adjusted EBITDA for the three and nine months ended December 31, 2020 was impacted by the same factors that impacted revenue and continued productivity and synergy realization.

Network Solutions

Network Solutions revenue for the three months ended December 31, 2020 reflects the impacts of the eRx and PDX acquisitions, which had a combined impact of $35.3 million, as well as new sales. For the nine months ended December 31, 2020, Network Solutions revenue was impacted by the same factors that impacted the three months ended December 31, 2020, including a combined revenue impact of $85.2 million from the eRx and PDX acquisitions, partially offset by lower utilization due to COVID-19. Network Solutions adjusted EBITDA for the three and nine months ended December 31, 2020 was impacted by the same factors that impacted revenue as well as investments to support new product launches and market expansion opportunities in the core network, data solutions, and business to business payments.

Technology-Enabled Services

Technology-Enabled Services revenue for the three and nine months ended December 31, 2020, reflects lower volume, driven by the impact of COVID-19 and customer attrition, partially offset by new sales and organic revenue growth. Technology-Enabled Services adjusted EBITDA for the three and nine months ended December 31, 2020 was impacted by the same factors that impacted revenue and continued productivity.

Three and Nine Months Ended December 31, 2019

(amounts in millions) (1)	Three Months Ended December 31, 2019			Nine Months Ended December 31, 2019
Total revenue	$	—		$	—
Operating expenses
Sales, marketing, general and administrative	$	1.1		$	2.5
Accretion and changes in estimate with related parties, net		(1.2	)		47.2
Total operating expenses	$	(0.1	)	$	49.7
Operating income (loss)	$	0.1		$	(49.7	)
Non-operating (income) expense
Loss from Equity Method Investment in the Joint Venture		8.8			104.5
(Gain) loss on other investments		(74.1	)		(71.6	)
Other, net		(0.6	)		(1.2	)
Total non-operating (income) and expense	$	(65.9	)	$	31.6
Income (loss) before income tax provision (benefit)		66.0			(81.3	)
Income tax provision (benefit)		15.2			(0.6	)
Net income (loss)	$	50.7		$	(80.7	)

⁽¹⁾ As a result of displaying amounts in millions, rounding differences may exist in the table above.

Operating Expenses

Accretion and changes in estimate with related parties, net

For the three months ended December 31, 2019, the Company recorded a reduction in accretion expense of $1.2 million. Accretion and changes in estimate with related parties, net for the nine months ended December 31, 2019 was $47.2 million. These amounts reflect estimated tax payments to be paid to related parties for anticipated future tax savings allocated to the Company.

Non-Operating Income and Expense

Loss from Equity Method Investment in the Joint Venture

Prior to the Merger, loss from equity method investment in the Joint Venture generally represented our proportionate share of the income or loss from our investment in the Joint Venture, including basis adjustments related to amortization expense associated with equity method intangible assets, property and equipment, deferred revenue and other items.

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Loss from equity method investment in the Joint Venture was $8.8 million and $104.5 million for the three and nine months ended December 31, 2019, respectively. The loss was discretely affected by the Joint Venture’s adoption of ASC 606 which drove $4.4 million of income and Change Healthcare Inc.’s adoption of ASU 2018-07, which resulted in $11.3 million of loss upon changes in the fair value of its dividend receivable.

(Gain) loss on other investments

(Gain) loss on other investments was $74.1 million and $71.6 million for the three and nine months ended December 31, 2019, respectively. This amount reflects gains recognized during the period on equity securities.

Income Taxes

Our effective tax rate for the three and nine months ended December 31, 2019 was 23.1% and 0.7%, respectively. Fluctuations in our reported income tax rates from the statutory rate are primarily due to benefits recognized as a result of certain incentive tax credits resulting from research and experimental expenditures and discrete items recognized in the quarters.

Significant Changes in Assets and Liabilities    

During the first nine months of fiscal year 2021, we completed a debt offering of $325.0 million, repaid $250.0 million that was outstanding on our Revolving Facility, and repaid $265.0 million on our Term Loan Facility. Further, we adopted ASC 842, establishing operating lease right-of-use assets and operating liabilities. As a result of the eRx acquisition, our investment in business purchase option was eliminated and we recognized the assets and liabilities of the acquired eRx and PDX businesses at fair value. Finally, goodwill increased primarily as a result of the acquisitions of eRx and PDX, partially offset by the dispositions of Connected Analytics and Capacity Management.

Within our Network Solutions segment, we regularly receive funds from certain pharmaceutical industry participants in advance of its obligation to remit these funds to participating retail pharmacies. Such funds are not restricted; however, these funds are generally paid out in satisfaction of the processing obligations within three business days of their receipt. At the time of receipt, we record a corresponding liability within accrued expenses on our consolidated balance sheets. At December 31, 2020, we reported $19.0 million of such pass-through payment obligations which were subsequently paid in the first week of January 2021. At March 31, 2020, we reported $29.1 million of such pass-through payment obligations.

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and our Revolving Facility. Our principal uses of liquidity are working capital, capital expenditures, debt service, business acquisitions and other general corporate purposes. Pursuant to the UHG Agreement with UnitedHealth Group, however, there are limitations on how we conduct our business during the period from the signing of the UHG Agreement through the close of the transaction, including limitations on our ability to, among other things, engage in certain acquisitions, incur indebtedness or issue or sell new debt securities. We anticipate our cash on hand, cash generated from operations, and funds available under the Revolving Facility will be sufficient to fund our planned capital expenditures, debt service obligations, permitted business acquisitions and operating needs. Further, we may be required to make additional principal payments on the Term Loan Facility based on excess cash flows of the prior year, as defined in the credit agreement governing the Term Loan Facility.

Cash and cash equivalents totaled $137.4 million and $410.4 million at December 31, 2020 and March 31, 2020, respectively, of which $15.1 million and $22.2 million was held outside the U.S., respectively. As of December 31, 2020, no amounts had been drawn under the Revolving Facility and $6.2 million had been issued in letters of credit against the Revolving Facility, leaving $778.8 million available for borrowing. We also have the ability to borrow up to an additional $1,105.1 million, or such amount that the senior secured net leverage ratio does not exceed 4.9 to 1.0, whichever is greater, under the Term Loan Facility, subject to certain additional conditions and commitments by existing or new lenders to fund any additional borrowings.

Cash Flows

Nine Months Ended December 31, 2020

The following table summarizes the net cash flow from operating, investing and financing activities:

	Nine Months Ended
(amounts in millions) (1)	December 31, 2020
Cash provided by (used in) operating activities	$	487.2
Cash provided by (used in) investing activities		(504.2	)
Cash provided by (used in) financing activities		(259.5	)
Effects of exchange rate changes on cash and cash equivalents		3.4
Net change in cash and cash equivalents	$	(273.0	)

⁽¹⁾ As a result of displaying amounts in millions, rounding differences may exist in the table above.

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Operating Activities

Cash provided by operating activities is primarily affected by operating income, including the impact of debt service payments, integration related costs and the timing of collections and related disbursements. Cash provided by operating activities includes $10.1 million as a use of cash related to pass-through funds for the nine months ended December 31, 2020.

Investing Activities

Cash used in investing activities reflects primarily the eRx, PDX and Nucleus.io acquisitions partially offset by the sales of the Connected Analytics and Capacity Management businesses that occurred during the nine months ended December 31, 2020. Cash used in investing activities also reflects routine capital expenditures related to purchase of property and equipment and the development of software as well as expenditures related to significant software development efforts necessary to integrate the contributed businesses.

Financing Activities

Cash used in financing activities reflects the repayment of the Revolving Facility and payment made on the Term Loan offset by the issuance of additional Senior Notes during the nine months ended December 31, 2020. Additional cash used in financing activities reflects payments under tax receivable agreements, interest rate cap agreements, employee tax withholdings on vesting of equity awards, deferred financing obligations and TEU agreements.

Nine Months Ended December 31, 2019

The following table summarizes the net cash flow from operating, investing and financing activities:

	Nine Months Ended
(amounts in millions) (1)	December 31, 2019
Cash provided by (used in) operating activities	$	—
Cash provided by (used in) investing activities		(882.3	)
Cash provided by (used in) financing activities		882.3
Effects of exchange rate changes on cash and cash equivalents		—
Net change in cash and cash equivalents	$	—

⁽¹⁾ As a result of displaying amounts in millions, rounding differences may exist in the table above.

Investing Activities

Cash used in investing activities during the nine months ended December 31, 2019, reflects the incremental investment in the Joint Venture upon the Company’s initial public offering.

Financing Activities

Cash provided by financing activities during the nine months ended December 31, 2019, was primarily impacted by the proceeds from the initial public offering.

Capital Expenditures

We incur capital expenditures to grow our business by developing new and enhanced capabilities, to increase the effectiveness and efficiency of the organization and to reduce risks. Additionally, we incur capital expenditures for product development, disaster recovery, security enhancements, regulatory compliance and the replacement and upgrade of existing equipment at the end of its useful life.

Debt

Senior Credit Facilities and Senior Notes

In March 2017, the Joint Venture entered into a $5,100.0 million term loan facility (the “Term Loan Facility”), and a $500.0 million revolving credit facility (the “Revolving Facility”, together with the Term Loan Facility, the “Senior Credit Facilities”). Additionally, the Joint Venture issued $1,000.0 million of 5.75% senior notes due 2025 (the “Senior Notes”).

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In July 2019, the Joint Venture amended the Revolving Facility, the primary effects of which were to increase the maximum amount that can be borrowed from $500.0 million to $785.0 million and to extend the maturity date until July 2024. In the event the outstanding balance under the Term Loan Facility exceeds $1,100.0 million on December 1, 2023, amounts due, if any, under the Revolving Facility become due and payable on December 1, 2023.

On April 21, 2020, we issued $325.0 million aggregate principal amount of 5.75% Senior Notes due 2025 (the “Notes”). The Senior Notes were issued as part of the same series as the $1,000.0 million Senior Notes issued in February 2017.

In September 2020, we repaid $50.0 million on our Term Loan Facility and recognized a loss on extinguishment of $1.5 million. In October 2020, we repaid an additional $75.0 million on our Term Loan Facility and recognized a loss on extinguishment of $2.2 million. In November 2020, we repaid an additional $100.0 million on our Term Loan Facility and recognized a loss on extinguishment of $2.8 million. In December 2020, we repaid an additional $40.0 million on our Term Loan Facility and recognized a loss on extinguishment of $1.1 million.

Tangible Equity Units

In connection with our initial public offering in July 2019, we completed an offering of 5,750,000 TEUs. Each TEU, which has a stated amount of $50.00, is comprised of a stock purchase contract and a senior amortizing note due June 30, 2022. Each senior amortizing note has an initial principal amount of $8.2378 and bears interest at 5.5% per year. On each March 30, June 30, September 30 and December 30, we pay equal quarterly cash installments of $0.7500 per amortizing note with an aggregate principal amount of $47.4 million. Each installment constitutes a payment of interest and partial payment of principal. Unless settled earlier, each purchase contract will automatically settle on June 30, 2022.

Hedges

From time to time, we execute interest rate cap agreements with various counterparties that effectively cap our LIBOR exposure on a portion of our existing Term Loan Facility or similar replacement debt. The following table summarizes the terms of our interest rate cap agreements at December 31, 2020.

				Receive LIBOR			Pay
Effective Date	Expiration Date	Notional Amount		Exceeding(1)			Fixed Rate
August 31, 2018	December 31, 2021	$	600,000,000		1.00	%		1.82	%
August 31, 2018	December 31, 2021	$	900,000,000		1.00	%		1.82	%
March 31, 2020	March 31, 2024	$	250,000,000		1.00	%		0.18	%
March 31, 2020	March 31, 2024	$	250,000,000		1.00	%		0.18	%
March 31, 2020	March 31, 2024	$	250,000,000		1.00	%		0.18	%
March 31, 2020	March 31, 2024	$	250,000,000		1.00	%		0.19	%

⁽¹⁾ All based on 1-month LIBOR.

The interest rate cap agreements are recorded on the balance sheet at fair value and changes in the fair value are recorded in other comprehensive income. The fair value of the interest rate caps is reclassified from other comprehensive income to interest expense in the same period the interest expense on the underlying hedged debt impacts earnings. Any payments we receive to the extent LIBOR exceeds the specified cap rate is also reclassified from other comprehensive income to interest expense in the period received.

LIBOR Transition

LIBOR is a commonly used indicative measure of the average interest rate at which major global banks could borrow from one another. In July 2017, the Financial Conduct Authority (the “FCA”) (the authority that governs LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors. While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021. In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist. We have material contracts that are indexed to USD-LIBOR and are monitoring this activity and evaluating the related risks.

Effect of Certain Debt Covenants

A breach of any of the covenants under the agreements governing existing debt could limit our ability to borrow funds under the Term Loan Facility and could result in a default under the Term Loan Facility. Upon the occurrence of an event of default under the Term Loan Facility, the lenders could elect to declare all amounts then outstanding to be immediately due and payable, and the lenders could terminate all commitments to extend further credit. If we were unable to repay the amounts declared due, the lenders could proceed against any collateral granted to them to secure that indebtedness.

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With certain exceptions, the Term Loan Facility obligations are secured by a first-priority security interest in substantially all of our assets. The Term Loan Facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. The senior secured net leverage test must be met as a condition to incur additional indebtedness, but otherwise is applicable only to the extent that amounts drawn exceed 35% of the Revolving Facility at the end of any fiscal quarter. As of December 31, 2020, we were in compliance with all debt covenants.

Our ability to meet liquidity needs depends on our subsidiaries’ earnings and cash flows, the terms of our indebtedness along with our subsidiaries’ indebtedness, and other contractual restrictions.

Cautionary Notice Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of federal securities laws. Any statements made in this Quarterly Report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “potential,” “continues,” “seeks,” “predicts,” and the negatives of these words and other similar expressions.

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that factors affecting our actual financial results could cause actual results to differ materially from those expressed in the forward-looking statements. Factors that could materially affect our financial results or such forward-looking statements include, among others, the following factors:

• various conditions to the closing of the proposed transaction with UnitedHealth Group may not be satisfied or waived;

• business disruptions from the proposed transaction may harm our business, including current plans and operations;

• if we do not consummate the transaction, the price of our common stock may decline significantly from the current market price;

• if the proposed merger is not completed, in certain circumstances, we could be required to pay a termination fee of $300.0 million to UnitedHealth Group;

• our ability to retain or renew existing customers and attract new customers;

• macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets;

• uncertainty and risks related to the impact of the COVID-19 pandemic on the national and global economy, our business, suppliers, customers, and employees;

• our ability to connect a large number of payers and providers;

• our ability to provide competitive services and prices while maintaining our margins;

• further consolidation in our end-customer markets;

• our ability to effectively manage our costs;

• our ability to effectively develop and maintain relationships with our channel partners;

• a decline in transaction volume in the U.S. healthcare industry;

• our ability to timely develop new services and the market’s willingness to adopt our new services;

• our ability to maintain our access to data sources;

• our ability to maintain the security and integrity of our data;

• our ability to deliver services timely without interruption;

• our ability to make acquisitions and integrate the operations of acquired businesses;

• government regulation and changes in the regulatory environment;

• economic and political instability in the U.S. and international markets where we operate;

• risks related to our international operations;

• the ability of our outside service providers and key vendors to fulfill their obligations to us;

• litigation or regulatory proceedings;

• our ability to protect and enforce our intellectual property, trade secrets and other forms of unpatented intellectual property;

• our ability to defend our intellectual property from infringement claims by third parties;

• changes in local, state, federal and international laws and regulations, including related to taxation;

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• our reliance on key management personnel;

• our ability to manage and expand our operations and keep up with rapidly changing technologies;

• our adoption of new, or amendments to existing, accounting standards;

• losses against which we do not insure;

• our ability to make timely payments of principal and interest on our indebtedness;

• our ability to satisfy covenants in the agreements governing our indebtedness;

• our ability to maintain our liquidity;

• the potential dilutive effect of future issuances of our common stock; and

• the impact of anti-takeover provisions in our organizational documents and under Delaware law, which may discourage or delay acquisition attempts.

There may be other factors, many of which are beyond our control, that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 in the section entitled “Risk Factors” and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. You should evaluate all forward-looking statements made in this report and the other public statements we may make from time to time in the context of these risks and uncertainties.

Our forward-looking statements made herein speak only as of the date on which made. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the normal course of business.

Interest Rate Risk

We have interest rate risk primarily related to borrowings under our Senior Credit Facilities. Borrowings under the Senior Credit Facilities bear interest at a rate equal to either (i) LIBOR for the relevant interest period, adjusted for statutory reserve requirements (the Term Loan Facility, is subject to a floor of 1.00% per annum and the Revolving Facility is subject to a floor of 0.00% per annum), plus an applicable margin or (ii) a base rate equal to the highest of (a) the rate of interest in effect as publicly announced by the administrative agent as its prime rate, (b) the federal funds effective rate plus 0.50% and (c) adjusted LIBOR for an interest period of one month plus 1.00% (the Term Loan Facility may be subject to a floor of 2.00% per annum), in each case, plus an applicable margin.

As of December 31, 2020, we had Term Loan borrowings of $3,543.3 million (before unamortized debt discount) and no Revolving Facility borrowings under the Senior Credit Facilities. As of December 31, 2020, the LIBOR-based interest rate on the Term Loan Facility was LIBOR plus 2.5%.

We manage economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into interest rate cap agreements to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our interest rate cap agreements are used to manage differences in the amount, timing and duration of our known or expected cash receipts and our known or expected cash payments principally related to our borrowings. As of December 31, 2020, our outstanding interest rate cap agreements were designated as cash flow hedges of interest rate risk and were determined to be highly effective.

A change in interest rates on variable rate debt may impact our pretax earnings and cash flows. Based on the outstanding debt as of December 31, 2020, and assuming that our mix of debt instruments, derivative financial instruments and other variables remain the same, the annualized effect of a one percentage point change in variable interest rates would have an annualized pretax impact on the earnings and cash flows of approximately $10.4 million.

In the future, in order to manage our interest rate risk, we may refinance existing debt, enter into additional interest rate cap agreements, modify our existing interest rate cap agreements or make changes that may impact our ability to treat our interest rate cap agreements as a cash flow hedge. However, we do not intend or expect to enter into derivative or interest rate cap agreement transactions for speculative purposes.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosures.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving their desired control objectives. Based on the evaluation of management’s disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the quarter covered by this report, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various legal proceedings in the ordinary course of business. We believe that the ultimate disposition of such proceedings will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. See Note 15, Legal Proceedings, in Part I, Item 1 of this Quarterly Report.

ITEM 1A. RISK FACTORS

In addition to the risk factors below and the other information included in this report, you should carefully consider the factors discussed in the section entitled “Risk Factors” included in the most recent Annual Report, as well as the factors identified under “Cautionary Statement Regarding Forward-Looking Statements” at the end of Part I, Item 2 of this Quarterly Report, which could materially affect the business, financial condition or future results. The risks described in the Annual Report and this Quarterly Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.

Risks Related to the Proposed Transaction with UnitedHealth Group

The conditions under the UHG Agreement to UnitedHealth Group’s consummation of the transaction with a subsidiary of UnitedHealth Group may not be satisfied at all or in the anticipated timeframe.

Under the terms of the UHG Agreement, the consummation of our transaction with a subsidiary of UnitedHealth Group is subject to customary conditions. Satisfaction of certain of the conditions is not within our control, and difficulties in otherwise satisfying the conditions may prevent, delay or otherwise materially adversely affect the consummation of the transaction. It also is possible that an event, occurrence, revelation or development of a state of circumstances or facts since the date of the UHG Agreement may have or reasonably be expected to have a material adverse effect (as defined in the UHG Agreement) on the Company, the non-occurrence of which is a condition to the consummation of the transaction. We cannot predict with certainty whether and when any of the required conditions will be satisfied. If the transaction does not receive, or timely receive, the required regulatory approvals and clearances, or if another event occurs delaying or preventing the transaction, such delay or failure to complete the transaction may create uncertainty or otherwise have negative consequences that may materially and adversely affect our sales, financial condition and results of operations, as well as the price per share for our common stock.

While the proposed transaction is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.

Whether or not the proposed transaction is consummated, the proposed transaction may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The pendency of the transaction may also divert management’s attention and our resources from ongoing business and operations and our employees and other key personnel may have uncertainties about the effect of the pending transaction, and the uncertainties may impact our ability to retain, recruit and hire key personnel while the transaction is pending or if it fails to close. We may incur unexpected costs, charges or expenses resulting from the transaction. Furthermore, we cannot predict how our physician, health plan and other partners will view or react to the transaction upon consummation. If we are unable to reassure our partners to continue their partnerships and affiliates with us, our revenues, financial condition and results of operations may be adversely affected.

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The preparations for integration between UnitedHealth Group and the Company have placed, and we expect will continue to place a significant burden on many of our teammates and on our internal resources. If, despite our efforts, key teammates depart because of these uncertainties and burdens, or because they do not wish to remain with the combined company, our business and results of operations may be adversely affected. In addition, whether or not the transaction is consummated, while it is pending we will continue to incur costs, fees, expenses and charges related to the proposed transaction, which may materially and adversely affect our financial condition and results of operations.

In addition, the UHG Agreement generally requires the Company to operate its business in the ordinary course of business consistent with past practice pending consummation of the merger and also restricts us from taking certain actions with respect to our business and financial affairs without UnitedHealth Group’s consent. Such restrictions will be in place until either the merger is consummated or the UHG Agreement is terminated. For these and other reasons, the pendency of the merger could adversely affect our business and results of operations.

In the event that our proposed transaction with a wholly-owned subsidiary of UnitedHealth Group is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.

The conditions to the consummation of the proposed transaction may not be satisfied as noted above. If the transaction is not consummated, we would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the proposed transaction. For these and other reasons, not consummating the transaction could adversely affect our business and results of operations. Furthermore, if we do not consummate the transaction, the price of our common stock may decline significantly from the current market price, which we believe reflects a market assumption that the transaction will be consummated. Certain costs associated with the transaction have already been incurred or may be payable even if the transaction is not consummated. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruptions to our business resulting from the announcement and pendency of the transaction, including any adverse changes in our relationships with our customers, vendors and employees or recruiting and retention efforts, could continue or accelerate in the event of a failed acquisition.

If the UHG Agreement is terminated, we may, under certain circumstances, be obligated to pay a termination fee to UnitedHealth Group. These costs could require us to use available cash that would have otherwise been available for other uses.

If the proposed transaction is not completed, in certain circumstances, we could be required to pay a termination fee of $300.0 million to UnitedHealth Group. If the UHG Agreement is terminated, the termination fee we may be required to pay, if any, under the UHG Agreement may require us to use available cash that would have otherwise been available for general corporate purposes or other uses. For these and other reasons, termination of the UHG Agreement could materially and adversely affect our business, results of operations or financial condition, which in turn would materially and adversely affect the price per share of our common stock.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference (as stated therein) as part of this Quarterly Report.

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Exhibit Index

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of January  5, 2021, by and among Change Healthcare Inc., UnitedHealth Group Incorporated and Cambridge Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 6, 2021)
3.1	Amended and Restated Certificate of Incorporation of Change Healthcare Inc., dated as of June 26,  2019 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 on February 4, 2020)
3.2	Amended and Restated Bylaws of Change Healthcare Inc., dated as of June  26, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 filed on February 4, 2020)
10.1	Certain Tax Receivable Agreements Acknowledgment and Termination Agreement, dated as of January  5, 2021, by and among Change Healthcare Inc., UnitedHealth Group Incorporated and certain other parties thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 6, 2021)
10.2†	Roderick O’Reilly Offer Letter, dated December  22, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 28, 2020)
10.3†*	Form of Performance Stock Unit Grant Notice under the Change Healthcare Inc. 2019 Omnibus Incentive Plan
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1*	Supplemental Information of Change Healthcare LLC for the fiscal years ended March 31, 2020 and 2019.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

† Indicates management contract or compensatory plan.

Certain agreements and other documents filed as exhibits to this Form 10-Q contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and other documents and that may not be reflected in such agreements and other documents. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements and other documents.

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SIGNATURES

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

	Change Healthcare Inc.
February 4, 2021	By:	/s/ Neil E. de Crescenzo
		Neil E. de Crescenzo Chief Executive Officer and Director
		(Principal Executive Officer)
February 4, 2021	By:	/s/ Fredrik Eliasson
		Fredrik Eliasson
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)

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EX-10.3

Exhibit 10.3

PERFORMANCE STOCK UNIT GRANT NOTICE

UNDER THE

CHANGE HEALTHCARE INC.

2019 OMNIBUS INCENTIVE PLAN

Change Healthcare Inc., a Delaware corporation (the “Company”), pursuant to its 2019 Omnibus Incentive Plan (the “Plan”), hereby grants to the Participant set forth below the number of Performance Stock Units, which are Restricted Stock Units that are subject to the performance vesting conditions described herein (“Performance Stock Units” or “PSUs”) set forth below. The Performance Stock Units are subject to all of the terms and conditions as set forth herein, in the Performance Stock Unit Agreement (attached hereto or previously provided to the Participant in connection with a prior grant), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.

Participant:	[Insert Participant Name]
Date of Grant:	October __, 2020
Vesting Commencement Date:	June 17, 2020
Number of Performance Stock Units:	[Insert Total No. of PSUs Granted], consisting of:
	[Insert 60% of Total PSUs granted] Tranche I PSUs (“Tranche I PSUs”); and
	[Insert 40% of Total PSUs granted] Tranche II PSUs (“Tranche II PSUs”)
Vesting Schedule:	The PSUs will become earned (“Earned PSUs”) based on achievement of the Performance Conditions with respect to the Performance Period, in each case, as set forth below.
	Performance Period: April 1, 2020 to March 31, 2023
	Performance Condition: The number of PSUs in each tranche that become Earned PSUs shall be based on the achievement of the Performance Conditions set forth below applicable to such tranche, with the number of PSUs earned in respect of such tranche equal to (x) the target number of PSUs in such tranche multiplied by (y) the applicable Percentage of Award Earned for such tranche (calculated as set forth below, rounded up to the nearest whole unit).

Tranche	Performance Condition	Threshold Level of Achievement			Target Level of Achievement			Moderate Level of Achievement			Maximum Level of Achievement
Tranche I PSUs	CAGR (Revenue)		0.9	%		4.5	%		5.5	%		6.6	%
Tranche II PSUs	CAGR (Adjusted EBITDA)		3.0	%		4.8	%		7.0	%		9.1	%

The Company may, in its good faith discretion, make such adjustments to the applicable “Threshold,” “Target,” “Moderate” or “Maximum” goals in the event of any material changes to strategy, acquisitions, divestures or unforeseen circumstances that were not contemplated at the outset of the Performance Period, subject in each case, to Committee approval.
Calculation of Number of Earned PSUs: Following the last day of the Performance Period, the Committee shall calculate the Percentage of Award Earned with respect to each tranche, based on the percentage specified below.
If actual performance with respect to any tranche is between (i) “Threshold” and the “Target” or the (ii) “Target” and “Maximum” levels of achievement, the Percentage of Award Earned shall be determined using linear interpolation (and rounded to the nearest whole percentage point) between such numbers. In the event that actual performance does not meet the Threshold Level of Achievement with respect to any tranche, the “Percentage of Award Earned” with respect to such tranche shall be zero percent (0%). All determinations with respect to whether and the extent to which a Performance Condition has been achieved shall be made by the Committee in its sole discretion. The applicable Performance Conditions shall not be achieved and the applicable PSUs shall not become Earned PSUs until the Committee certifies in writing the extent to which such Performance Conditions have been met (such date, the “Determination Date”).
Level of Achievement	Percentage of Award Earned
Below Threshold	0%
Threshold	50%
Target	100%
Moderate	150%
Maximum	200%
Above Maximum	200%
Any PSUs which do not become Earned PSUs based on actual performance during the Performance Period shall be forfeited as of the last day of the Performance Period.

2

Definitions:

“Adjusted EBITDA” means the Company’s normal-course EBITDA as adjusted for specific items as determined by the Company, including, but not limited to, integration costs and other one-time expenses.

“Beginning Performance Measure” means, (i) with respect to Tranche I RSUs, the Company’s Revenue with respect to the Company’s fiscal year ended March 31, 2020 and (ii) with respect to Tranche II RSUs, the Company’s Adjusted EBITDA with respect to the Company’s fiscal year ended March 31, 2020.

“CAGR” shall mean compounded annual growth rate, and shall be expressed as a percentage (rounded to the nearest tenth of a percent (0.1%)) and shall be calculated for a performance period using the following formula:

“Ending Performance Measure” means, (i) with respect to Tranche I RSUs, the Company’s Revenue with respect to the Company’s fiscal year ended March 31, 2023 and (ii) with respect to Tranche II RSUs, the Company’s Adjusted EBITDA with respect to the Company’s fiscal year ended March 31, 2023.

“Revenue” means the Company’s Solutions Revenue.

“Solutions Revenue” means the Company’s annual revenue, excluding postage.

Vesting; Termination:

Provided the Participant has not undergone a Termination on or prior to the Determination Date, any PSUs that become Earned PSUs, if any, shall become vested on the Determination Date.

Notwithstanding the foregoing:

•   In the event that the Participant undergoes a Termination as a result of the Participant’s Disability or Retirement, in either case, prior to the end of the Performance Period, a prorated portion of the PSUs will remain outstanding and eligible to become Earned PSUs based on actual performance during the Performance Period, with such proration based on the number of days the Participant was employed during the Performance Period relative to the total number of days in the Performance Period. The Earned PSUs, if any, shall vest and become settled in accordance with Section 3 of the Performance Stock Unit Agreement within 30 days following the Determination Date.

3

•   In the event that the Participant undergoes a Termination as a result of the Participant’s death prior to the end of the Performance Period, all PSUs granted shall remain outstanding and eligible to become Earned PSUs based on actual performance during the Performance Period, and the Earned PSUs, if any, shall vest and become settled in accordance with Section 3 of the Performance Stock Unit Agreement within 30 days following the Determination Date.

•   In the event that the Participant undergoes a Termination other than (i) for Cause or (ii) a voluntary resignation by the Participant (other than a Retirement), in either case, following the end of the Performance Period, but prior to the Determination Date, the Earned PSUs, if any, shall vest and become settled in accordance with Section 3 of the Performance Stock Unit Agreement within 30 days following the Determination Date.

•   Notwithstanding the foregoing, in the event of a Change in Control, PSUs shall be converted into time-based vesting shares (the “Converted PSUs”) determined assuming achievement of a 100% payout (i.e. achievement of performance at Target level), which such Converted PSUs shall vest on the last day of the Performance Period and shall become settled in accordance with Section 3 of the Performance Stock Unit Agreement within 30 days following such date; provided, however, that, if, on or within the 12 months following the Change in Control but prior to the last day of the Performance Period, the Participant undergoes a Termination by the Service Recipient without Cause or by such Participant for Good Reason (as defined below), in each case, such Converted PSUs shall fully vest as of the date of such Termination and shall become settled in accordance with Section 3 of the Performance Stock Unit Agreement within 30 days following such date.

•   “Good Reason” means (i) a material diminution in the Participant’s authority, title, duties or responsibilities, or the assignment to the Participant of any duties inconsistent with the Participant’s position; (ii) a material reduction in the Participant’s base salary or target bonus opportunity; (iii) relocation by more than 50 miles of the Participant’s principal place of employment or service; or (iv) a material reduction in the level of employee benefits provided to the Participant.

*            *             *

4

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS PERFORMANCE STOCK UNIT GRANT NOTICE, THE PERFORMANCE STOCK UNIT AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF PERFORMANCE STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS PERFORMANCE STOCK UNIT GRANT NOTICE, THE PERFORMANCE STOCK UNIT AGREEMENT AND THE PLAN.

CHANGE HEALTHCARE INC.	PARTICIPANT1
By:
Title:

¹  To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such acceptance shall constitute the Participant’s signature hereof.

5

PERFORMANCE STOCK UNIT AGREEMENT

UNDER THE

CHANGE HEALTHCARE INC.

2019 OMNIBUS INCENTIVE PLAN

Pursuant to the Performance Stock Units Grant Notice (the “Grant Notice”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Performance Stock Unit Agreement (this “Performance Stock Unit Agreement”) and the Change Healthcare Inc. 2019 Omnibus Incentive Plan (the “Plan”), Change Healthcare Inc., a Delaware corporation (the “Company”), and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1. Grant of Performance Stock Units. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Performance Stock Units provided in the Grant Notice (with each Performance Stock Unit representing the right to receive one share of Common Stock upon the vesting of such Performance Stock Unit). The Company may make one or more additional grants of Performance Stock Units to the Participant under this Performance Stock Unit Agreement by providing the Participant with a new Grant Notice, which may also include any terms and conditions differing from this Performance Stock Unit Agreement to the extent provided therein. The Company reserves all rights with respect to the granting of additional Performance Stock Units hereunder and makes no implied promise to grant additional Performance Stock Units.

2. Vesting. Subject to the conditions contained herein and in the Plan, the Performance Stock Units shall vest as provided in the Grant Notice. With respect to any Performance Stock Unit, the period of time that such Performance Stock Unit remains subject to vesting shall be its Restricted Period.

3. Settlement of Performance Stock Units. Subject to the proviso to Section 9(d)(ii) of the Plan, as soon as reasonable practicable (and in any event, within 30 days) following the Determination Date (as defined in the Grant Notice), the Company shall issue to the Participant or the Participant’s beneficiary, without charge, one share of Common Stock (or other securities or other property, as applicable) for each such outstanding vested Performance Stock Unit.

4. Treatment of Performance Stock Units Upon Termination. Unless otherwise determined by the Committee, in the event of the Participant’s Termination for any reason:

(a) all vesting with respect to the Performance Stock Units shall cease (after taking into account vesting of Performance Stock Units as set forth in the Grant Notice); and

(b) the unvested Performance Stock Units shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.

5. Company; Participant.

(a) The term “Company” as used in this Performance Stock Unit Agreement with reference to employment shall include the Board, the Company and its Subsidiaries.

(b) Whenever the word “Participant” is used in any provision of this Performance Stock Unit Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Performance Stock Units may be transferred by will or by the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

6

6. Non-Transferability. The Performance Stock Units are not transferable by the Participant except to Permitted Transferees in accordance with Section 13(b) of the Plan. Except as otherwise provided herein, no assignment or transfer of the Performance Stock Units, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Performance Stock Units shall terminate and become of no further effect.

7. Rights as Stockholder. The Participant or a Permitted Transferee of the Performance Stock Units shall have no rights as a stockholder with respect to any share of Common Stock underlying a Performance Stock Unit unless and until the Participant shall have become the holder of record or the beneficial owner of such Common Stock, and no adjustment shall be made for dividends or distributions or other rights in respect of such share of Common Stock for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof.

8. Dividend Equivalents. The Performance Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock), which shall accrue in cash without interest and shall be delivered in cash. Accumulated dividend equivalents shall be payable at such time as the underlying Performance Stock Units to which such dividend equivalents relate are settled in accordance with Section 3 above. For the avoidance of doubt, dividend equivalents accrued in respect of Performance Stock Units shall only be paid to the extent the underlying Performance Stock Unit vests and is settled, and to the extent that any Performance Stock Units are forfeited and not vested, the Participant shall have no right to such dividend equivalent payments.

9. Tax Withholding. The provisions of Section 13(d) of the Plan are incorporated herein by reference and made a part hereof. In addition, the Committee, subject to its having considered the applicable accounting impact of any such determination, has full discretion to allow the Participant to satisfy, in whole or in part, any additional income, employment and/or other applicable taxes payable by the Participant with respect to an Award by electing to have the Company withhold from the shares of Common Stock otherwise issuable or deliverable to, or that would otherwise be retained by, the Participant upon the grant, vesting or settlement of the Award, as applicable, shares of Common Stock having an aggregate Fair Market Value that is greater than the applicable minimum required statutory withholding liability (but such withholding may in no event be in excess of the maximum statutory withholding amount(s) in the Participant’s relevant tax jurisdictions).

10. Notice. Every notice or other communication relating to this Performance Stock Unit Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Corporate Secretary, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.

7

11. No Right to Continued Service. This Performance Stock Unit Agreement does not confer upon the Participant any right to continue as an employee or service provider to the Company.

12. Binding Effect. This Performance Stock Unit Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

13. Waiver and Amendments. Except as otherwise set forth in Section 12 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Performance Stock Unit Agreement shall be valid only if made in writing and signed by the parties hereto; provided, however, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

14. Governing Law. This Performance Stock Unit Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Performance Stock Unit Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Performance Stock Unit Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Delaware.

15. Section 409A of the Code. It is intended that the Performance Stock Units granted hereunder shall be exempt from Section 409A of the Code pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.

16. Exhibit for Non U.S. Participants. If the Participant is residing and/or working outside of the United States, the Performance Stock Units shall be subject to any special provisions set forth in Exhibit A to this Performance Stock Unit Agreement. If the Participant becomes based outside the United States while holding any Performance Stock Units, the special provisions set forth in Exhibit A shall apply to the Participant to the extent that the Company determines that the application of such provisions is necessary or advisable for legal or administrative reasons. Moreover, if the Participant relocates between any of the countries included on Exhibit A, the special provisions set forth in Exhibit A for such country shall apply to the Participant to the extent that the Company determines that the application of such provisions is necessary or advisable for legal or administrative reasons. Exhibit A constitutes part of this Performance Stock Unit Agreement.

17. Plan. The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Performance Stock Unit Agreement, the Plan shall govern and control.

8

EX-31.1

Exhibit 31.1

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Neil E. de Crescenzo, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Change Healthcare Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [Reserved]

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2021	By:	/s/ Neil E. de Crescenzo
		Name: Neil E. de Crescenzo
		Title: President and Chief Executive Officer of Change Healthcare Inc.

EX-31.2

Exhibit 31.2

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Fredrik Eliasson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Change Healthcare Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [Reserved]

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2021	By:	/s/ Fredrik Eliasson
		Name: Fredrik Eliasson
		Title: Executive Vice President and Chief Financial Officer of Change Healthcare Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Change Healthcare Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Neil E. de Crescenzo, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of the Company, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 4, 2021	By:	/s/ Neil E. de Crescenzo
		Name: Neil E. de Crescenzo
		Title: President and Chief Executive Officer of Change Healthcare Inc.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Change Healthcare Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fredrik Eliasson, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of the Company, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 4, 2021	By:	/s/ Fredrik Eliasson
		Name: Fredrik Eliasson
		Title: Executive Vice President and Chief Financial Officer of Change Healthcare Inc.

EX-99.1

Exhibit 99.1

Financial Information of Consolidated Subsidiary

Change Healthcare LLC

EXPLANATORY NOTE

During the first quarter of fiscal year 2021, the Company decided to allocate all administrative and certain other corporate expenses to the respective reportable segments. This allocation methodology differs from the methodology utilized by the Joint Venture in prior fiscal years. The financial results of the Joint Venture’s reportable segments were presented for periods prior to the Merger in the notes to the Change Healthcare LLC financial statements that were included as an exhibit the Company’s financial statements. Therefore, the adjusted EBITDA of the Joint Venture’s reportable segments has been retrospectively adjusted for those periods to be consistent with the Company’s current allocation methodology as presented in the tables below.

SEGMENT ADJUSTED EBITDA

(unaudited, amounts in thousands)

	Software and     Analytics		Network     Solutions		Technology- Enabled       Services		Postage and     Eliminations		Total
Fiscal Year 2020:
First Quarter	$	176,501	$	79,222	$	25,333	$	—	$	281,056
Second Quarter		110,993		79,526		27,174		—		217,693
Third Quarter		127,793		87,571		17,262		—		232,626
Fourth Quarter		150,341		85,340		28,677		—		264,358
Total	$	565,629	$	331,659	$	98,445	$	—	$	995,733
Fiscal Year 2019:
First Quarter	$	121,098	$	76,852	$	29,798	$	—	$	227,749
Second Quarter		117,132		78,775		20,045		—		215,952
Third Quarter		126,416		83,367		24,294		—		234,077
Fourth Quarter		154,434		78,191		24,556		—		257,180
Total	$	519,081	$	317,185	$	98,693	$	—	$	934,958

XML

Document and Entity Information - shares	9 Months Ended
	Dec. 31, 2020	Jan. 26, 2021
Document Type	10-Q
Document Quarterly Report	true
Current Fiscal Year End Date	--03-31
Document Period End Date	Dec. 31, 2020
Document Fiscal Year Focus	2021
Document Transition Report	false
Entity File Number	001-38961
Entity Registrant Name	Change Healthcare Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-2152098
Entity Address, Address Line One	424 Church Street
Entity Address, Address Line Two	Suite 1400
Entity Address, City or Town	Nashville
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37219
City Area Code	615
Local Phone Number	932-3000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		304,771,882
Amendment Flag	false
Entity Central Index Key	0001756497
Document Fiscal Period Focus	Q3
Former Address [Member]
Entity Address, Address Line One	3055 Lebanon Pike
Entity Address, Address Line Two	Suite 1000
Entity Address, City or Town	Nashville
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37214
Common Stock [Member]
Title of 12(b) Security	Common Stock, par value $.001 per share
Trading Symbol	CHNG
Security Exchange Name	NASDAQ
Tangible Equity Units [Member]
Title of 12(b) Security	6.00% Tangible Equity Units
Trading Symbol	CHNGU
Security Exchange Name	NASDAQ

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Total revenue	$ 785,141		$ 2,235,261
Operating expenses
Cost of operations (exclusive of depreciation and amortization below)	332,373		977,568
Research and development	58,323		168,110
Sales, marketing, general and administrative	161,959	$ 1,115	499,039	$ 2,504
Customer postage	49,877		145,672
Depreciation and amortization	151,143		436,552
Accretion and changes in estimate with related parties, net	956	(1,191)	10,414	47,172
Gain on sale of businesses	(32,217)		(60,487)
Total operating expenses	722,414	(76)	2,176,868	49,676
Operating income (loss)	62,727	76	58,393	(49,676)
Non-operating (income) expense
Interest expense, net	61,439	1	185,733	1
Contingent consideration			(3,000)
Loss on extinguishment of debt	6,145		7,634
Loss from Equity Method Investment in the Joint Venture		8,764		104,497
(Gain) loss on forward purchase contract		(74,084)		(71,649)
Other, net	(2,491)	(580)	(1,443)	(1,245)
Total non-operating (income) expense	65,093	(65,899)	188,924	31,604
Income (loss) before income tax provision (benefit)	(2,366)	65,975	(130,531)	(81,280)
Income tax provision (benefit)	(4,562)	15,240	(31,411)	(564)
Net income (loss)	$ 2,196	$ 50,735	$ (99,120)	$ (80,716)
Net income (loss) per share:
Basic	$ 0.01	$ 0.35	$ (0.31)	$ (0.67)
Diluted	$ 0.01	$ 0.35	$ (0.31)	$ (0.67)
Weighted average common shares outstanding:
Basic	321,013,595	143,392,295	320,570,092	120,657,859
Diluted	324,815,524	146,201,860	320,570,092	120,657,859
Solutions [Member]
Total revenue	$ 735,264		$ 2,089,589
Postage [Member]
Total revenue	$ 49,877		$ 145,672

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Consolidated Statements of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ 2,196	$ 50,735	$ (99,120)	$ (80,716)
Other comprehensive income (loss):
Foreign currency translation adjustment	11,526	1,728	23,100	3,537
Changes in fair value of interest rate caps, net of taxes	(81)	1,313	(6,261)	(5,428)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture, net of taxes		134		1,307
Other comprehensive income (loss)	11,445	3,175	16,839	(584)
Total comprehensive income (loss)	$ 13,641	$ 53,910	$ (82,281)	$ (81,300)

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Current assets:
Cash & cash equivalents	$ 137,357	$ 410,405
Accounts receivable, net	697,948	740,105
Contract assets, net	125,509	132,704
Prepaid expenses and other current assets	127,442	117,967
Total current assets	1,088,256	1,401,181
Property and equipment, net	183,843	206,196
Operating lease right-of-use assets, net	99,258
Goodwill	4,105,413	3,795,325
Intangible assets, net	4,302,594	4,365,806
Investment in business purchase option		146,500
Other noncurrent assets, net	368,448	192,372
Total assets	10,147,812	10,107,380
Current liabilities:
Accounts payable	59,664	68,169
Accrued expenses	502,992	390,294
Deferred revenue	393,823	302,313
Due to related parties, net	11,606	20,234
Current portion of long-term debt	37,019	278,779
Current portion of operating lease liabilities	30,813
Total current liabilities	1,035,917	1,059,789
Long-term debt, excluding current portion	4,780,828	4,710,294
Long-term operating lease liabilities	80,789
Deferred income tax liabilities	618,397	615,904
Tax receivable agreement obligations due to related parties	99,614	177,826
Tax receivable agreement obligations	228,294	164,633
Other long-term liabilities	70,235	93,487
Total liabilities	6,914,074	6,821,933
Commitments and contingencies
Stockholders' Equity:
Common Stock (par value, $.001), 9,000,000,000 and 9,000,000,000 shares authorized and 304,656,863 and 303,428,142 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively	305	303
Preferred stock (par value, $.001), 900,000,000 shares authorized and no shares issued and outstanding at both December 31, 2020 and March 31, 2020
Additional paid-in capital	4,253,567	4,222,580
Accumulated other comprehensive income (loss)	9,467	(7,372)
Accumultaed deficit	(1,029,601)	(930,064)
Total stockholders' equity	3,233,738	3,285,447
Total liabilities and stockholders' equity	10,147,812	10,107,380
Common Stock [Member]
Stockholders' Equity:
Total stockholders' equity	$ 305	$ 303

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2020	Mar. 31, 2020
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	9,000,000,000	9,000,000,000
Common Stock, shares issued	304,656,863	303,428,142
Common Stock, shares outstanding	304,656,863	303,428,142
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	900,000,000	900,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]	Total
Balance (ASC 606 [Member]) at Mar. 31, 2019			$ 35,797,000				$ 35,797,000
Balance (ASU 2018-02 [Member]) at Mar. 31, 2019			(422,000)		$ 422,000
Balance at Mar. 31, 2019	$ 75,000	$ 1,153,509,000		$ (17,841,000)		$ (3,256,000)		$ 1,132,487,000
Balance, shares at Mar. 31, 2019	75,474,654
Equity compensation expense		5,862,000						5,862,000
Net income (loss)				(37,517,000)				(37,517,000)
Foreign currency translation adjustment						226,000		226,000
Change in fair value of interest rate caps, net of taxes						(5,431,000)		(5,431,000)
Balance at Jun. 30, 2019	$ 75,000	1,159,371,000		(19,983,000)		(8,039,000)		1,131,424,000
Balance, shares at Jun. 30, 2019	75,474,654
Balance (ASC 606 [Member]) at Mar. 31, 2019			35,797,000				35,797,000
Balance (ASU 2018-02 [Member]) at Mar. 31, 2019			(422,000)		$ 422,000
Balance at Mar. 31, 2019	$ 75,000	1,153,509,000		(17,841,000)		(3,256,000)		1,132,487,000
Balance, shares at Mar. 31, 2019	75,474,654
Net income (loss)								(80,716,000)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture								1,307,000
Foreign currency translation adjustment								3,537,000
Change in fair value of interest rate caps, net of taxes								(5,428,000)
Balance at Dec. 31, 2019	$ 124,000	2,016,608,000		(63,183,000)		(3,418,000)		1,950,131,000
Balance, shares at Dec. 31, 2019	125,027,648
Balance at Jun. 30, 2019	$ 75,000	1,159,371,000		(19,983,000)		(8,039,000)		1,131,424,000
Balance, shares at Jun. 30, 2019	75,474,654
Equity compensation expense		8,585,000						8,585,000
Issuance of Change Healthcare Inc. common stock upon initial public offering	$ 49,000	608,630,000						608,679,000
Issuance of Change Healthcare Inc. common stock upon initial public offering, shares	49,285,713
Effect of initial public offering issuance costs on Joint Venture equity		(4,160,000)						(4,160,000)
Issuance of tangible equity units		232,929,000						232,929,000
Issuance of Change Healthcare Inc. common stock upon exercise of equity awards		1,139,000						1,139,000
Issuance of Change Healthcare Inc. common stock upon exercise of equity awards, shares	175,439
Net income (loss)				(93,935,000)				(93,935,000)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture						1,173,000		1,173,000
Foreign currency translation adjustment						1,583,000		1,583,000
Change in fair value of interest rate caps, net of taxes						(1,310,000)		(1,310,000)
Balance at Sep. 30, 2019	$ 124,000	2,006,494,000		(113,918,000)		(6,593,000)		1,886,107,000
Balance, shares at Sep. 30, 2019	124,935,806
Equity compensation expense		9,148,000						9,148,000
Issuance of Change Healthcare Inc. common stock upon exercise of equity awards		966,000						966,000
Issuance of Change Healthcare Inc. common stock upon exercise of equity awards, shares	91,842
Net income (loss)				50,735,000				50,735,000
Unrealized gain (loss) on available for sale debt securities of the Joint Venture						134,000		134,000
Foreign currency translation adjustment						1,728,000		1,728,000
Change in fair value of interest rate caps, net of taxes						1,313,000		1,313,000
Balance at Dec. 31, 2019	$ 124,000	2,016,608,000		(63,183,000)		(3,418,000)		1,950,131,000
Balance, shares at Dec. 31, 2019	125,027,648
Balance (ASU 2016-13 [Member]) at Mar. 31, 2020			(417,000)				(417,000)
Balance at Mar. 31, 2020	$ 303,000	4,222,580,000		(930,064,000)		(7,372,000)		3,285,447,000
Balance, shares at Mar. 31, 2020	303,428,142
Equity compensation expense		8,780,000						8,780,000
Issuance of common stock under equity compensation plans	$ 1,000	2,143,000						2,144,000
Issuance of common stock under equity compensation plans, shares	341,230
Net income (loss)				(58,694,000)				(58,694,000)
Foreign currency translation adjustment						6,353,000		6,353,000
Change in fair value of interest rate caps, net of taxes						(4,184,000)		(4,184,000)
Other		(75,000)						(75,000)
Balance at Jun. 30, 2020	$ 304,000	4,233,428,000		(989,175,000)		(5,203,000)		3,239,354,000
Balance, shares at Jun. 30, 2020	303,769,372
Balance (ASU 2016-13 [Member]) at Mar. 31, 2020			$ (417,000)				$ (417,000)
Balance at Mar. 31, 2020	$ 303,000	4,222,580,000		(930,064,000)		(7,372,000)		3,285,447,000
Balance, shares at Mar. 31, 2020	303,428,142
Net income (loss)								(99,120,000)
Foreign currency translation adjustment								23,100,000
Change in fair value of interest rate caps, net of taxes								(6,261,000)
Balance at Dec. 31, 2020	$ 305,000	4,253,567,000		(1,029,601,000)		9,467,000		3,233,738,000
Balance, shares at Dec. 31, 2020	304,656,863
Balance at Jun. 30, 2020	$ 304,000	4,233,428,000		(989,175,000)		(5,203,000)		3,239,354,000
Balance, shares at Jun. 30, 2020	303,769,372
Equity compensation expense		12,372,000						12,372,000
Issuance of common stock under equity compensation plans		408,000						408,000
Issuance of common stock under equity compensation plans, shares	911,961
Employee tax withholding on vesting of equity compensation awards	$ (254,764)	(3,131,000)						(3,131,000)
Net income (loss)				(42,622,000)				(42,622,000)
Foreign currency translation adjustment						5,221,000		5,221,000
Change in fair value of interest rate caps, net of taxes						(1,996,000)		(1,996,000)
Other		(356,000)						(356,000)
Balance at Sep. 30, 2020	$ 304,000	4,242,721,000		(1,031,797,000)		(1,978,000)		3,209,250,000
Balance, shares at Sep. 30, 2020	304,426,569
Equity compensation expense		9,673,000						9,673,000
Issuance of common stock under equity compensation plans	$ 1,000	1,606,000						1,607,000
Issuance of common stock under equity compensation plans, shares	249,288
Employee tax withholding on vesting of equity compensation awards	$ (18,994)	(294,000)						(294,000)
Net income (loss)				2,196,000				2,196,000
Foreign currency translation adjustment						11,526,000		11,526,000
Change in fair value of interest rate caps, net of taxes						(81,000)		(81,000)
Other		(139,000)						(139,000)
Balance at Dec. 31, 2020	$ 305,000	$ 4,253,567,000		$ (1,029,601,000)		$ 9,467,000		$ 3,233,738,000
Balance, shares at Dec. 31, 2020	304,656,863

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities:
Net income (loss)	$ 2,196	$ (99,120)	$ (80,716)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss from Equity Method Investment in the Joint Venture			104,497
Depreciation and amortization	151,143	436,552
Amortization of capitalized software developed for sale	460	550
Accretion and changes in estimate, net	(2,759)	8,429
Equity compensation		34,858
Deferred income tax expense (benefit)		(33,905)	(564)
Amortization of debt discount and issuance costs		24,587	403
Contingent consideration		(3,000)
Gain on sale of businesses	(32,217)	(60,487)
Loss on extinguishment of debt	6,145	7,634
(Gain) loss on forward purchase contract			(71,649)
Non-cash lease expense		21,930
Other, net		7,681	1,526
Changes in operating assets and liabilities:
Accounts receivable, net		28,331
Contract assets, net		5,201
Prepaid expenses and other		(69,609)	(1,335)
Accounts payable		(15,785)
Accrued expenses and other liabilities		68,708	47,255
Deferred revenue		124,679
Due to the Joint Venture, net			583
Net cash provided by (used in) operating activities		487,234
Cash flows from investing activities:
Capitalized expenditures		(182,929)
Acquisitions, net of cash acquired		(439,483)
Proceeds from sale of businesses		117,124
Investment in the Joint Venture			(610,784)
Investment in debt and equity securities of the Joint Venture			(278,875)
Other, net		1,100	7,332
Net cash provided by (used in) investing activities		(504,188)	(882,327)
Cash flows from financing activities:
Payments on Revolving Facility		(250,000)
Payments on Term Loan Facility		(265,000)
Proceeds from issuance of Senior Notes		325,000
Payments under tax receivable agreements		(20,691)
Receipts (payments) on derivative instruments		(22,255)
Employee tax withholding on vesting of equity compensation awards		(3,425)
Payments on deferred financing obligations		(9,081)
Payment of senior amortizing notes		(11,599)	(7,332)
Proceeds from exercise of equity awards		4,158	2,105
Proceeds from initial public offering, net of issuance costs			608,679
Proceeds from issuance of equity component of tangible equity units, net of issuance costs			232,929
Proceeds from issuance of debt component of tangible equity units			47,367
Other, net		(6,650)	(1,421)
Net cash provided by (used in) financing activities		(259,543)	882,327
Effect of exchange rate changes on cash and cash equivalents		3,449
Net increase (decrease) in cash and cash equivalents		(273,048)
Cash and cash equivalents at beginning of period		410,405	3,409
Cash and cash equivalents at end of period	$ 137,357	$ 137,357	$ 3,409

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Nature of Business and Organization

9 Months Ended

Dec. 31, 2020

Nature of Business and Organization [Abstract]

Nature of Business and Organization

1. Nature of Business and Organization

Change Healthcare Inc. (the “Company”, “our” or “we”) is an independent healthcare technology company, focused on accelerating the transformation of the healthcare system through the power of our healthcare platform. We provide data and analytics-driven solutions to improve clinical, financial and patient engagement outcomes in the U.S. healthcare system. Our platform and comprehensive suite of software, analytics, technology-enabled services and network solutions drive improved results in the complex workflows of healthcare system payers and providers by enhancing clinical decision making, simplifying billing, collection and payment processes, and enabling a better patient experience.

We are a Delaware corporation originally formed on June 22, 2016, to initially hold an equity investment in Change Healthcare LLC (the “Joint Venture”), a joint venture between the Company and McKesson Corporation (“McKesson”). 

Amendment of Certificate of Incorporation

Effective June 26, 2019 and in contemplation of our initial public offering of common stock, we amended the certificate of incorporation to effect a 126.4 for 1 stock split for all previously issued shares of common stock, to increase the authorized number of common stock, and to authorize shares of preferred stock.  Following this amendment, the authorized shares include 9,000,000,000 shares of common stock (par value $.001 per share), one share of Class X stock (par value $.001 per share), and 900,000,000 shares of preferred stock (par value $.001 per share).  As a result of the Merger (defined below), the Class X Stock is no longer available for issuance.

Initial Public Offering

Effective July 1, 2019, we completed our initial public offering of 49,285,713 shares of common stock and a concurrent offering of 5,750,000 tangible equity units (“TEUs”) for net proceeds of $608,679 and $278,875, respectively.

McKesson Exit

On March 10, 2020, McKesson completed a split-off of its interest in the Joint Venture through an exchange offer of its common stock for shares of PF2 SpinCo, Inc, a Delaware corporation and wholly owned subsidiary of McKesson (“SpinCo”). Immediately following consummation of the exchange offer, SpinCo was merged with and into Change Healthcare Inc. (the “Merger”). As a result, McKesson no longer owns any voting or economic interest in the Joint Venture. Prior to the Merger, we accounted for our investment in the Joint Venture under the equity method of accounting. Subsequent to the Merger, we own 100% of Change Healthcare LLC, and as a result, consolidate the financial statements of Change Healthcare LLC.

COVID-19 Considerations

On March 11, 2020, the World Health Organization declared the current coronavirus (“COVID-19”) outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the U.S., federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures led to weakened conditions in many sectors of the economy, including a decline in healthcare transaction volumes that are integral to our business.

We experienced, and expect to continue to experience, an adverse impact on our financial results as a result of COVID-19.  However, we are not presently aware of events or circumstances arising from COVID-19 that would require us to revise the carrying value of our assets or liabilities, nor do we expect the impact of COVID-19 to cause us to be unable to comply with our debt covenants or meet our contractual obligations.

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Significant Accounting Policies

9 Months Ended

Dec. 31, 2020

Significant Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) Guidelines, Rules and Regulations and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. All intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements.

Business Combinations

We recognize the consideration transferred (i.e., purchase price) in a business combination, as well as the acquired business’ identifiable assets, liabilities and noncontrolling interests at their acquisition date fair value. The excess of the consideration transferred over the fair value of the identifiable assets, liabilities and noncontrolling interest, if any, is recorded as goodwill. Any excess of the fair value of the identifiable assets acquired and liabilities assumed over the consideration transferred, if any, is generally recognized within earnings as of the acquisition date.

The fair values of the consideration transferred, assets, liabilities and noncontrolling interests are estimated based on one or a combination of income, cost or market approaches as determined based on the nature of the asset or liability and the level of inputs available (i.e., quoted prices in an active market, other observable inputs or unobservable inputs). To the extent our initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are reported for those items which are incomplete.

In conjunction with business combinations, we generally recognize goodwill attributable to the assembled workforce and expected synergies among the operations of the acquired entities and our existing operations. Goodwill is generally deductible for federal income tax purposes when a business combination is treated as an asset purchase and is generally not deductible for federal income tax purposes when a business combination is treated as a stock purchase. See Note 4, Business Combinations.

Allowance for Credit Losses

The allowance for credit losses of $24,003  and $22,360 at December  31, 2020 and March 31, 2020, respectively, were primarily based on historical credit loss experience, current conditions and adjustments for certain asset-specific risk characteristics. The following table summarizes activity related to the allowance for credit losses:

	Nine Months Ended December 31,
	2020		2019
Balance at beginning of period	$	22,360	$	—
Cumulative effect of accounting change-ASU 2016-13		417		—
Acquisitions and Dispositions (1)		(3,534)		—
Provisions		11,623		—
Write-offs		(6,863)		—
Balance at end of period	$	24,003	$	—

⁽¹⁾ Amount relates primarily to the acquisitions of eRx and PDX and sales of Connected Analytics and Capacity Management. See Note 4, Business Combinations and Note 5, Dispositions.  

Leases

We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains an operating or finance lease, at the commencement date, we record a right-of-use asset and a corresponding lease liability based on the present value of the minimum lease payments.

As most of our leases do not provide an implicit borrowing rate, to determine the present value of lease payments, we use the portfolio approach and determine our hypothetical secured borrowing rate based on information available at lease commencement. Further, we make certain estimates and judgements regarding the lease term and lease payments, noted below.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, we are reasonably certain to exercise the option.

Certain of our lease agreements include rental payments that are adjusted periodically for inflation or passage of time. These step payments are included within our present value calculation as they are known adjustments at commencement. Some of our lease agreements include variable payments that are excluded from our present value calculation. For example, some of our equipment leases include a component which varies based on the asset’s use.

Additionally, we have lease agreements that include lease and non-lease components, such as equipment leases, which are generally accounted for as a single lease component. For these leases, lease payments include all fixed payments stated within the contract. For other leases, such as office space, lease and non-lease components are accounted for separately. Our lease agreements do not contain any material residual value guarantees that would impact our lease payments.

Recently Adopted Accounting Pronouncements

Financial Instruments: Credit Losses

In April 2020, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-13, as amended by ASU No. 2018-19, which requires that a financial asset (or group of financial assets) measured at amortized cost be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance also requires us to pool assets with similar risk characteristics and consider current economic conditions when estimating losses. We adopted this standard using the modified retrospective approach and recorded a cumulative effect to retained earnings of $417 as of April 1, 2020. 

Fair Value Measurements

In April 2020, we adopted FASB ASU No. 2018-13, which modifies the disclosure requirements for fair value measurements. Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements. See Note 10, Fair Value Measurements.  

Hosting Arrangement Implementation Costs

In April 2020, we adopted FASB ASU No. 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update also requires that the effects of such capitalized costs be classified in the same respective caption in the statement of operations, balance sheet and cash flows as the underlying hosting arrangement. We adopted this standard prospectively beginning April 1, 2020. This adoption did not have a material impact on our financial statements for the three and nine months ended December 31, 2020.

Leases

In April 2020, we adopted FASB ASU No. 2016-02, which created Topic 842 – Leases (“ASC 842”).  The standard generally requires that all lease obligations be recognized on the balance sheet at the present value of the remaining lease payments with a corresponding right-of-use asset. In July 2018, the FASB issued ASU No. 2018-11 which provides companies with the option to apply this cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

Upon adoption, we elected the transition “practical expedients” permitting us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Additionally, we elected the practical expedient to not separate lease and non-lease components for equipment lease agreements.

We adopted ASC 842 using the modified retrospective approach and recorded right-of-use assets of $111,815 and lease liabilities of $125,331, primarily related to operating leases. The recognition of the right-of-use assets in combination with our previously recorded prepaid rent balances resulted in no requirement to adjust the opening balance of retained earnings. Our accounting for finance leases remains substantially unchanged. Adoption of ASC 842 did not materially impact our consolidated statement of operations and had no impact on our consolidated statement of cash flows. See Note 8, Leases, for additional information.

London Interbank Offered Rate (LIBOR) Reform

In March 2020, the FASB issued ASU No. 2020-04, which created Topic 848 – Reference Rate Reform. ASU No. 2020-04 contains optional practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts which may be elected over time as activities occur. Among other things, the ASU intends to ease the transition from LIBOR to an alternative reference rate. During the first quarter of fiscal year 2021, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impacts of ASU No. 2020-04 and may apply other elections as reference rate reform activities progress. 

Accounting Pronouncements Not Yet Adopted

None that are expected to have a material impact on our financial statements.

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Revenue Recognition

9 Months Ended

Dec. 31, 2020

Revenue Recognition [Abstract]

Revenue Recognition

3. Revenue Recognition

We generate most of our solutions revenue by using technology solutions (generally Software as a Service (“SaaS”)) to provide services to our customers that automate and simplify business and administrative functions for payers, providers, pharmacies, and channel partners and through the licensing of software, software systems (consisting of software, hardware and maintenance support) and content. 

We recognize revenue when the customer obtains control of the good or service through satisfying a performance obligation by transferring the promised good or service to the customer.

Principal Revenue Generating Products and Services

Hosted solutions and SaaS - We enter into arrangements whereby we provide the customer access to a Company-owned software solution, which are generally marketed under annual and multi-year arrangements. The customer is only provided “access” (not a license) to the software application. In these arrangements, the customer does not purchase equipment nor does the customer take physical possession of the software. The related revenue is recognized ratably over the contracted term. For fixed fee arrangements, revenue recognition begins after set-up and implementation are complete. For per-transaction fee arrangements, revenue is recognized as transactions are processed beginning on the service start date. Revenue for hosted solutions and SaaS, which is included in solutions revenue, is generated by the Software and Analytics, Network Solutions, and Technology-Enabled Services segments.

Transaction processing services - We provide transaction processing (such as claims processing) services to hospitals, pharmacies and health systems via a cloud-based (SaaS) platform. The promised service is to stand ready to process transactions for our customers over the contractual period on an as needed basis. Revenue related to these services is recognized over time as transactions are processed and the revenue is recognized over the individual days in which the services are performed. Revenue is recognized as solutions revenue in the Software and Analytics, Network Solutions, and Technology-Enabled Services segments, with the exception of revenue related to postage that is generated through the delivery of certain of these services. Postage revenue is discussed below and is separately presented on the consolidated statement of operations. Any fixed annual fees and implementation fees are recognized ratably over the contract period.

Contingent fee services - We provide services to customers in which the transaction price is contingent on future occurrences, such as savings generated or amounts collected on behalf of our customers through the delivery of services. In some cases, we perform services in advance of invoicing the customer, thereby creating a contract asset.  Revenue in these arrangements is estimated and constrained until we determine that it is probable a significant revenue reversal will not occur, and variable consideration is allocated to the performance obligation for which we earn a contingent fee. We use the expected value method when estimating variable consideration, as we have a large number of contracts with similar characteristics and consider a portfolio of data from other similar contracts to form our estimate of expected value. Revenue for contingent fee services, which is included in solutions revenue, is generated by the Software and Analytics and Technology-Enabled Services segments. 

Content license subscriptions and time-based software - Our content license subscriptions and time-based software arrangements provide a license to use a software for a specified period of time. At the end of the contractual period, the customer either renews the license for an additional term or ceases to use the software. Software licenses are typically delivered to the customer with functionality that allows the customer to benefit from the software on its own or together with readily available resources. As contracts for these solutions generally do not price individual components separately, we allocate the transaction price to the license and ongoing support performance obligations based on standalone selling price, primarily determined by historical value relationships between licenses and ongoing support and updates. Revenue allocated to content license subscriptions and time-based software license agreements is generally recognized at the point-in-time of delivery of the license or the content update upon transfer of control of the underlying license to the customer. Generally, software implementation fees are recognized over the implementation period through an input measure of progress method. Revenue allocated to maintenance and support is recognized ratably over the period covered by the agreements, as passage of time represents a faithful depiction of the transfer of these services. In some cases, software arrangements provide licenses to several software applications that are highly integrated with the implementation services and software updates and cannot function separately. The bundle is a single performance obligation since the individually promised goods and services are not distinct in the context of the contract because the related implementation services significantly modify and customize the software and the updates provided to the integrated software solution are critical to the software’s utility. The related revenue is recognized on a straight-line basis, ratably over the contractual term due to the frequency and criticality of the updates throughout the license period. Revenue for content license subscriptions and time-based software, which is included in solutions revenue, is generated by the Software and Analytics segment.

Perpetual software licenses - Our perpetual software arrangements provide a license for a customer to use software in perpetuity. Software licenses are typically delivered to the customer with functionality from which the customer can benefit from the license on its own or together with readily available resources. Perpetual software arrangements are recognized at the time of delivery or through an input measure of progress method over the installation period if the arrangements require significant production or modification or customization of the software. Contracts accounted for through an input measure of progress method are generally measured based on the ratio of labor hours incurred to date to total estimated labor hours to be incurred. Software implementation fees are recognized as the work is performed or under the input method for perpetual software. Hardware revenue is generally recognized upon delivery. Maintenance is recognized ratably over the term of the agreement as passage of time represents a faithful depiction of the transfer of these services. License, implementation, hardware and maintenance revenue for these arrangements, which is included in solutions revenue, is generated by the Software and Analytics and Network Solutions segments.

Professional services - We provide training and consulting services to our customers, and the services may be fixed fee or time and materials based. Consulting services that fall outside of the standard implementation services vary depending on the scope and complexity of the service requested by the customer. Consulting services are deemed to be capable of being distinct from other products and services, and the services are satisfied either at a point of time or over time based on delivery and are recognized as solutions revenue in the Software and Analytics and Technology-Enabled Services segments. Training services are usually provided as an optional service to enhance the customer’s experience with a software product or provides additional education surrounding the general topic of the solution. Training services are capable of being distinct from other products and services. We treat training services as a distinct performance obligation, and those services are satisfied at a point of time and recognized as solutions revenue in the Software and Analytics and Technology-Enabled Services segments.

Postage Revenue

Postage revenue is the result of providing delivery services to customers in our payment and communication solutions. Postage revenue is generally billed as a pass-through cost to our customers. The service is part of a combined performance obligation with the printing and handling services provided to the customer because the postage services are not distinct within the context of the contract. We present Postage Revenue separately from Solutions Revenue on the consolidated statements of operations as doing so makes the financial statements more informative for the users. The revenue related to the combined performance obligation of the postage, printing, and handling service is recognized as the transactions are processed, and the revenue is recognized over the individual days in which the services are performed.

Contract Balances

We generally recognize a contract asset when revenue is recognized in advance of invoicing on a customer contract, unless the right to payment for that revenue is unconditional (i.e. requiring no further performance and only the passage of time). If a right to payment is determined to meet the criteria to be considered 'unconditional', then we will recognize a receivable. 

We did not recognize any impairment loss on accounts receivable or contract assets during the three and nine months ended December 31, 2020. Change Healthcare Inc. did not have accounts receivable prior to the Merger.

We record deferred revenue when billings or payments are received from customers in advance of our performance. Deferred revenue is generally recognized when transfer of control to customers occurs. The deferred revenue balance is driven by multiple factors, including the frequency of renewals, invoice timing, invoice duration and fair value adjustments as a result of the Merger. As of December  31, 2020, we expect 94% of the deferred revenue balance to be recognized in one year or less, and approximately $245,760 of the beginning period balance was recognized during the nine months ended December 31, 2020.

Costs to Obtain or Fulfill a Contract

At December  31, 2020, we had capitalized costs to obtain a contract of $4,339 in prepaid and other current assets and $27,502 in other noncurrent assets. At December 31, 2020, we had capitalized costs to fulfill a contract of $3,287 in prepaid and other current assets and $18,072 in other noncurrent assets. Amortization of such capitalized costs to obtain or fulfill a contract were immaterial for the three and nine months ended December 31, 2020. Change Healthcare Inc. did not have costs to obtain or fulfill a contract prior to the Merger, and therefore did not record amortization of such capitalized costs during the three and nine months ended December  31, 2019.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts includes deferred revenue and other revenue yet to be recognized from non-cancellable contracts. As of December 31, 2020, the total remaining performance obligations approximated $1,507,154, of which approximately 49% is expected to be recognized over the next twelve months, and the remaining 51% thereafter.

In this balance, we do not include the value of unsatisfied performance obligations related to those contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed. Additionally, this balance does not include revenue related to performance obligations that are part of a contract with an original expected duration of one year or less.  Lastly, this balance does not include variable consideration allocated to the individual goods or services in a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Examples includes variable fees associated with transaction processing and contingent fee services.

Disaggregated Revenue

We disaggregate the revenue from contracts with customers by operating segment as we believe doing so best depicts how the nature, amount, timing and uncertainty of revenues are affected by economic factors. See Note 19, Segment Reporting, for the total revenue disaggregated by operating segment for the three and nine months ended December 31, 2020.

In addition to disaggregating revenue by operating segment, we disaggregate revenue between revenue that is recognized over time and revenue that is recognized at a point in time. Approximately 98% and 96% of revenue was recognized over time and approximately  2% and 4% of revenue was recognized at a point in time for the three and nine months ended December  31, 2020, respectively.

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Business Combinations

9 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Business Combinations

4. Business Combinations

Fiscal Year 2021 Transactions

eRx Network Holdings, Inc.

On May 1, 2020, we exercised our option to purchase and completed the acquisition of 100% of the ownership interest in eRx Network Holdings, Inc. (“eRx”), a leading provider in comprehensive, innovative and secure data-driven solutions for pharmacies. At the time of the acquisition, all outstanding eRx equity awards were canceled and holders of eRx stock options and vested eRx stock appreciation rights were able to elect to receive consideration in the form of a cash payment or vested stock appreciation rights of the Company. See Note 17, Incentive Compensation Plans, for additional information.

Prior to the acquisition, we held an option to purchase eRx which we accounted for as an equity investment. Therefore, our acquisition of eRx was accounted for as a business combination achieved in stages under the acquisition method in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). Accordingly, we remeasured our business purchase option to fair value and recognized a loss of $6,000 which is recorded in Other, net on our consolidated statement of operations.

The following table summarizes information related to this acquisition as of the acquisition date. The fair values of the assets acquired and the liabilities assumed were determined based on information available to the Company using primarily an income-based approach. During the second and third quarters of fiscal year 2021, we continued to make purchase price allocation adjustments to refine the fair value of assets acquired and liabilities assumed, including goodwill. These refinements primarily included an increase to the determined fair value of customer relationships and deferred tax liabilities and a decrease to the determined fair value of technology-based intangible assets.There were no material impacts to the consolidated statement of operations as a result of the adjustments. We consider our accounting for the assets acquired and liabilities assumed in the eRx acquisition to be complete.

	eRx
Cash paid at closing	$	249,359
Fair value of eRx purchase option		140,500
Fair value of vested stock appreciation rights		5,097
Cash paid for canceled eRx equity awards		5,891
Total Consideration Fair Value at Acquisition Date	$	400,847
Allocation of the Consideration Transferred:
Cash	$	54,108
Accounts receivable, net of allowance of $326		12,747
Prepaid expenses and other current assets		609
Goodwill		225,156
Identifiable intangible assets:
Customer relationships (life 17 years)		131,200
Internally developed technology (life 9-12 years)		29,700
Other noncurrent assets		20
Accounts payable		(2,543)
Accrued expenses and other current liabilities		(10,933)
Deferred income tax liabilities		(39,217)
Total consideration transferred	$	400,847

The goodwill recognized, all of which is assigned to the Network Solutions segment, is primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. The goodwill is not expected to be deductible for tax purposes. See Note 6, Goodwill.  

Acquisition costs related to the purchase of eRx were not material.

PDX, Inc.

On June 1, 2020, we completed the cash purchase of 100% of the ownership interest in PDX, Inc. (“PDX”), a company focused on delivering patient centric and innovative technologies for pharmacies and health systems. We accounted for this transaction as a business combination using the acquisition method.

The fair values of the assets acquired and the liabilities assumed were determined based on information available to the Company using primarily an income-based approach.  During the second quarter of fiscal year 2021, we continued to make purchase price allocation adjustments to refine the fair value of assets acquired, including goodwill. These refinements primarily included an increase to the determined fair value of customer relationships and decreases to the determined fair values of technology-based intangible assets and deferred revenue. There were no material impacts to the consolidated statement of operations as a result of the adjustments. Additional information is being gathered to finalize the amounts with respect to deferred taxes. Accordingly, the measurement of the deferred tax assets acquired and deferred tax liabilities assumed may change upon finalization of the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date. We consider our accounting for the other assets acquired and liabilities assumed in the PDX acquisition to be complete.

After customary working capital adjustments, transaction fees and other adjustments, the total consideration fair value at the acquisition date was $198,291. The following table summarizes the allocation of consideration transferred:

	PDX
Cash	$	755
Accounts receivable, net of allowance of $1,092		5,739
Prepaid expenses and other current assets		2,251
Property and equipment		840
Goodwill		98,830
Identifiable intangible assets:
Customer relationships (life 18 years)		74,300
Technology-based intangible assets (life 10-11 years)		25,300
Other noncurrent assets		690
Accounts payable		(3,882)
Deferred revenue, current		(2,946)
Accrued expenses and other current liabilities		(3,364)
Other noncurrent liabilities		(222)
Total consideration transferred	$	198,291

The goodwill recognized, all of which is assigned to the Network Solutions segment, is primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. The goodwill is expected to be deductible for tax purposes. See Note 6, Goodwill.  

Acquisition costs related to the purchase of PDX were not material.

Nucleus.io

In August 2020, we completed the acquisition of Nucleus.io, a leader in the development of advanced, fully enabled, cloud-native imaging and workflow technology. We acquired Nucleus.io for total consideration of $35,120 and accounted for the acquisition as a business combination. The consideration transferred was primarily allocated to technology-based intangible assets of $11,700 and goodwill of $22,341.  The goodwill recognized is assigned to the Software and Analytics segment. The preliminary values of the consideration transferred, assets acquired and liabilities assumed in the acquisition, including the related tax effects, are subject to change upon receipt of a final valuation and working capital settlement.

Fiscal Year 2020 Transactions

The Merger

On March 10, 2020, the Company combined with SpinCo in a two-step all-stock “Reverse Morris Trust” transaction that involved a separation of SpinCo from McKesson followed by the merger of SpinCo with and into the Company, with the Company as the surviving company. As a result of the Merger, the Joint Venture became a wholly owned subsidiary of the Company.

McKesson accepted 15,426,537 shares of its own common stock, par value $0.01 in exchange for all 175,995,192 issued and outstanding shares of SpinCo common stock, par value $0.001 per share (the “SpinCo Common Stock”). All shares of SpinCo Common Stock were then converted into an equal number of shares of common stock of the Company, par value $0.001, which the Company issued to the former holders of SpinCo Common Stock, together with cash in lieu of any fractional shares.

Prior to the Merger, we accounted for our investment in the Joint Venture under the equity method of accounting. Therefore, the acquisition of control of the Joint Venture was accounted for as a business combination achieved in stages under the acquisition method in accordance with ASC 805. Accordingly, we remeasured our previously held equity interest in the Joint Venture to fair value by reference to the publicly traded price of the common shares issued to SpinCo shareholders in exchange for the remaining 58% equity interest in the Joint Venture. Upon remeasurement, we recognized a loss on investment of $230,229. The loss represents the amount by which the carrying value of our investment in the Joint Venture exceeded the fair value of our 42% interest immediately prior to the Merger.

The fair values of the assets acquired and the liabilities assumed were determined based on information available to the Company. Additional information is being gathered to finalize the provisional measurements with respect to deferred taxes. Accordingly, the measurement of the deferred tax assets acquired and deferred tax liabilities assumed may change upon finalization of the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date. During the first quarter of fiscal year 2021, we increased the estimated fair value of our deferred tax liability by $1,604 which also impacted goodwill. During the third quarter of fiscal year 2021, we made additional adjustments decreasing our deferred tax liability and goodwill by $4,692. There were no impacts to the consolidated statement of operations as a result of the adjustments. We consider our accounting for the other assets acquired and liabilities assumed in the Merger to be complete.

The following table summarizes information related to this acquisition as of the acquisition date:  

Net Assets acquired
Cash	$	330,665
Accounts receivable, net of allowance of $22,059		718,895
Contract assets		132,704
Prepaid and other current assets		115,265
Investment in business purchase option		146,500
Property and equipment, net		206,751
Goodwill		4,357,560
Other noncurrent assets		169,539
Identified intangible assets:
Customer relationships (life 12-16 years)		3,056,000
Tradenames (life 18 years)		146,000
Technology-based intangible assets (life 6-12 years)		1,188,000
Drafts and accounts payable		(60,637)
Accrued expenses		(559,456)
Deferred revenue, current		(292,528)
Current portion of long-term debt		(28,969)
Other current liabilities		(22,732)
Long-term debt, excluding current portion		(4,713,565)
Deferred income tax liabilities		(574,988)
Tax receivable agreement obligations with related parties		(176,586)
Other long-term liabilities		(102,675)
Net Assets acquired	$	4,035,743
Summary of purchase consideration:
Fair value of shares issued to SpinCo shareholders
(175,995,192 shares at $12.47 per share):
Common Stock, $0.001 par value	$	176
Additional paid-in capital		2,194,484
Fair value of Joint Venture equity interest previously held		1,589,040
Fair value of Joint Venture equity interest previously held through TEUs		216,764
Settlement of dividend receivable		42,778
Repayment of advances to member		(7,499)
Purchase consideration	$	4,035,743

The goodwill recognized in the Merger is primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries in which we operate. The majority of the goodwill is not expected to be deductible for tax purposes.

Acquisition costs related to the Merger were not material.

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Dispositions

9 Months Ended

Dec. 31, 2020

Dispositions [Abstract]

Dispositions

5. Dispositions

Connected Analytics

On May 1, 2020, we completed the sale of our Connected Analytics business, which was included in our Software and Analytics segment, for total consideration of $55,000, subject to a customary working capital adjustment, including a $25,000 note receivable from the buyer which was recorded within Other noncurrent assets, net on the consolidated balance sheet. The net book value of the Connected Analytics business prior to the sale was $22,619 which includes primarily net accounts receivable of $16,325, goodwill of $21,705 and deferred revenue of $17,133. In connection with this transaction, we recognized a pre-tax gain on disposal of $24,170 which is included within Gain on sale of businesses on the consolidated statement of operations. In July 2020, we received $25,000 plus interest from the buyer in satisfaction of the outstanding note receivable.

Capacity Management

On December 2, 2020, we completed the sale of our Capacity Management business, which was included in our Software and Analytics segment, for total consideration of $67,500, subject to a customary working capital adjustment. The net book value of the Capacity Management business prior to the sale was $31,599 which includes primarily net accounts receivable of $14,999, goodwill of $26,944 and deferred revenue of $15,230. In connection with this transaction, we recognized a pre-tax gain on disposal of $32,655 which is included within Gain on sale of businesses on the consolidated statement of operations.

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Goodwill

9 Months Ended

Dec. 31, 2020

Goodwill [Abstract]

Goodwill

6. Goodwill

The following table presents the changes in the carrying amount of goodwill:

	Software and Analytics		Network Solutions		Technology-Enabled Services		Total
Balance at March 31, 2020	$	1,770,118	$	1,645,831	$	379,376	$	3,795,325
Acquisitions (1)		22,341		323,986		—		346,327
Dispositions		(51,136)		—		—		(51,136)
Effects of foreign currency		17,926		—		—		17,926
Adjustments (2)		(1,637)		(1,081)		(311)		(3,029)
Balance at December 31, 2020	$	1,757,612	$	1,968,736	$	379,065	$	4,105,413

⁽¹⁾ Amounts relate primarily to the acquisitions of eRx, PDX and Nucleus.io. See Note 4, Business Combinations.  

⁽²⁾ Amounts relate to fair value adjustments to the assets acquired and liabilities assumed in the Merger. See Note 4, Business Combinations.

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Equity Method Investment in Change Healthcare LLC

9 Months Ended

Dec. 31, 2020

Equity Method Investment in Change Healthcare LLC [Abstract]

Equity Method Investment in Change Healthcare LLC

7. Equity Method Investment in Change Healthcare LLC

Prior to the Merger, the Company accounted for its investment in the Joint Venture using the equity method of accounting.  During the three and nine months ended December  31, 2019, the Company recorded a proportionate share of the loss from this investment of $8,764 and $104,497, respectively, which included transaction and integration expenses incurred by the Joint Venture and basis adjustments, including amortization expenses, associated with equity method intangible assets.  These amounts are in Loss from Equity Method Investment in the Joint Venture in the consolidated statements of operations.

Following completion of the Merger, we consolidate the Joint Venture and no longer account for our ownership interest as an equity method investment.Summarized statement of operations information of the Joint Venture prior to the Merger is as follows:

		Three Months Ended		Nine Months Ended
		December 31, 2019		December 31, 2019
Total revenue	$	808,226	$	2,459,593
Cost of operations (exclusive of depreciation and amortization)	$	339,413	$	998,943
Customer postage	$	55,693	$	171,288
Net income (loss)	$	31,191	$	102,973

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Leases

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

8. Leases

We lease office space, other facilities, office equipment for internal use, vehicles and bulk invoice pricing and mailing related equipment for customer solutions. Our lease portfolio includes both operating and finance leases with original terms ranging from one to 15 years.

Statement of Operations Information

The components of lease cost are as follows:

		Three Months Ended		Nine Months Ended
	Statement of Operations Location	December 31, 2020		December 31, 2020
Operating lease cost	(1)	$	9,951	$	32,109
Finance lease cost
Amortization expense	Depreciation and amortization		110		312
Interest expense	Interest expense, net		35		102
Short-term lease cost	(1)		261		747
Variable lease cost	(1)		1,524		5,275
Sublease income	Other, net		(172)		(834)
Total lease cost		$	11,709	$	37,711

⁽¹⁾ Cost classification varies depending on the leased asset. Costs are primarily included within sales, marketing, general and administrative and cost of operations.  

Balance Sheet Information

Right-of-use assets and lease liabilities are as follows:

	Balance Sheet Location	December 31, 2020
Right-of-use assets
Operating leases	Operating lease right-of-use assets, net	$	99,258
Finance leases	Property and equipment, net		1,975
Total right-of-use assets		$	101,233
Lease liabilities
Current liabilities
Operating leases	Current portion of operating lease liabilities	$	30,813
Finance leases	Current portion of long-term debt		577
Noncurrent liabilities
Operating leases	Long-term operating lease liabilities		80,789
Finance leases	Long-term debt, excluding current portion		1,373
Total lease liabilities		$	113,552

Cash Flow Information

Supplemental cash flow information is as follows:

	Nine Months Ended December 31, 2020
	Operating Leases			Finance Leases
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	31,331	$	102
Financing cash flows	$	—	$	490
Non-cash activities
Right-of-use assets obtained in exchange for lease liabilities  (1)	$	11,846	$	363

⁽¹⁾ Amounts exclude the impact of adopting ASC 842. See Note 2, Significant Accounting Policies.  

Maturity of Lease Liabilities

Maturities of lease liabilities by fiscal year as of December 31, 2020 are as follows:

	Operating Leases			Finance Leases		Total
Remainder of 2021	$	10,022	$	183	$	10,205
2022		36,697		664		37,361
2023		27,580		485		28,065
2024		19,037		468		19,505
2025		14,011		390		14,401
2026 and thereafter		25,501		—		25,501
Total lease liabilities, undiscounted		132,848		2,190		135,038
Less: Imputed interest		21,246		240		21,486
Total lease liabilities	$	111,602	$	1,950	$	113,552

Maturities of lease liabilities by fiscal year as of March 31, 2020 were as follows:

	Operating Leases			Finance Leases		Total
2021	$	40,476	$	468	$	40,944
2022		34,750		468		35,218
2023		23,761		468		24,229
2024		15,393		468		15,861
2025		10,780		390		11,170
2026 and thereafter		15,850		—		15,850
Total lease liabilities, undiscounted	$	141,010	$	2,262	$	143,272

Other Information

Other information related to our leases as of December 31, 2020 is as follows:

	Operating Leases		Finance Leases
Weighted-average remaining lease term	4.79 years		3.70 years
Weighted-average discount rate	7.39	%	6.53	%

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Interest Rate Cap Agreements

9 Months Ended

Dec. 31, 2020

Interest Rate Cap Agreements [Abstract]

Interest Rate Cap Agreements

9. Interest Rate Cap Agreements

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage exposures to a wide variety of business and operational risks through management of core business activities. We manage economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage differences in the amount, timing and duration of known or expected cash receipts and known or expected cash payments principally related to existing borrowings.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate cap agreements as part of our interest rate risk management strategy. Payments and receipts related to interest rate cap agreements are included in cash flows from financing activities in the consolidated statements of cash flows.

In August 2018, the Joint Venture executed annuitized interest rate cap agreements with notional amounts of $500,000, accreting to $1,500,000 to limit the exposure of the variable component of interest rates under the Term Loan Facility or future variable rate indebtedness to a maximum of 1.0%. The interest rate cap agreements became effective August 31, 2018, accreted to $1,500,000 in March 2020 and expire December 31, 2021. Upon completion of the Merger, these agreements were redesignated as cash flow hedges of the Company.

In March 2020, we executed additional annuitized interest rate cap agreements with notional amounts totaling $1,000,000 to limit the exposure of the variable component of the interest rates under the Term Loan Facility or future variable rate indebtedness to a maximum of 1.0%. Each interest rate cap agreement became effective March 31, 2020 and expires March 31, 2024.

At December 31, 2020, each of our outstanding interest rate cap agreements were designated as cash flow hedges of interest rate risk and were determined to be highly effective.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. We estimate that $2,005  will be reclassified as an increase to interest expense within one year.

Fair Value

The fair value of derivative instruments at December 31, 2020 and March 31, 2020 is as follows:

	Fair Values of Derivative Financial Instruments
	Asset (Liability)
Derivative financial instruments designated as hedging instruments:	Balance Sheet Location	December 31, 2020		March 31, 2020
Interest rate cap agreements	Accrued expenses		(28,985)		(28,131)
Interest rate cap agreements	Other long-term liabilities		(3,288)		(19,277)
Total		$	(32,273)	$	(47,408)

See Note 10, Fair Value Measurements, for additional information.

Effect of Derivative Instruments on the Statement of Operations

The effect of the derivative instruments on the consolidated statements of operations is as follows:

	Three Months Ended December 31,					Nine Months Ended December 31,
Derivative financial instruments in cash flow hedging relationships:	2020		2019		2020		2019
Gain/(loss) related to derivative financial instruments recognized in other comprehensive income (loss)	$	(383)	$	—	$	(7,119)	$	—
Gain/(loss) related to portion of derivative financial instruments reclassified from accumulated other comprehensive income (loss) to interest expense	$	302	$	—	$	858	$	—

Credit Risk-Related Contingent Features

We have agreements with each of our derivative counterparties providing that if we default on any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then we also could be declared in default on our derivative obligations.

As of December 31, 2020, the termination value of derivative financial instruments in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, was $32,953. If we had breached any of these provisions at December 31, 2020, we could have been required to settle our obligations under the agreements at this termination value. We do not offset any derivative financial instruments and the derivative financial instruments are not subject to collateral posting requirements.

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Fair Value Measurements

9 Months Ended

Dec. 31, 2020

Fair Value Measurements [Abstract]

Fair Value Measurements

10. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis consist of derivative financial instruments and contingent consideration obligations. The following tables summarize these items, aggregated by the level in the fair value hierarchy within which those measurements fall:

			Quoted in		Significant Other		Significant
	Balance at		Identical Markets		Observable Inputs		Unobservable Inputs
Description	December 31, 2020		(Level 1)		(Level 2)		(Level 3)
Interest rate cap agreements	$	(32,273)	$	—	$	(32,273)	$	—
Contingent consideration obligation		—		—		—		—
Total	$	(32,273)	$	—	$	(32,273)	$	—

			Quoted in		Significant Other		Significant
	Balance at		Identical Markets		Observable Inputs		Unobservable Inputs
Description	March 31, 2020		(Level 1)		(Level 2)		(Level 3)
Interest rate cap agreements	$	(47,408)	$	—	$	(47,408)	$	—
Contingent consideration obligation		(3,000)		—		—		(3,000)
Total	$	(50,408)	$	—	$	(47,408)	$	(3,000)

Derivative Financial Instruments

The valuation of our derivative financial instruments is determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair value of the interest rate cap agreements is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) using the overnight index swap rate as the discount rate.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we considered the impact of netting and any applicable credit enhancements and measured the credit risk of our derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs to evaluate the likelihood of both our own default and counterparty default. As of December  31, 2020, we determined that the credit valuation adjustments are not significant to the overall valuation of the derivatives. As a result, the derivative valuations are classified in Level 2 of the fair value hierarchy.

Contingent Consideration

Prior to December 31, 2020, the valuation of our contingent consideration obligations was determined using a discounted cash flow method that involved a Monte Carlo simulation. This analysis reflects the contractual terms of the purchase agreements (i.e., minimum and maximum payments, length of earn-out periods, manner of calculating amounts due, etc.) and utilizes assumptions with regard to future cash flows that were determined using a Monte Carlo simulation which were then discounted to present value using an appropriate discount rate. Significant increases with respect to assumptions as to future revenue would have resulted in a higher fair value measurement while an increase in the discount rate would have resulted in a lower fair value measurement. The measurement period ended December 31, 2020, and the Company determined no obligations remained. As such, the contingent consideration liability was reduced to zero as of December 31, 2020.

The table below presents a reconciliation of the fair value of the liabilities that use significant unobservable inputs (Level 3):

		Three Months Ended December 31,			Nine Months Ended December 31,
	2020		2019		2020			2019
Balance at beginning of period	$	—	$	—	$	(3,000)	$	—
Gain/(loss) included in contingent consideration		—		—		3,000		—
Balance at end of period	$	—	$	—	$	—	$	—

Assets and Liabilities Measured at Fair Value upon Initial Recognition

The carrying amounts and fair values of financial instruments held as of December 31, 2020 and March 31, 2020 were as follows:

	December 31, 2020				March 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	137,357	$	137,357	$	410,405	$	410,405
Accounts receivable	$	697,948	$	697,948	$	740,105	$	740,105
Investment in business purchase option	$	—	$	—	$	146,500	$	146,500
Senior Credit Facilities (Level 2)	$	3,447,156	$	3,529,963	$	3,682,457	$	3,452,687
Senior Notes (Level 2)	$	1,317,689	$	1,348,188	$	997,772	$	950,000
Debt component of tangible equity units (Level 2)	$	24,268	$	24,801	$	35,431	$	34,806

Additionally, the assets acquired and liabilities assumed as part of business acquisitions were recorded at fair value upon initial recognition. See Note 4, Business Combinations, for additional information.

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Long-Term Debt

9 Months Ended

Dec. 31, 2020

Long-Term Debt [Abstract]

Long-Term Debt

11. Long-Term Debt

Our long-term indebtedness is comprised of a senior secured term loan facility (the “Term Loan Facility”), a revolving credit facility (the “Revolving Facility”; together with the Term Loan Facility, the “Senior Credit Facilities”), and 5.75% senior notes due 2025 (the “Senior Notes”).

Long-term debt as of December 31, 2020 and March 31, 2020, consisted of the following:

	December 31, 2020			March 31, 2020
Senior Credit Facilities
$5,100,000 Term Loan Facility, due March 1, 2024, net of unamortized discount of $96,094 and $125,793 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 4.42% and 4.42%, respectively)	$	3,447,156	$		3,682,457
$785,000 Revolving Facility, expiring July 3, 2024, and bearing interest at a variable interest rate (1)		—			250,000
Senior Notes
$1,325,0005.75% Senior Notes due March 1, 2025, net of unamortized discount of $7,311 and $2,228 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 5.90% and 5.80%, respectively)		1,317,689			997,772
Tangible Equity Unit Senior Amortizing Note
$47,367 Senior Amortizing Notes due June 30, 2022, net of unamortized discount of $405 and $842 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 7.44% and 7.44%, respectively)		24,268			35,431
Other		28,734			23,413
Less current portion		(37,019)			(278,779)
Long-term debt	$	4,780,828	$		4,710,294

⁽¹⁾ The weighted average interest rate at March 31, 2020 was 3.25%.

Senior Credit Facilities

In June 2020, we repaid our outstanding Revolving Facility balance of $250,000.  The Revolving Facility has a total borrowing capacity of $785,000 less outstanding letters of credit which totaled $6,194 and $5,118 at December 31, 2020 and March 31, 2020, respectively, leaving $778,806 and $529,882 available for borrowing, respectively.

Senior Notes Issuance

In April 2020, we issued an additional $325,000 aggregate principal amount of 5.75% Senior Notes due 2025 (the “Notes”) and incurred issuance costs of $5,364.  The Notes were issued as part of the same series as the $1,000,000 Senior Notes issued in February 2017.

Term Loan Repayments

In the second quarter of fiscal year 2021, we repaid $50,000 on our Term Loan Facility and recognized a loss on extinguishment of $1,489 in our consolidated statement of operations. In the third quarter of fiscal year 2021, we repaid an additional $215,000 and recognized a loss on extinguishment of $6,145 in our consolidated statement of operations.

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Net Income (Loss) Per Share

9 Months Ended

Dec. 31, 2020

Net Income (Loss) Per Share [Abstract]

Net Income (Loss) Per Share

12. Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Numerator:
Net income (loss)	$	2,196	$	50,735	$	(99,120)	$	(80,716)
Denominator:
Weighted average common shares outstanding		304,547,891		124,962,970		304,104,388		108,371,642
Minimum shares issuable under purchase contracts		16,465,704		18,429,325		16,465,704		12,286,217
Total weighted average shares outstanding		321,013,595		143,392,295		320,570,092		120,657,859
Basic net income (loss) per share	$	0.01	$	0.35	$	(0.31)	$	(0.67)
Diluted net income per share:
Numerator:
Net income (loss)	$	2,196	$	50,735	$	(99,120)	$	(80,716)
Denominator:
Number of shares used in basic computation		321,013,595		143,392,295		320,570,092		120,657,859
Weighted average effect of dilutive securities
Dilutive shares issuable under purchase contracts		—		1,450,910		—		—
Time-Vesting Options		932,344		1,059,868		—		—
Restricted Share Units		2,753,810		289,537		—		—
Deferred Stock Units		95,624		9,250		—		—
Employee Stock Purchase Program Shares		20,151		—		—		—
		324,815,524		146,201,860		320,570,092		120,657,859
Diluted net income (loss) per share	$	0.01	$	0.35	$	(0.31)	$	(0.67)

Due to their antidilutive effect, the following securities have been excluded from diluted net income (loss) per share:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Dilutive shares issuable under purchase contracts		—		—		1,579,991		1,712,220
Time-Vesting Options		—		—		766,432		1,290,327
Restricted Share Units		—		—		2,360,586		605,830
Deferred Stock Units		—		—		81,983		6,167

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Tax Receivable Agreements

9 Months Ended

Dec. 31, 2020

Tax Receivable Agreements [Abstract]

Tax Receivable Agreements

13. Tax Receivable Agreements

Upon the consummation of the Merger, we assumed obligations related to certain tax receivable agreements (collectively, the “tax receivable agreements”) entered into by the Joint Venture with its current and former owners.  Depending on whether the respective tax receivable agreements were assumed as part of the Merger or became effective after the Merger, the liabilities related to the tax receivable agreements are subject to differing accounting models as explained below.

Under the tax receivable agreements assumed in connection with the Merger, we are obligated to make payments to certain former stockholders as well as to affiliates of The Blackstone Group, Inc., some of whom are considered related parties. The cash payments made are equal to 85% of the applicable cash savings realized or expected to be realized for the applicable tax receivable agreements. The tax receivable agreements were measured at their fair value as part of the Merger and are recognized at their initial fair value plus recognized accretion to date on the consolidated balance sheet. Accretion recorded during the period pertaining to related party payments is recorded separately to Accretion and changes in estimate with related parties, net, whereas non-related party accretion is recorded within Sales, marketing, general and administrative in the consolidated statement of operations. As the payments are due to both current and former owners, we have separately presented the estimated aggregated payments due to related parties in future fiscal years in the table below.

McKesson Tax Receivable Agreement

In connection with the closing of the Merger, we along with the Joint Venture, the subsidiaries of McKesson that served as members of the Joint Venture (“McK Members”), and McKesson entered into a tax receivable agreement (the “McKesson Tax Receivable Agreement”). The McKesson Tax Receivable Agreement generally requires payment to affiliates of McKesson of 85% of certain cash tax savings realized (or, in certain circumstances, deemed to be realized) in periods ending on or after the date on which McKesson ceases to own at least 20% of the Joint Venture as a result of (i) certain amortizable tax basis in assets transferred to the Joint Venture at the Contribution Agreement Closing and (ii) imputed interest deductions and certain other tax attributes arising from payments under the McKesson Tax Receivable Agreement.  Following the McKesson exit and based on anticipated amortization allocations, we recorded an obligation for the McKesson Tax Receivable estimated payments, which represents a loss contingency under ASC 450 and is included in the other long-term liabilities on the consolidated balance sheet. Future changes in this value will be reflected within pretax income or loss.

Based on facts and circumstances at December 31, 2020, we estimate the aggregate payments due under our tax receivable agreements in future fiscal years to be as follows: 

	Related Party Tax Receivable Agreements		McKesson Tax Receivable Agreement		Other Tax Receivable Agreements		Total
Remainder of 2021	$	—	$	—	$	—	$	—
2022		11,606		128		10,788		22,522
2023		11,349		35,992		10,722		58,063
2024		23,421		7,368		13,549		44,338
2025		50,772		23,836		20,004		94,612
Thereafter		83,221		92,192		61,192		236,605
Gross expected payments		180,369		159,516		116,255		456,140
Less: Amounts representing discount		(69,149)		—		(36,561)		(105,710)
Total tax receivable agreement obligation		111,220		159,516		79,694		350,430
Less: Current portion due (included in accrued expenses)		(11,606)		(128)		(10,788)		(22,522)
Tax receivable agreement long-term obligation	$	99,614	$	159,388	$	68,906	$	327,908

The timing and/or amount of aggregate payments due may vary based on a number of factors, including the amount of net operating losses and income tax rates.

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Income Taxes

9 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

14. Income Taxes

The following table summarizes income tax information:

	Three Months Ended December 31,				Nine Months Ended December 31,
		2020		2019		2020		2019
Income tax provision (benefit)	$	(4,562)	$	15,240	$	(31,411)	$	(564)
Effective tax rate		192.8%		23.1%		24.1%		0.7%

Three and Nine Months Ended December  31, 2020 and 2019

Fluctuations in our reported income tax rates from the statutory rate are primarily due to the impacts of our acquisition and divestiture activity, benefits recognized as a result of certain incentive tax credits resulting from research and experimental expenditures, and discrete items recognized in the three and nine months ended December 31, 2020. For the three and nine months ended December 31, 2019, fluctuations in our reported income tax rates from the statutory rate are primarily due to benefits recognized as a result of certain incentive tax credits resulting from research and experimental expenditures and the impacts of discrete items.

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Legal Proceedings

9 Months Ended

Dec. 31, 2020

Legal Proceedings [Abstract]

Legal Proceedings

15. Legal Proceedings

We are subject to various claims with customers and vendors, pending and potential legal actions for damages, investigations relating togovernmental laws and regulators and other matters arising out of the normal conduct of our business.

Government Subpoenas and Investigations

From time to time, we receive subpoenas or requests for information from various government agencies. We generallyrespond to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and canresult in considerable costs. Such subpoenas and requests also can lead to the assertion of claims or the commencementof civil or criminal proceedings against us and other members of the health care industry, as well as to settlements.

Other Matters

In the ordinary course of business, we are involved in various claims and legal proceedings. While the ultimate resolution of thesematters has yet to be determined, we do not believe that it is reasonably possible that their outcomes will have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Dec. 31, 2020

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

16. Accumulated Other Comprehensive Income (Loss)

The following is a summary of the accumulated other comprehensive income (loss) activity for the nine months ended December 31, 2020 and 2019. Prior to the Merger, the activity in accumulated other comprehensive income (loss) reflects the proportionate share of the Joint Venture’s accumulated other comprehensive income (loss), net of taxes.

	Available		Foreign Currency				Accumulated Other
	For Sale		Translation		Cash Flow		Comprehensive
	Debt Security		Adjustment		Hedge		Income (Loss)
Balance at March 31, 2019	$	—	$	(1,565)	$	(1,691)	$	(3,256)
Cumulative effect of accounting change of the Joint Venture-ASU 2018-02		—		—		422		422
Change associated with foreign currency translation		—		226		—		226
Change associated with current period hedging		—		—		(5,117)		(5,117)
Reclassification into earnings		—		—		(314)		(314)
Balance at June 30, 2019	$	—	$	(1,339)	$	(6,700)	$	(8,039)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		1,173		—		—		1,173
Change associated with foreign currency translation		—		1,583		—		1,583
Change associated with current period hedging		—		—		(1,509)		(1,509)
Reclassification into earnings		—		—		199		199
Balance at September 30, 2019	$	1,173	$	244	$	(8,010)	$	(6,593)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		134		—		—		134
Change associated with foreign currency translation		—		1,728		—		1,728
Change associated with current period hedging		—		—		289		289
Reclassification into earnings		—		—		1,024		1,024
Balance at December 31, 2019	$	1,307	$	1,972	$	(6,697)	$	(3,418)
Balance at March 31, 2020	$	—	$	(7,084)	$	(288)	$	(7,372)
Change associated with foreign currency translation		—		6,353		—		6,353
Change associated with current period hedging		—		—		(4,459)		(4,459)
Reclassification into earnings		—		—		275		275
Balance at June 30, 2020	$	—	$	(731)	$	(4,472)	$	(5,203)
Change associated with foreign currency translation		—		5,221		—		5,221
Change associated with current period hedging		—		—		(2,277)		(2,277)
Reclassification into earnings		—		—		281		281
Balance at September 30, 2020	$	—	$	4,490	$	(6,468)	$	(1,978)
Change associated with foreign currency translation		—		11,526		—		11,526
Change associated with current period hedging		—		—		(383)		(383)
Reclassification into earnings		—		—		302		302
Balance at December 31, 2020	$	—	$	16,016	$	(6,549)	$	9,467

Effective April 1, 2019, the Joint Venture adopted FASB ASU No. 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017.  The adoption of this update resulted in a reclassification between accumulated other comprehensive income (loss) and accumulated earnings (deficit).  

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Incentive Compensation Plans

9 Months Ended

Dec. 31, 2020

Incentive Compensation Plans [Abstract]

Incentive Compensation Plans

17. Incentive Compensation Plans

Long Term Incentive Plan Awards

In connection with the Omnibus Incentive Plan, during the nine months ended December 31, 2020, we granted to our employees and directors one or a combination of time-vesting restricted stock units, cash settled restricted stock units, and performance stock units under vesting terms that generally vary from one to four years from the date of grant.

Restricted Stock Units (“RSUs”) – We granted 107,520  and 5,832,321  RSUs during the three and nine months ended December  31, 2020, respectively. The RSUs are subject to either a graded vesting schedule over four years or a one-year cliff vesting schedule, depending on the terms of the specific award.  Upon vesting, the RSUs are exchanged for shares of common stock.

Cash Settled Restricted Stock Units (“CSRSUs”) – We granted zero and 172,524 CSRSUs during the three and nine months ended December  31, 2020, respectively. The CSRSUs vest 100% upon the one-year anniversary of the date of grant. Upon vesting, we are required to pay cash in settlement of such CSRSUs based on their fair value at the date such CSRSUs vest.

Performance Stock Units (“PSUs”) – We granted 1,177,152 PSUs during the three and nine months ended December 31, 2020. The PSUs consist of two tranches, one for which vesting varies based on the Company’s compounded annual revenue growth rate over a three year period in comparison to a target percentage and one for which vesting varies based on the Company’s compounded annual Adjusted EBITDA growth rate over a three year period in comparison to a target percentage. The awards earned upon satisfaction of the performance conditions become vested on the third anniversary of the vesting commencement date of the award. The Company recognizes compensation expense for the PSUs based on the number of awards that are considered probable to vest. Recognition of expense is based on the probability of achievement of performance targets and is periodically reevaluated.

We recognized compensation expense related to these awards granted during the three and nine months ended December  31, 2020 of $5,518 and $10,971, respectively. At December 31, 2020, aggregate unrecognized compensation expense related to these awards was $73,859.

eRx Awards

Upon completion of the eRx acquisition all outstanding eRx equity awards were canceled. Holders of eRx stock options and vested eRx stock appreciation rights were able to elect to receive consideration in the form of a cash payment or vested stock appreciation rights of the Company. For those individuals with unvested eRx equity awards, we elected to issue replacement awards with vesting and exercisability terms generally identical to the existing eRx awards which were replaced. These replacement awards granted under the Omnibus Incentive Plan consisted of unvested restricted share units (“eRx RSUs”) and unvested stock appreciation rights (“eRx SARs”) with terms identical to the original eRx awards. The awards vest subject to the employee’s continued employment through the date when Blackstone has sold at least 25% of the maximum number of shares held by it (i.e., a liquidity event) and achieved specified rates of return that vary by award. Upon vesting, we are required to pay cash in settlement of such eRx awards based on their fair value at the date of such vesting. During the three and nine months ended December  31, 2020, we recognized compensation expense related to eRx awards granted under the Omnibus Incentive Plan of $208  and $1,675, respectively. At December 31, 2020, aggregate unrecognized compensation expense related to these awards was $1,185.

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Related Party Transactions

9 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

18. Related Party Transactions

eRx Option Agreement

Prior to the creation of the Joint Venture, we entered into an option agreement to acquire eRx (the “Option Agreement”). Under the terms of the Option Agreement, the option to acquire eRx would only become exercisable at any such time that McKesson owns (directly or indirectly), in the aggregate, less than 5% of the outstanding units of the Joint Venture. Subsequent to the Merger, the Option became exercisable and was exercised on May 1, 2020. See Note 4, Business Combinations, for additional information.

Transition Services Agreements

In connection with the creation of the Joint Venture, we entered into transition services agreements with eRx. Under the agreements, we provided certain transition services to eRx in exchange for specified fees. Prior to the acquisition of eRx, we recognized $283 and $0in transition feeincome during the nine months ended December 31, 2020 and 2019, respectively.  We recognized $0 in transition fee income during the three months ended December 31, 2020 and 2019. The amounts received are included in Other, net in the consolidated statement of operations.

Employer Healthcare Program Agreement with Equity Healthcare

Effective January 1, 2014, we entered into an employer health program agreement with Equity Healthcare LLC (“EquityHealthcare”), an affiliate of Blackstone, whereby Equity Healthcare provides certain negotiating, monitoring and otherservices in connection with our health benefit plans. In consideration for Equity Healthcare’s services, we pay a fee of $1.00 per participating employee per month.

Term Loans Held by Related Party

Certain investment funds managed by GSO Capital Partners LP (the“GSO-managed funds”) held a portion of the term loans under our Senior Credit Facilities. GSO Advisor Holdings LLC (“GSO Advisor”) is the generalpartner of GSO Capital Partners LP and Blackstone, indirectly through its subsidiaries, holds all of the issued and outstanding equity interests of GSOAdvisor. As of December 31, 2020 and March 31, 2020, the GSO-managed funds held $168,200 and $151,301,respectively, in principal amount of the Senior CreditFacilities (none of which is classified within current portion of long-term debt).

Transactions with Blackstone Portfolio Companies

We provide various services to, and purchase services from, certain Blackstone portfolio companies under contracts thatwere executed in the normal course of business. The following is a summary of revenue recognized/amounts paid related to service provided to/from Blackstone portfolio companies:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Revenue recognized related to services provided	$	934	$	—	$	2,815	$	—
Amount paid related to services received	$	3,883	$	—	$	13,341	$	—

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Segment Reporting

9 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment Reporting

19. Segment Reporting

Management views the Company’s operating results based on three reportable segments: (a) Software and Analytics, (b) Network Solutions and (c) Technology-Enabled Services.

Software and Analytics

The Software and Analytics segment provides solutions for revenue cycle management, provider network management, payment accuracy, value-based payments, clinical decision support, consumer engagement, risk adjustment and quality performance, and imaging and clinical workflow.

Network Solutions

The Network Solutions segment provides solutions for financial, administrative, clinical and pharmacy transactions, electronic payments and aggregation and analytics of clinical and financial data.

Technology-Enabled Services

The Technology-Enabled Services segment provides solutions for financial and administrative management, value-based care, communication and payment, pharmacy benefits administration and healthcare consulting.

Postage and Eliminations

Postage and eliminations includes pass-through postage costs, as well as eliminations to remove inter-segment revenue and expenses and consolidating adjustments to classify certain rebates paid to channel partners as a reduction of revenue. These administrative costs are excluded from the adjusted EBITDA measure for each respective reportable segment.

Segment Results

Revenue and adjusted EBITDA for each of the reportable segments for the three and nine months endedDecember  31, 2020 are shown below.  Information is reflected in the manner utilized by management to make operating decisions, assess performance and allocate resources. Such amounts include allocations of corporate shared services functions that are essential to the core operations of the reportable segments. Segment assets and related depreciation expenses are not presented to management for purposes of operational decision making, and therefore are not included in the accompanying tables.

	Three Months Ended		Nine Months Ended
	December 31, 2020		December 31, 2020
Segment Revenue
Software and Analytics	$	372,212	$	1,118,661
Network Solutions		192,588		519,509
Technology-Enabled Services		222,514		642,037
Postage and Eliminations (1)		22,006		73,142
Purchase Accounting Adjustment (2)		(24,179)		(118,088)
Net Revenue	$	785,141	$	2,235,261
Segment Adjusted EBITDA
Software and Analytics	$	120,779	$	382,103
Network Solutions		103,847		268,858
Technology-Enabled Services		8,798		11,158
Adjusted EBITDA	$	233,424	$	662,119
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Income (loss) before income tax provision (benefit)	$	(2,366)	$	(130,531)
Amortization of capitalized software developed for sale		460		550
Depreciation and amortization		151,143		436,552
Interest expense		61,439		185,733
Equity compensation		10,944		34,858
Acquisition accounting adjustments		20,601		103,826
Acquisition and divestiture-related costs		2,661		10,119
Integration and related costs		9,688		27,581
Strategic initiatives, duplicative and transition costs		4,324		13,169
Severance costs		2,591		10,467
Accretion and changes in estimate, net		(2,759)		8,429
Impairment of long-lived assets and other		658		14,418
Gain on sale of businesses		(32,217)		(60,487)
Contingent consideration		—		(3,000)
Loss on extinguishment of debt		6,145		7,634
Other non-routine, net		112		2,801
Adjusted EBITDA	$	233,424	$	662,119

⁽¹⁾ Revenue for the Postage and Eliminations segment includes postage revenue of $49,877 and $145,672 for the three and nine months ended December  31, 2020, respectively.

⁽²⁾ Amount reflects the impact to deferred revenue resulting from the Merger which reduced revenue recognized during the period.

Prior to the Merger, the Company had minimal operations outside of the investment in the Joint Venture and the Company’s standalone operating results were not utilized by management to make operating decisions, assess performance, or allocate resources. As such, the Company reported its results as a single reportable segment for the three and nine months ended December 31, 2019.

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Subsequent Events

9 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

20. Subsequent Events

On January 5, 2021, the Company entered into a definitive agreement and plan of merger with UnitedHealth Group Incorporated (“UnitedHealth Group”) under which UnitedHealth Group will acquire all outstanding shares of the Company (“the transaction”). The agreement calls for the acquisition of the Company’s common stock for $25.75 per share in cash and is expected to close in the second half of 2021, subject to Company shareholders’ approval, regulatory approvals and other customary closing conditions. No accounting adjustments related to this transaction were recorded in the three months ended December 31, 2020. Agreements related to the transaction are included as exhibits to this Form 10-Q.

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Significant Accounting Policies (Policy)

9 Months Ended

Dec. 31, 2020

Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) Guidelines, Rules and Regulations and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. All intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements.

Business Combinations

Business Combinations

We recognize the consideration transferred (i.e., purchase price) in a business combination, as well as the acquired business’ identifiable assets, liabilities and noncontrolling interests at their acquisition date fair value. The excess of the consideration transferred over the fair value of the identifiable assets, liabilities and noncontrolling interest, if any, is recorded as goodwill. Any excess of the fair value of the identifiable assets acquired and liabilities assumed over the consideration transferred, if any, is generally recognized within earnings as of the acquisition date.

The fair values of the consideration transferred, assets, liabilities and noncontrolling interests are estimated based on one or a combination of income, cost or market approaches as determined based on the nature of the asset or liability and the level of inputs available (i.e., quoted prices in an active market, other observable inputs or unobservable inputs). To the extent our initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are reported for those items which are incomplete.

In conjunction with business combinations, we generally recognize goodwill attributable to the assembled workforce and expected synergies among the operations of the acquired entities and our existing operations. Goodwill is generally deductible for federal income tax purposes when a business combination is treated as an asset purchase and is generally not deductible for federal income tax purposes when a business combination is treated as a stock purchase. See Note 4, Business Combinations.

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses of $24,003  and $22,360 at December  31, 2020 and March 31, 2020, respectively, were primarily based on historical credit loss experience, current conditions and adjustments for certain asset-specific risk characteristics. The following table summarizes activity related to the allowance for credit losses:

	Nine Months Ended December 31,
	2020		2019
Balance at beginning of period	$	22,360	$	—
Cumulative effect of accounting change-ASU 2016-13		417		—
Acquisitions and Dispositions (1)		(3,534)		—
Provisions		11,623		—
Write-offs		(6,863)		—
Balance at end of period	$	24,003	$	—

⁽¹⁾ Amount relates primarily to the acquisitions of eRx and PDX and sales of Connected Analytics and Capacity Management. See Note 4, Business Combinations and Note 5, Dispositions.  

Leases

Leases

We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains an operating or finance lease, at the commencement date, we record a right-of-use asset and a corresponding lease liability based on the present value of the minimum lease payments.

As most of our leases do not provide an implicit borrowing rate, to determine the present value of lease payments, we use the portfolio approach and determine our hypothetical secured borrowing rate based on information available at lease commencement. Further, we make certain estimates and judgements regarding the lease term and lease payments, noted below.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, we are reasonably certain to exercise the option.

Certain of our lease agreements include rental payments that are adjusted periodically for inflation or passage of time. These step payments are included within our present value calculation as they are known adjustments at commencement. Some of our lease agreements include variable payments that are excluded from our present value calculation. For example, some of our equipment leases include a component which varies based on the asset’s use.

Additionally, we have lease agreements that include lease and non-lease components, such as equipment leases, which are generally accounted for as a single lease component. For these leases, lease payments include all fixed payments stated within the contract. For other leases, such as office space, lease and non-lease components are accounted for separately. Our lease agreements do not contain any material residual value guarantees that would impact our lease payments.

Recently Adopted Accounting Pronouncements and Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

Financial Instruments: Credit Losses

In April 2020, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-13, as amended by ASU No. 2018-19, which requires that a financial asset (or group of financial assets) measured at amortized cost be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance also requires us to pool assets with similar risk characteristics and consider current economic conditions when estimating losses. We adopted this standard using the modified retrospective approach and recorded a cumulative effect to retained earnings of $417 as of April 1, 2020. 

Fair Value Measurements

In April 2020, we adopted FASB ASU No. 2018-13, which modifies the disclosure requirements for fair value measurements. Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements. See Note 10, Fair Value Measurements.  

Hosting Arrangement Implementation Costs

In April 2020, we adopted FASB ASU No. 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update also requires that the effects of such capitalized costs be classified in the same respective caption in the statement of operations, balance sheet and cash flows as the underlying hosting arrangement. We adopted this standard prospectively beginning April 1, 2020. This adoption did not have a material impact on our financial statements for the three and nine months ended December 31, 2020.

Leases

In April 2020, we adopted FASB ASU No. 2016-02, which created Topic 842 – Leases (“ASC 842”).  The standard generally requires that all lease obligations be recognized on the balance sheet at the present value of the remaining lease payments with a corresponding right-of-use asset. In July 2018, the FASB issued ASU No. 2018-11 which provides companies with the option to apply this cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

Upon adoption, we elected the transition “practical expedients” permitting us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Additionally, we elected the practical expedient to not separate lease and non-lease components for equipment lease agreements.

We adopted ASC 842 using the modified retrospective approach and recorded right-of-use assets of $111,815 and lease liabilities of $125,331, primarily related to operating leases. The recognition of the right-of-use assets in combination with our previously recorded prepaid rent balances resulted in no requirement to adjust the opening balance of retained earnings. Our accounting for finance leases remains substantially unchanged. Adoption of ASC 842 did not materially impact our consolidated statement of operations and had no impact on our consolidated statement of cash flows. See Note 8, Leases, for additional information.

London Interbank Offered Rate (LIBOR) Reform

In March 2020, the FASB issued ASU No. 2020-04, which created Topic 848 – Reference Rate Reform. ASU No. 2020-04 contains optional practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts which may be elected over time as activities occur. Among other things, the ASU intends to ease the transition from LIBOR to an alternative reference rate. During the first quarter of fiscal year 2021, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impacts of ASU No. 2020-04 and may apply other elections as reference rate reform activities progress. 

Accounting Pronouncements Not Yet Adopted

None that are expected to have a material impact on our financial statements.

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Significant Accounting Policies (Tables)

9 Months Ended

Dec. 31, 2020

Significant Accounting Policies [Abstract]

Summary of Activity Related to Allowance for Credit Losses

	Nine Months Ended December 31,
	2020		2019
Balance at beginning of period	$	22,360	$	—
Cumulative effect of accounting change-ASU 2016-13		417		—
Acquisitions and Dispositions (1)		(3,534)		—
Provisions		11,623		—
Write-offs		(6,863)		—
Balance at end of period	$	24,003	$	—

⁽¹⁾ Amount relates primarily to the acquisitions of eRx and PDX and sales of Connected Analytics and Capacity Management. See Note 4, Business Combinations and Note 5, Dispositions.  

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Business Combinations (Tables)

9 Months Ended

Dec. 31, 2020

eRx Network Holdings, Inc. [Member]

Business Acquisition [Line Items]

Summary of Information Related to Acquisition

	eRx
Cash paid at closing	$	249,359
Fair value of eRx purchase option		140,500
Fair value of vested stock appreciation rights		5,097
Cash paid for canceled eRx equity awards		5,891
Total Consideration Fair Value at Acquisition Date	$	400,847
Allocation of the Consideration Transferred:
Cash	$	54,108
Accounts receivable, net of allowance of $326		12,747
Prepaid expenses and other current assets		609
Goodwill		225,156
Identifiable intangible assets:
Customer relationships (life 17 years)		131,200
Internally developed technology (life 9-12 years)		29,700
Other noncurrent assets		20
Accounts payable		(2,543)
Accrued expenses and other current liabilities		(10,933)
Deferred income tax liabilities		(39,217)
Total consideration transferred	$	400,847

PDX, Inc. [Member]

Business Acquisition [Line Items]

Summary of Information Related to Acquisition

	PDX
Cash	$	755
Accounts receivable, net of allowance of $1,092		5,739
Prepaid expenses and other current assets		2,251
Property and equipment		840
Goodwill		98,830
Identifiable intangible assets:
Customer relationships (life 18 years)		74,300
Technology-based intangible assets (life 10-11 years)		25,300
Other noncurrent assets		690
Accounts payable		(3,882)
Deferred revenue, current		(2,946)
Accrued expenses and other current liabilities		(3,364)
Other noncurrent liabilities		(222)
Total consideration transferred	$	198,291

The Merger [Member]

Business Acquisition [Line Items]

Summary of Information Related to Acquisition

Net Assets acquired
Cash	$	330,665
Accounts receivable, net of allowance of $22,059		718,895
Contract assets		132,704
Prepaid and other current assets		115,265
Investment in business purchase option		146,500
Property and equipment, net		206,751
Goodwill		4,357,560
Other noncurrent assets		169,539
Identified intangible assets:
Customer relationships (life 12-16 years)		3,056,000
Tradenames (life 18 years)		146,000
Technology-based intangible assets (life 6-12 years)		1,188,000
Drafts and accounts payable		(60,637)
Accrued expenses		(559,456)
Deferred revenue, current		(292,528)
Current portion of long-term debt		(28,969)
Other current liabilities		(22,732)
Long-term debt, excluding current portion		(4,713,565)
Deferred income tax liabilities		(574,988)
Tax receivable agreement obligations with related parties		(176,586)
Other long-term liabilities		(102,675)
Net Assets acquired	$	4,035,743
Summary of purchase consideration:
Fair value of shares issued to SpinCo shareholders
(175,995,192 shares at $12.47 per share):
Common Stock, $0.001 par value	$	176
Additional paid-in capital		2,194,484
Fair value of Joint Venture equity interest previously held		1,589,040
Fair value of Joint Venture equity interest previously held through TEUs		216,764
Settlement of dividend receivable		42,778
Repayment of advances to member		(7,499)
Purchase consideration	$	4,035,743

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Goodwill (Tables)

9 Months Ended

Dec. 31, 2020

Goodwill [Abstract]

Schedule of Goodwill

	Software and Analytics		Network Solutions		Technology-Enabled Services		Total
Balance at March 31, 2020	$	1,770,118	$	1,645,831	$	379,376	$	3,795,325
Acquisitions (1)		22,341		323,986		—		346,327
Dispositions		(51,136)		—		—		(51,136)
Effects of foreign currency		17,926		—		—		17,926
Adjustments (2)		(1,637)		(1,081)		(311)		(3,029)
Balance at December 31, 2020	$	1,757,612	$	1,968,736	$	379,065	$	4,105,413

⁽¹⁾ Amounts relate primarily to the acquisitions of eRx, PDX and Nucleus.io. See Note 4, Business Combinations.  

⁽²⁾ Amounts relate to fair value adjustments to the assets acquired and liabilities assumed in the Merger. See Note 4, Business Combinations.

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Equity Method Investment in Change Healthcare LLC (Tables)

9 Months Ended

Dec. 31, 2020

Equity Method Investment in Change Healthcare LLC [Abstract]

Summarized Financial Information of the Joint Venture

		Three Months Ended		Nine Months Ended
		December 31, 2019		December 31, 2019
Total revenue	$	808,226	$	2,459,593
Cost of operations (exclusive of depreciation and amortization)	$	339,413	$	998,943
Customer postage	$	55,693	$	171,288
Net income (loss)	$	31,191	$	102,973

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Leases (Tables)

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Components of Lease Cost

		Three Months Ended		Nine Months Ended
	Statement of Operations Location	December 31, 2020		December 31, 2020
Operating lease cost	(1)	$	9,951	$	32,109
Finance lease cost
Amortization expense	Depreciation and amortization		110		312
Interest expense	Interest expense, net		35		102
Short-term lease cost	(1)		261		747
Variable lease cost	(1)		1,524		5,275
Sublease income	Other, net		(172)		(834)
Total lease cost		$	11,709	$	37,711

⁽¹⁾ Cost classification varies depending on the leased asset. Costs are primarily included within sales, marketing, general and administrative and cost of operations.  

Right-of-use Assets and Lease Liabilities

	Balance Sheet Location	December 31, 2020
Right-of-use assets
Operating leases	Operating lease right-of-use assets, net	$	99,258
Finance leases	Property and equipment, net		1,975
Total right-of-use assets		$	101,233
Lease liabilities
Current liabilities
Operating leases	Current portion of operating lease liabilities	$	30,813
Finance leases	Current portion of long-term debt		577
Noncurrent liabilities
Operating leases	Long-term operating lease liabilities		80,789
Finance leases	Long-term debt, excluding current portion		1,373
Total lease liabilities		$	113,552

Supplemental Cash Flow Information

	Nine Months Ended December 31, 2020
	Operating Leases			Finance Leases
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	31,331	$	102
Financing cash flows	$	—	$	490
Non-cash activities
Right-of-use assets obtained in exchange for lease liabilities  (1)	$	11,846	$	363

⁽¹⁾ Amounts exclude the impact of adopting ASC 842. See Note 2, Significant Accounting Policies.  

Lease Liability Maturities

Maturities of lease liabilities by fiscal year as of December 31, 2020 are as follows:

	Operating Leases			Finance Leases		Total
Remainder of 2021	$	10,022	$	183	$	10,205
2022		36,697		664		37,361
2023		27,580		485		28,065
2024		19,037		468		19,505
2025		14,011		390		14,401
2026 and thereafter		25,501		—		25,501
Total lease liabilities, undiscounted		132,848		2,190		135,038
Less: Imputed interest		21,246		240		21,486
Total lease liabilities	$	111,602	$	1,950	$	113,552

Maturities of lease liabilities by fiscal year as of March 31, 2020 were as follows:

	Operating Leases			Finance Leases		Total
2021	$	40,476	$	468	$	40,944
2022		34,750		468		35,218
2023		23,761		468		24,229
2024		15,393		468		15,861
2025		10,780		390		11,170
2026 and thereafter		15,850		—		15,850
Total lease liabilities, undiscounted	$	141,010	$	2,262	$	143,272

Other Information Related to Leases

	Operating Leases		Finance Leases
Weighted-average remaining lease term	4.79 years		3.70 years
Weighted-average discount rate	7.39	%	6.53	%

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Interest Rate Cap Agreements (Tables)

9 Months Ended

Dec. 31, 2020

Interest Rate Cap Agreements [Abstract]

Schedule of Fair Value of Derivative Instruments

	Fair Values of Derivative Financial Instruments
	Asset (Liability)
Derivative financial instruments designated as hedging instruments:	Balance Sheet Location	December 31, 2020		March 31, 2020
Interest rate cap agreements	Accrued expenses		(28,985)		(28,131)
Interest rate cap agreements	Other long-term liabilities		(3,288)		(19,277)
Total		$	(32,273)	$	(47,408)

Schedule of Effect of Derivative Instruments on Statement of Operations

	Three Months Ended December 31,					Nine Months Ended December 31,
Derivative financial instruments in cash flow hedging relationships:	2020		2019		2020		2019
Gain/(loss) related to derivative financial instruments recognized in other comprehensive income (loss)	$	(383)	$	—	$	(7,119)	$	—
Gain/(loss) related to portion of derivative financial instruments reclassified from accumulated other comprehensive income (loss) to interest expense	$	302	$	—	$	858	$	—

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Fair Value Measurements (Tables)

9 Months Ended

Dec. 31, 2020

Fair Value Measurements [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

			Quoted in		Significant Other		Significant
	Balance at		Identical Markets		Observable Inputs		Unobservable Inputs
Description	December 31, 2020		(Level 1)		(Level 2)		(Level 3)
Interest rate cap agreements	$	(32,273)	$	—	$	(32,273)	$	—
Contingent consideration obligation		—		—		—		—
Total	$	(32,273)	$	—	$	(32,273)	$	—

			Quoted in		Significant Other		Significant
	Balance at		Identical Markets		Observable Inputs		Unobservable Inputs
Description	March 31, 2020		(Level 1)		(Level 2)		(Level 3)
Interest rate cap agreements	$	(47,408)	$	—	$	(47,408)	$	—
Contingent consideration obligation		(3,000)		—		—		(3,000)
Total	$	(50,408)	$	—	$	(47,408)	$	(3,000)

Reconciliation of Fair Value Derivative Using Unobservable Inputs

		Three Months Ended December 31,			Nine Months Ended December 31,
	2020		2019		2020			2019
Balance at beginning of period	$	—	$	—	$	(3,000)	$	—
Gain/(loss) included in contingent consideration		—		—		3,000		—
Balance at end of period	$	—	$	—	$	—	$	—

Carrying Amount and Estimated Fair Value of Financial Instruments

	December 31, 2020				March 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	137,357	$	137,357	$	410,405	$	410,405
Accounts receivable	$	697,948	$	697,948	$	740,105	$	740,105
Investment in business purchase option	$	—	$	—	$	146,500	$	146,500
Senior Credit Facilities (Level 2)	$	3,447,156	$	3,529,963	$	3,682,457	$	3,452,687
Senior Notes (Level 2)	$	1,317,689	$	1,348,188	$	997,772	$	950,000
Debt component of tangible equity units (Level 2)	$	24,268	$	24,801	$	35,431	$	34,806

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Long-Term Debt (Tables)

9 Months Ended

Dec. 31, 2020

Long-Term Debt [Abstract]

Schedule of Long-Term Debt

	December 31, 2020			March 31, 2020
Senior Credit Facilities
$5,100,000 Term Loan Facility, due March 1, 2024, net of unamortized discount of $96,094 and $125,793 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 4.42% and 4.42%, respectively)	$	3,447,156	$		3,682,457
$785,000 Revolving Facility, expiring July 3, 2024, and bearing interest at a variable interest rate (1)		—			250,000
Senior Notes
$1,325,0005.75% Senior Notes due March 1, 2025, net of unamortized discount of $7,311 and $2,228 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 5.90% and 5.80%, respectively)		1,317,689			997,772
Tangible Equity Unit Senior Amortizing Note
$47,367 Senior Amortizing Notes due June 30, 2022, net of unamortized discount of $405 and $842 at December 31, 2020 and March 31, 2020, respectively (effective interest rate of 7.44% and 7.44%, respectively)		24,268			35,431
Other		28,734			23,413
Less current portion		(37,019)			(278,779)
Long-term debt	$	4,780,828	$		4,710,294

⁽¹⁾ The weighted average interest rate at March 31, 2020 was 3.25%.

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Net Income (Loss) Per Share (Tables)

9 Months Ended

Dec. 31, 2020

Net Income (Loss) Per Share [Abstract]

Computation of Basic Net Income (Loss) Per Share of Common Stock

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Numerator:
Net income (loss)	$	2,196	$	50,735	$	(99,120)	$	(80,716)
Denominator:
Weighted average common shares outstanding		304,547,891		124,962,970		304,104,388		108,371,642
Minimum shares issuable under purchase contracts		16,465,704		18,429,325		16,465,704		12,286,217
Total weighted average shares outstanding		321,013,595		143,392,295		320,570,092		120,657,859
Basic net income (loss) per share	$	0.01	$	0.35	$	(0.31)	$	(0.67)
Diluted net income per share:
Numerator:
Net income (loss)	$	2,196	$	50,735	$	(99,120)	$	(80,716)
Denominator:
Number of shares used in basic computation		321,013,595		143,392,295		320,570,092		120,657,859
Weighted average effect of dilutive securities
Dilutive shares issuable under purchase contracts		—		1,450,910		—		—
Time-Vesting Options		932,344		1,059,868		—		—
Restricted Share Units		2,753,810		289,537		—		—
Deferred Stock Units		95,624		9,250		—		—
Employee Stock Purchase Program Shares		20,151		—		—		—
		324,815,524		146,201,860		320,570,092		120,657,859
Diluted net income (loss) per share	$	0.01	$	0.35	$	(0.31)	$	(0.67)

Antidilutive Securities Excluded from Diluted Net Income (Loss) Per Share

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Dilutive shares issuable under purchase contracts		—		—		1,579,991		1,712,220
Time-Vesting Options		—		—		766,432		1,290,327
Restricted Share Units		—		—		2,360,586		605,830
Deferred Stock Units		—		—		81,983		6,167

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Tax Receivable Agreements (Tables)

9 Months Ended

Dec. 31, 2020

McKesson Tax Receivable Agreement [Member]

Related Party Transaction [Line Items]

Aggregate Payments Due Under Tax Receivable Agreements

	Related Party Tax Receivable Agreements		McKesson Tax Receivable Agreement		Other Tax Receivable Agreements		Total
Remainder of 2021	$	—	$	—	$	—	$	—
2022		11,606		128		10,788		22,522
2023		11,349		35,992		10,722		58,063
2024		23,421		7,368		13,549		44,338
2025		50,772		23,836		20,004		94,612
Thereafter		83,221		92,192		61,192		236,605
Gross expected payments		180,369		159,516		116,255		456,140
Less: Amounts representing discount		(69,149)		—		(36,561)		(105,710)
Total tax receivable agreement obligation		111,220		159,516		79,694		350,430
Less: Current portion due (included in accrued expenses)		(11,606)		(128)		(10,788)		(22,522)
Tax receivable agreement long-term obligation	$	99,614	$	159,388	$	68,906	$	327,908

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Income Taxes (Tables)

9 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Summary of Income Tax Information

	Three Months Ended December 31,				Nine Months Ended December 31,
		2020		2019		2020		2019
Income tax provision (benefit)	$	(4,562)	$	15,240	$	(31,411)	$	(564)
Effective tax rate		192.8%		23.1%		24.1%		0.7%

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Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Dec. 31, 2020

Accumulated Other Comprehensive Income (Loss) [Abstract]

Summary of Accumulated Other Comprehensive Income (Loss)

	Available		Foreign Currency				Accumulated Other
	For Sale		Translation		Cash Flow		Comprehensive
	Debt Security		Adjustment		Hedge		Income (Loss)
Balance at March 31, 2019	$	—	$	(1,565)	$	(1,691)	$	(3,256)
Cumulative effect of accounting change of the Joint Venture-ASU 2018-02		—		—		422		422
Change associated with foreign currency translation		—		226		—		226
Change associated with current period hedging		—		—		(5,117)		(5,117)
Reclassification into earnings		—		—		(314)		(314)
Balance at June 30, 2019	$	—	$	(1,339)	$	(6,700)	$	(8,039)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		1,173		—		—		1,173
Change associated with foreign currency translation		—		1,583		—		1,583
Change associated with current period hedging		—		—		(1,509)		(1,509)
Reclassification into earnings		—		—		199		199
Balance at September 30, 2019	$	1,173	$	244	$	(8,010)	$	(6,593)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture		134		—		—		134
Change associated with foreign currency translation		—		1,728		—		1,728
Change associated with current period hedging		—		—		289		289
Reclassification into earnings		—		—		1,024		1,024
Balance at December 31, 2019	$	1,307	$	1,972	$	(6,697)	$	(3,418)
Balance at March 31, 2020	$	—	$	(7,084)	$	(288)	$	(7,372)
Change associated with foreign currency translation		—		6,353		—		6,353
Change associated with current period hedging		—		—		(4,459)		(4,459)
Reclassification into earnings		—		—		275		275
Balance at June 30, 2020	$	—	$	(731)	$	(4,472)	$	(5,203)
Change associated with foreign currency translation		—		5,221		—		5,221
Change associated with current period hedging		—		—		(2,277)		(2,277)
Reclassification into earnings		—		—		281		281
Balance at September 30, 2020	$	—	$	4,490	$	(6,468)	$	(1,978)
Change associated with foreign currency translation		—		11,526		—		11,526
Change associated with current period hedging		—		—		(383)		(383)
Reclassification into earnings		—		—		302		302
Balance at December 31, 2020	$	—	$	16,016	$	(6,549)	$	9,467

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Related Party Transactions (Tables)

9 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Summary of Revenue Recognized/Amounts Paid Related to Service Provided to/from Portfolio Companies

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Revenue recognized related to services provided	$	934	$	—	$	2,815	$	—
Amount paid related to services received	$	3,883	$	—	$	13,341	$	—

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Segment Reporting (Tables)

9 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Revenue and Adjusted EBITDA for each Reportable Segment

	Three Months Ended		Nine Months Ended
	December 31, 2020		December 31, 2020
Segment Revenue
Software and Analytics	$	372,212	$	1,118,661
Network Solutions		192,588		519,509
Technology-Enabled Services		222,514		642,037
Postage and Eliminations (1)		22,006		73,142
Purchase Accounting Adjustment (2)		(24,179)		(118,088)
Net Revenue	$	785,141	$	2,235,261
Segment Adjusted EBITDA
Software and Analytics	$	120,779	$	382,103
Network Solutions		103,847		268,858
Technology-Enabled Services		8,798		11,158
Adjusted EBITDA	$	233,424	$	662,119
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Income (loss) before income tax provision (benefit)	$	(2,366)	$	(130,531)
Amortization of capitalized software developed for sale		460		550
Depreciation and amortization		151,143		436,552
Interest expense		61,439		185,733
Equity compensation		10,944		34,858
Acquisition accounting adjustments		20,601		103,826
Acquisition and divestiture-related costs		2,661		10,119
Integration and related costs		9,688		27,581
Strategic initiatives, duplicative and transition costs		4,324		13,169
Severance costs		2,591		10,467
Accretion and changes in estimate, net		(2,759)		8,429
Impairment of long-lived assets and other		658		14,418
Gain on sale of businesses		(32,217)		(60,487)
Contingent consideration		—		(3,000)
Loss on extinguishment of debt		6,145		7,634
Other non-routine, net		112		2,801
Adjusted EBITDA	$	233,424	$	662,119

⁽¹⁾ Revenue for the Postage and Eliminations segment includes postage revenue of $49,877 and $145,672 for the three and nine months ended December  31, 2020, respectively.

⁽²⁾ Amount reflects the impact to deferred revenue resulting from the Merger which reduced revenue recognized during the period.

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Nature of Business and Organization (Narrative) (Details) $ / shares in Units, $ in Thousands			9 Months Ended
	Jul. 01, 2019 USD ($) shares	Jun. 26, 2019 $ / shares shares	Dec. 31, 2020 $ / shares shares	Dec. 31, 2019 USD ($)	Mar. 31, 2020 $ / shares shares
Organization, Consolidation and Presentation of Financial Statements [Line Items]
Stock split conversion ratio		126.4
Common Stock, shares authorized		9,000,000,000	9,000,000,000		9,000,000,000
Common Stock, par value | $ / shares		$ 0.001	$ 0.001		$ 0.001
Preferred stock, shares authorized		900,000,000	900,000,000		900,000,000
Preferred stock, par value | $ / shares		$ 0.001	$ 0.001		$ 0.001
Share offering	49,285,713
Proceeds from initial public offering | $	$ 608,679			$ 608,679
Common Class X [Member]
Organization, Consolidation and Presentation of Financial Statements [Line Items]
Common Stock, shares authorized		1
Common Stock, par value | $ / shares		$ 0.001
Tangible Equity Units [Member]
Organization, Consolidation and Presentation of Financial Statements [Line Items]
Tangible equity unit offering	5,750,000
Proceeds from tangible equity units | $	$ 278,875
Change Healthcare LLC [Member]
Organization, Consolidation and Presentation of Financial Statements [Line Items]
Ownership percentage			100.00%

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Significant Accounting Policies (Narrative) (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2020 USD ($) item	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)
Significant Accounting Policies [Line Items]
Allowance for credit losses	$ 24,003			$ 22,360
Cumulative effect	3,233,738	$ 3,209,250	$ 3,239,354	3,285,447	1,950,131	$ 1,886,107	$ 1,131,424	1,132,487
ROU assets	99,258
Operating lease liability	$ 111,602
Minimum [Member]
Significant Accounting Policies [Line Items]
Number of lease renewal options | item	1
Lease renewal option, extension period	1 month
Maximum [Member]
Significant Accounting Policies [Line Items]
Lease renewal option, extension period	1 year
Accumulated Deficit [Member]
Significant Accounting Policies [Line Items]
Cumulative effect	$ (1,029,601)	$ (1,031,797)	$ (989,175)	(930,064)	$ (63,183)	$ (113,918)	$ (19,983)	(17,841)
ASC 842 [Member]
Significant Accounting Policies [Line Items]
ROU assets				111,815
Operating lease liability				125,331
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Significant Accounting Policies [Line Items]
Allowance for credit losses				417
Cumulative effect				(417)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member] | Accumulated Deficit [Member]
Significant Accounting Policies [Line Items]
Cumulative effect				$ (417)

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Significant Accounting Policies (Summary of Activity Related to Allowance for Credit Losses) (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounts Receivable, Allowance for Credit Loss [Line Items]
Balance at beginning of period	$ 22,360
Acquisitions and Dispositions	(3,534)
Provisions	11,623
Write-offs	(6,863)
Balance at end of period	24,003
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2016-13 [Member]
Accounts Receivable, Allowance for Credit Loss [Line Items]
Balance at beginning of period	$ 417

XML

Revenue Recognition (Narrative) (Details)	3 Months Ended	9 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)
Revenue from Contract with Customer [Line Items]
Percentage of deferred revenue balance expected to be recognized in one year or less		94.00%
Deferred revenue recognized		$ 245,760,000
Customer contracts, impairment loss	$ 0	0
Remaining performance obligation	$ 1,507,154,000	$ 1,507,154,000
Over Time [Member]
Revenue from Contract with Customer [Line Items]
Percentage of revenue recognized	98.00%	96.00%
Point in Time [Member]
Revenue from Contract with Customer [Line Items]
Percentage of revenue recognized	2.00%	4.00%
Prepaid and Other Current Assets [Member] | Obtain Contract [Member]
Revenue from Contract with Customer [Line Items]
Capitalized contract costs, current	$ 4,339,000	$ 4,339,000
Prepaid and Other Current Assets [Member] | Fulfill Contract [Member]
Revenue from Contract with Customer [Line Items]
Capitalized contract costs, current	3,287,000	3,287,000
Other Noncurrent Assets [Member] | Obtain Contract [Member]
Revenue from Contract with Customer [Line Items]
Capitalized contract costs, noncurrent	27,502,000	27,502,000
Other Noncurrent Assets [Member] | Fulfill Contract [Member]
Revenue from Contract with Customer [Line Items]
Capitalized contract costs, noncurrent	$ 18,072,000	$ 18,072,000

XML

Revenue Recognition (Remaining Performance Obligation - Narrative) (Details)	Dec. 31, 2020
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-30
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected satisfaction, period	12 months
Remaining performance obligation, percentage	49.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-09-30
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected satisfaction, period	1 year
Remaining performance obligation, percentage	51.00%

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Business Combinations (eRx Network Holdings, Inc. - Narrative) (Details) $ in Thousands	May 01, 2020 USD ($)
Business Acquisition [Line Items]
Remeasurement loss	$ 6,000
eRx Network Holdings, Inc. [Member]
Business Acquisition [Line Items]
Ownership percentage acquired in exchange	100.00%

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Business Combinations (PDX, Inc. - Narrative) (Details) - PDX, Inc. [Member] - USD ($) $ in Thousands		9 Months Ended
	Jun. 01, 2020	Dec. 31, 2020
Business Acquisition [Line Items]
Ownership percentage acquired in exchange	100.00%
Total consideration	$ 198,291
Maximum [Member]
Business Acquisition [Line Items]
Purchase price allocation period after acquisition		1 year

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Business Combinations (Nucleus.io - Narrative) (Details) - USD ($) $ in Thousands	1 Months Ended
	Aug. 31, 2020	Dec. 31, 2020	Mar. 31, 2020
Business Acquisition [Line Items]
Goodwill		$ 4,105,413	$ 3,795,325
Nucleus.io [Member]
Business Acquisition [Line Items]
Total consideration	$ 35,120
Goodwill	22,341
Technology-Based Intangible Assets [Member] | Nucleus.io [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 11,700

XML

Business Combinations (The Merger - Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended	9 Months Ended
	Mar. 10, 2020	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Jun. 26, 2019
Business Acquisition [Line Items]
Common Stock, par value				$ 0.001		$ 0.001	$ 0.001
Loss from Equity Method Investment in the Joint Venture		$ 8,764	$ 104,497
Increase in deferred tax liability				$ (4,692)	$ 1,604
Joint Venture [Member] | Prior to Merger [Member]
Business Acquisition [Line Items]
Ownership percentage	42.00%
Percentage of remaining equity interest being acquired	58.00%
Loss from Equity Method Investment in the Joint Venture	$ 230,229
McKesson Common Stock [Member]
Business Acquisition [Line Items]
Common Stock, par value	$ 0.01
Number of shares of equity interests issued	15,426,537
SpinCo Common Stock [Member]
Business Acquisition [Line Items]
Common Stock, par value	$ 0.001
Number of shares of equity interests issued	175,995,192
Change Common Stock [Member]
Business Acquisition [Line Items]
Common Stock, par value	$ 0.001

XML

Business Combinations (eRx Network Holdings, Inc. - Summary of Information Related to Acquisition) (Details) - USD ($) $ in Thousands	May 01, 2020	Dec. 31, 2020	Mar. 31, 2020
Business Acquisition [Line Items]
Goodwill		$ 4,105,413	$ 3,795,325
eRx Network Holdings, Inc. [Member]
Business Acquisition [Line Items]
Cash paid at closing	$ 249,359
Fair value of eRx purchase option	140,500
Fair value of vested stock appreciation rights	5,097
Cash paid for canceled eRx equity awards	5,891
Total Consideration Fair Value at Acquisition Date	400,847
Cash	54,108
Accounts receivable, net of allowance for doubtful accounts	12,747
Prepaid expenses and other current assets	609
Goodwill	225,156
Other noncurrent assets	20
Accounts payable	(2,543)
Accrued expenses and other current liabilities	(10,933)
Deferred income tax liabilities	(39,217)
Total consideration transferred	400,847
Accounts receivable, allownace for doubtful accounts	326
Customer Relationships [Member] | eRx Network Holdings, Inc. [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 131,200
Useful life	17 years
Internally Developed Technology [Member] | eRx Network Holdings, Inc. [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 29,700
Internally Developed Technology [Member] | eRx Network Holdings, Inc. [Member] | Minimum [Member]
Business Acquisition [Line Items]
Useful life	9 years
Internally Developed Technology [Member] | eRx Network Holdings, Inc. [Member] | Maximum [Member]
Business Acquisition [Line Items]
Useful life	12 years

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Business Combinations (PDX, Inc. - Summary of Information Related to Acquisition) (Details) - USD ($) $ in Thousands	Jun. 01, 2020	Dec. 31, 2020	Mar. 31, 2020
Business Acquisition [Line Items]
Goodwill		$ 4,105,413	$ 3,795,325
PDX, Inc. [Member]
Business Acquisition [Line Items]
Cash	$ 755
Accounts receivable, net of allowance for doubtful accounts	5,739
Prepaid expenses and other current assets	2,251
Property and equipment	840
Goodwill	98,830
Other noncurrent assets	690
Accounts payable	(3,882)
Deferred revenue, current	(2,946)
Accrued expenses and other current liabilities	(3,364)
Other long-term liabilities	(222)
Total consideration transferred	198,291
Accounts receivable, allownace for doubtful accounts	1,092
Customer Relationships [Member] | PDX, Inc. [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 74,300
Useful life	18 years
Technology-Based Intangible Assets [Member] | PDX, Inc. [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 25,300
Technology-Based Intangible Assets [Member] | PDX, Inc. [Member] | Minimum [Member]
Business Acquisition [Line Items]
Useful life	10 years
Technology-Based Intangible Assets [Member] | PDX, Inc. [Member] | Maximum [Member]
Business Acquisition [Line Items]
Useful life	11 years

XML

Business Combinations (The Merger - Summary of Information Related to Acquisition) (Details) - USD ($) $ / shares in Units, $ in Thousands	Mar. 10, 2020	Dec. 31, 2020	Mar. 31, 2020	Jun. 26, 2019
Business Acquisition [Line Items]
Goodwill		$ 4,105,413	$ 3,795,325
Common Stock, par value		$ 0.001	$ 0.001	$ 0.001
The Merger [Member]
Business Acquisition [Line Items]
Cash	$ 330,665
Accounts receivable, net of allowance for doubtful accounts	718,895
Contract assets	132,704
Prepaid expenses and other current assets	115,265
Investment in business purchase option	146,500
Property and equipment, net	206,751
Goodwill	4,357,560
Other noncurrent assets	169,539
Drafts and accounts payable	(60,637)
Accrued expenses	(559,456)
Deferred revenue, current	(292,528)
Current portion of long-term debt	(28,969)
Other current liabilities	(22,732)
Long-term debt, excluding current portion	(4,713,565)
Deferred income tax liabilities	(574,988)
Tax receivable agreement with related parties	(176,586)
Other long-term liabilities	(102,675)
Total consideration transferred	4,035,743
Accounts receivable, allownace for doubtful accounts	22,059
Fair value of shares issued to SpinCo shareholders (175,995,192 shares at $12.47 per share): Common Stock, $0.001 par value	176
Additional paid-in capital	2,194,484
Fair value of Joint Venture equity interest previously held	1,589,040
Fair value of Joint Venture equity interest previously held through TEUs	216,764
Settlement of dividend receivable	42,778
Repayment of advances to member	(7,499)
Purchase consideration	$ 4,035,743
Fair value of shares issued to SpinCo shareholders , shares	175,995,192
Fair value of shares issued to SpinCo shareholders, share price	$ 12.47
Common Stock, par value	$ 0.001
Customer Relationships [Member] | The Merger [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 3,056,000
Customer Relationships [Member] | The Merger [Member] | Minimum [Member]
Business Acquisition [Line Items]
Useful life	12 years
Customer Relationships [Member] | The Merger [Member] | Maximum [Member]
Business Acquisition [Line Items]
Useful life	16 years
Tradenames [Member] | The Merger [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 146,000
Useful life	18 years
Technology-Based Intangible Assets [Member] | The Merger [Member]
Business Acquisition [Line Items]
Identified intangible assets	$ 1,188,000
Technology-Based Intangible Assets [Member] | The Merger [Member] | Minimum [Member]
Business Acquisition [Line Items]
Useful life	6 years
Technology-Based Intangible Assets [Member] | The Merger [Member] | Maximum [Member]
Business Acquisition [Line Items]
Useful life	12 years

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Dispositions (Narrative) (Details) - USD ($) $ in Thousands			1 Months Ended	3 Months Ended	9 Months Ended
	Dec. 02, 2020	May 01, 2020	Jul. 31, 2020	Dec. 31, 2020	Dec. 31, 2020	Dec. 01, 2020	Sep. 30, 2020	Jun. 30, 2020	Apr. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net book value				$ 3,233,738	$ 3,233,738		$ 3,209,250	$ 3,239,354		$ 3,285,447	$ 1,950,131	$ 1,886,107	$ 1,131,424	$ 1,132,487
Gain on sale of business				$ 32,217	$ 60,487
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | Connected Analytics [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration		$ 55,000
Net book value									$ 22,619
Net accounts receivable									16,325
Goodwill									21,705
Deferred revenue									$ 17,133
Gain on sale of business		24,170
Payment received on notes receivable			$ 25,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | Connected Analytics [Member] | Notes Receivable [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Other noncurrent assets		$ 25,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | Capacity Management [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration	$ 67,500
Net book value						$ 31,599
Net accounts receivable						14,999
Goodwill						26,944
Deferred revenue						$ 15,230
Gain on sale of business	$ 32,655

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Goodwill (Schedule of Goodwill) (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2020 USD ($)
Goodwill [Line Items]
Balance at March 31, 2020	$ 3,795,325
Acquisitions	346,327
Dispositions	(51,136)
Effects of foreign currency	17,926
Adjustments	(3,029)
Balance at December 31, 2020	4,105,413
Software and Analytics [Member]
Goodwill [Line Items]
Balance at March 31, 2020	1,770,118
Acquisitions	22,341
Dispositions	(51,136)
Effects of foreign currency	17,926
Adjustments	(1,637)
Balance at December 31, 2020	1,757,612
Network Solutions [Member]
Goodwill [Line Items]
Balance at March 31, 2020	1,645,831
Acquisitions	323,986
Adjustments	(1,081)
Balance at December 31, 2020	1,968,736
Technology-Enabled Services [Member]
Goodwill [Line Items]
Balance at March 31, 2020	379,376
Adjustments	(311)
Balance at December 31, 2020	$ 379,065

XML

Equity Method Investment in Change Healthcare LLC (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2020
Joint Venture [Member]
Schedule of Equity Method Investments [Line Items]
Write-off of basis differences within Loss from Equity Method Investment in the Joint Venture	$ 8,764	$ 104,497

XML

Equity Method Investment in Change Healthcare LLC (Summarized Financial Information of the Joint Venture) (Details) - Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2020
Schedule of Equity Method Investments [Line Items]
Total revenue	$ 808,226	$ 2,459,593
Cost of operations (exclusive of depreciation and amortization)	339,413	998,943
Customer postage	55,693	171,288
Net income (loss)	$ 31,191	$ 102,973

XML

Leases (Narrative) (Details)	9 Months Ended
	Dec. 31, 2020
Minimum [Member]
Operating and finance lease terms	1 year
Maximum [Member]
Operating and finance lease terms	15 years

XML

Leases (Components of Lease Cost) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2020
Leases [Abstract]
Operating lease cost	$ 9,951	$ 32,109
Finance lease cost: Amortization expense	110	312
Finance lease cost: Interest expense	35	102
Short-term lease cost	261	747
Variable lease cost	1,524	5,275
Sublease income	(172)	(834)
Total lease cost	$ 11,709	$ 37,711

XML

Leases (Right-of-use Assets and Lease Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Leases [Abstract]
Operating Lease, Right-of-Use Asset	$ 99,258
Finance Lease, Right-of-Use Asset	$ 1,975
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	us-gaap:PropertyPlantAndEquipmentAbstract
Total right-of-use assets	$ 101,233
Current liabilities: Operating leases	30,813
Current liabilities: Finance leases	$ 577
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Long Term Debt Current
Noncurrent liabilities: Operating leases	$ 80,789
Noncurrent liabilities: Finance leases	$ 1,373
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Long-term Debt, Excluding Current Maturities
Total lease liabilities	$ 113,552

XML

Leases (Supplemental Cash Flow Information) (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2020 USD ($)
Leases [Abstract]
Operating Leases: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows	$ 31,331
Operating Leases: Right-of-use assets obtained in exchange for lease liabilities	11,846
Finance Leases: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows	102
Finance Leases: Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows	490
Finance Leases: Right-of-use assets obtained in exchange for lease liabilities	$ 363

XML

Leases (Lease Liability Maturities) (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Operating Leases
Remainder of 2021	$ 10,022	$ 40,476
2022	36,697	34,750
2023	27,580	23,761
2024	19,037	15,393
2025	14,011	10,780
2026 and thereafter	25,501	15,850
Total lease liabilities, undiscounted	132,848	141,010
Less: Imputed interest	21,246
Total lease liabilities	111,602
Finance Leases
Remainder of 2021	183	468
2022	664	468
2023	485	468
2024	468	468
2025	390	390
2026 and thereafter
Total lease liabilities, undiscounted	2,190	2,262
Less: Imputed interest	240
Total lease liabilities	1,950
Remainder of 2021	10,205	40,944
2022	37,361	35,218
2023	28,065	24,229
2024	19,505	15,861
2025	14,401	11,170
2026 and thereafter	25,501	15,850
Total lease liabilities, undiscounted	135,038	$ 143,272
Less: Imputed interest	21,486
Total lease liabilities	$ 113,552

XML

Leases (Other Information Related to Leases) (Details)	Dec. 31, 2020
Operating Leases
Weighted-average remaining lease term	4 years 9 months 15 days
Weighted-average discount rate	7.39%
Finance Leases
Weighted-average remaining lease term	3 years 8 months 12 days
Weighted-average discount rate	6.53%

XML

Interest Rate Cap Agreements (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Dec. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Aug. 31, 2018
Derivative [Line Items]
Fair value derivative net liability	$ 32,953
Forecast [Member]
Derivative [Line Items]
Reclassified as interest expense		$ 2,005
Interest Rate Cap Agreements [Member]
Derivative [Line Items]
Notional amount			$ 1,000,000
Effective date	Mar. 31, 2020
Derivative, maturity date	Mar. 31, 2024
Interest Rate Cap Agreements [Member] | Maximum [Member]
Derivative [Line Items]
Variable rate			1.00%
Joint Venture [Member] | Interest Rate Cap Agreements [Member]
Derivative [Line Items]
Notional amount			$ 1,500,000
Effective date	Aug. 31, 2018
Derivative, maturity date	Dec. 31, 2021
Joint Venture [Member] | Interest Rate Cap Agreements [Member] | Minimum [Member]
Derivative [Line Items]
Notional amount				$ 500,000
Joint Venture [Member] | Interest Rate Cap Agreements [Member] | Maximum [Member]
Derivative [Line Items]
Notional amount				$ 1,500,000
Variable rate				1.00%

XML

Interest Rate Cap Agreements (Schedule of Fair Value of Derivative Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Derivatives Fair Value [Line Items]
Prepaid expenses and other current assets	$ 127,442	$ 117,967
Accrued expenses	(502,992)	(390,294)
Other long-term liabilities	(70,235)	(93,487)
Fair Values of Derivative Instruments Asset (Liability) Derivatives	(32,953)
Designated as Hedging Instrument [Member] | Interest Rate Cap Agreements [Member]
Derivatives Fair Value [Line Items]
Accrued expenses	(28,985)	(28,131)
Other long-term liabilities	(3,288)	(19,277)
Fair Values of Derivative Instruments Asset (Liability) Derivatives	$ (32,273)	$ (47,408)

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Interest Rate Cap Agreements (Schedule of Effect of Derivative Instruments on Statement of Operations) (Details) - Cash Flow Hedging [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020
Derivative Instruments, Gain (Loss) [Line Items]
Gain/(loss) related to derivative financial instruments recognized in other comprehensive income (loss)	$ (383)		$ (7,119)
Gain/ (loss) related to portion of derivative financial instruments reclassified from accumulated other comprehensive income (loss) to interest expense	$ 302		$ 858

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Fair Value Measurements (Narrative) (Details)	Dec. 31, 2020 USD ($)
Fair Value Measurements [Abstract]
Contingent consideration liability	$ 0

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Fair Value Measurements (Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Derivatives Fair Value [Line Items]
Interest rate cap agreements	$ (32,273)	$ (47,408)
Contingent consideration obligation		(3,000)
Total	(32,273)	(50,408)
Significant Other Observable Inputs (Level 2)
Derivatives Fair Value [Line Items]
Interest rate cap agreements	(32,273)	(47,408)
Total	$ (32,273)	(47,408)
Significant Unobservable Inputs (Level 3)
Derivatives Fair Value [Line Items]
Contingent consideration obligation		(3,000)
Total		$ (3,000)

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Fair Value Measurements (Reconciliation of Fair Value Derivative Using Unobservable Inputs) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Fair Value Measurements [Abstract]
Balance at beginning of period			$ (3,000)
Gain/(loss) included in contingent consideration			3,000
Balance at end of period

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Fair Value Measurements (Carrying Amount and Estimated Fair Value of Financial Instruments) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Dec. 31, 2020	Mar. 31, 2020
Carrying [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 137,357	$ 410,405
Accounts receivable	697,948	740,105
Investment in business purchase option		146,500
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	137,357	410,405
Accounts receivable	697,948	740,105
Investment in business purchase option		146,500
Significant Other Observable Inputs (Level 2) | Carrying [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt component of tangible equity units	24,268	35,431
Significant Other Observable Inputs (Level 2) | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt component of tangible equity units	24,801	34,806
Senior Notes due March 1, 2025 [Member] | Significant Other Observable Inputs (Level 2) | Carrying [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt	1,317,689	997,772
Senior Notes due March 1, 2025 [Member] | Significant Other Observable Inputs (Level 2) | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt	1,348,188	950,000
Senior Credit Facilities [Member] | Significant Other Observable Inputs (Level 2) | Carrying [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt	3,447,156	3,682,457
Senior Credit Facilities [Member] | Significant Other Observable Inputs (Level 2) | Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt	$ 3,529,963	$ 3,452,687

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Long-Term Debt (Long-Term Debt - Narrative) (Details) - Senior Notes due March 1, 2025 [Member]	9 Months Ended
	Dec. 31, 2020	Mar. 31, 2020
Debt Instrument [Line Items]
Stated interest rate	5.75%	5.75%
Maturity date	Mar. 01, 2025

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Long-Term Debt (Senior Credit Facilities - Narrative) (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2020	Dec. 31, 2020	Mar. 31, 2020
Debt Instrument [Line Items]
Payments on Revolving Facility		$ 250,000,000
Letters of credit		6,194,000	$ 5,118,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Payments on Revolving Facility	$ 250,000,000
Maximum borrowing capacity		785,000,000
Remaining borrowing capacity		$ 778,806,000	$ 529,882,000

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Long-Term Debt (Senior Notes Issuance - Narrative) (Details) - USD ($)	9 Months Ended
	Dec. 31, 2020	Apr. 21, 2020	Mar. 31, 2020	Feb. 28, 2017
Senior Notes due March 1, 2025 [Member]
Debt Instrument [Line Items]
Debt instrument, face amount	$ 1,325,000,000		$ 1,325,000,000
Stated interest rate	5.75%		5.75%
Maturity date	Mar. 01, 2025
Senior Notes - Issuance 2 [Member]
Debt Instrument [Line Items]
Debt instrument, face amount		$ 325,000,000
Issuance costs		$ 5,364,000
Senior Notes - Issuance 1 [Member]
Debt Instrument [Line Items]
Debt instrument, face amount				$ 1,000,000,000

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Long-Term Debt (Term Loan Repayments - Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2020
Debt Instrument [Line Items]
Loss on extinguishment of debt	$ 6,145	$ 1,489	$ 7,634
Term Loan Facility [Member]
Debt Instrument [Line Items]
Repayment of debt	$ 215,000	$ 50,000

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Long-Term Debt (Schedule of Long-Term Debt) (Details) - USD ($)	9 Months Ended
	Dec. 31, 2020	Mar. 31, 2020
Debt Instrument [Line Items]
Less current portion	$ (37,019,000)	$ (278,779,000)
Long-term debt	4,780,828,000	4,710,294,000
Senior Notes due March 1, 2025 [Member]
Debt Instrument [Line Items]
Long-term debt	1,317,689,000	997,772,000
Debt instrument, face amount	$ 1,325,000,000	$ 1,325,000,000
Stated interest rate	5.75%	5.75%
Maturity date	Mar. 01, 2025
Unamortized doscount	$ 7,311,000	$ 2,228,000
Effective interest rate	5.90%	5.80%
Senior Amortizing Notes due June 30, 2022 [Member]
Debt Instrument [Line Items]
Long-term debt	$ 24,268,000	$ 35,431,000
Debt instrument, face amount	$ 47,367,000	47,367,000
Maturity date	Jun. 30, 2022
Unamortized doscount	$ 405,000	$ 842,000
Effective interest rate	7.44%	7.44%
Other [Member]
Debt Instrument [Line Items]
Long-term debt	$ 28,734,000	$ 23,413,000
Term Loan Facility [Member]
Debt Instrument [Line Items]
Long-term debt	3,447,156,000	3,682,457,000
Debt instrument, face amount	$ 5,100,000,000	5,100,000,000
Maturity date	Mar. 01, 2024
Unamortized doscount	$ 96,094,000	$ 125,793,000
Effective interest rate	4.42%	4.42%
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term debt		$ 250,000,000
Debt instrument, face amount	$ 785,000,000	$ 785,000,000
Maturity date	Jul. 03, 2024
Weighted average interest rate		3.25%

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Net Income (Loss) Per Share (Computation of Basic Net Income (Loss) Per Share of Common Stock) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2020	Dec. 31, 2019
Earnings Per Share [Line Items]
Net income (loss)	$ 2,196	$ (42,622)	$ (58,694)	$ 50,735	$ (93,935)	$ (37,517)	$ (99,120)	$ (80,716)
Weighted average common shares outstanding	304,547,891			124,962,970			304,104,388	108,371,642
Minimum shares issuable under purchase contracts	16,465,704			18,429,325			16,465,704	12,286,217
Total weighted average shares outstanding	321,013,595			143,392,295			320,570,092	120,657,859
Basic net income (loss) per share	$ 0.01			$ 0.35			$ (0.31)	$ (0.67)
Diluted net income per share:
Net income (loss)	$ 2,196	$ (42,622)	$ (58,694)	$ 50,735	$ (93,935)	$ (37,517)	$ (99,120)	$ (80,716)
Number of shares used in basic computation	321,013,595			143,392,295			320,570,092	120,657,859
Weighted average effect of dilutive securities	324,815,524			146,201,860			320,570,092	120,657,859
Diluted net income (loss) per share	$ 0.01			$ 0.35			$ (0.31)	$ (0.67)
Dilutive Shares Issuable Under Purchase Contracts [Member]
Diluted net income per share:
Weighted average effect of dilutive securities				1,450,910
Time-Vesting Options [Member]
Diluted net income per share:
Weighted average effect of dilutive securities	932,344			1,059,868
Restricted Stock Units [Member]
Diluted net income per share:
Weighted average effect of dilutive securities	2,753,810			289,537
Deferred Stock Units [Member]
Diluted net income per share:
Weighted average effect of dilutive securities	95,624			9,250
Employee Stock Purchase Program Shares [Member]
Diluted net income per share:
Weighted average effect of dilutive securities	20,151

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Net Income (Loss) Per Share (Antidilutive Securities Excluded from Diluted Net Income (Loss) Per Share) (Details) - shares	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Dilutive Shares Issuable Under Purchase Contracts [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from diluted net income (loss) per share			1,579,991	1,712,220
Time-Vesting Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from diluted net income (loss) per share			766,432	1,290,327
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from diluted net income (loss) per share			2,360,586	605,830
Deferred Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from diluted net income (loss) per share			81,983	6,167

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Tax Receivable Agreements (Narrative) (Details)	9 Months Ended
	Dec. 31, 2020
Tax Receivable Agreements 2009-2011 [Member]
Related Party Transaction [Line Items]
Net cash tax savings, percentage payment provided by agreement	85.00%
McKesson Tax Receivable Agreement [Member]
Related Party Transaction [Line Items]
Net cash tax savings, percentage payment provided by agreement	85.00%
McKesson Tax Receivable Agreement [Member] | Joint Venture [Member]
Related Party Transaction [Line Items]
Maximum percentage ownership allowed to receive net cash tax savings payment	20.00%

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Tax Receivable Agreements (Aggregate Payments Due Under Tax Receivable Agreements (Details) $ in Thousands	Dec. 31, 2020 USD ($)
Related Party Transaction [Line Items]
Remainder of 2021
2022	22,522
2023	58,063
2024	44,338
2025	94,612
Thereafter	236,605
Gross expected payments	456,140
Less: Amounts representing discount	(105,710)
Total tax receivable agreement obligation	350,430
Less: Current portion due (included in accrued expenses)	(22,522)
Tax receivable agreement long-term obligation	327,908
Related Party Tax Receivable Agreements [Member]
Related Party Transaction [Line Items]
Remainder of 2021
2022	11,606
2023	11,349
2024	23,421
2025	50,772
Thereafter	83,221
Gross expected payments	180,369
Less: Amounts representing discount	(69,149)
Total tax receivable agreement obligation	111,220
Less: Current portion due (included in accrued expenses)	(11,606)
Tax receivable agreement long-term obligation	99,614
Other Tax Receivable Agreements [Member]
Related Party Transaction [Line Items]
Remainder of 2021
2022	10,788
2023	10,722
2024	13,549
2025	20,004
Thereafter	61,192
Gross expected payments	116,255
Less: Amounts representing discount	(36,561)
Total tax receivable agreement obligation	79,694
Less: Current portion due (included in accrued expenses)	(10,788)
Tax receivable agreement long-term obligation	68,906
McKesson Tax Receivable Agreement [Member]
Related Party Transaction [Line Items]
Remainder of 2021
2022	128
2023	35,992
2024	7,368
2025	23,836
Thereafter	92,192
Gross expected payments	159,516
Total tax receivable agreement obligation	159,516
Less: Current portion due (included in accrued expenses)	(128)
Tax receivable agreement long-term obligation	$ 159,388

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Income Taxes (Summary of Income Tax Information) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Income Taxes [Abstract]
Income tax provision (benefit)	$ (4,562)	$ 15,240	$ (31,411)	$ (564)
Effective tax rate	192.80%	23.10%	24.10%	0.70%

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Accumulated Other Comprehensive Income (Loss) (Summary Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2020	Dec. 31, 2019
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	$ 3,209,250	$ 3,239,354	$ 3,285,447	$ 1,886,107	$ 1,131,424	$ 1,132,487	$ 3,285,447	$ 1,132,487
Unrealized gain (loss) on available for sale debt securities of the Joint Venture				134	1,173			1,307
Change associated with foreign currency translation	11,526	5,221	6,353	1,728	1,583	226	23,100	3,537
Balance	3,233,738	3,209,250	3,239,354	1,950,131	1,886,107	1,131,424	3,233,738	1,950,131
Available For Sale Debt Security [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance				1,173
Unrealized gain (loss) on available for sale debt securities of the Joint Venture				134	1,173
Balance				1,307	1,173			1,307
Foreign Currency Translation Adjustment [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	4,490	(731)	(7,084)	244	(1,339)	(1,565)	(7,084)	(1,565)
Change associated with foreign currency translation	11,526	5,221	6,353	1,728	1,583	226
Balance	16,016	4,490	(731)	1,972	244	(1,339)	16,016	1,972
Cash Flow Hedge [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	(6,468)	(4,472)	(288)	(8,010)	(6,700)	(1,691)	(288)	(1,691)
Change associated with current period hedging	(383)	(2,277)	(4,459)	289	(1,509)	(5,117)
Reclassification into earnings	302	281	275	1,024	199	(314)
Balance	(6,549)	(6,468)	(4,472)	(6,697)	(8,010)	(6,700)	(6,549)	(6,697)
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	(1,978)	(5,203)	(7,372)	(6,593)	(8,039)	(3,256)	(7,372)	(3,256)
Unrealized gain (loss) on available for sale debt securities of the Joint Venture				134	1,173
Change associated with foreign currency translation	11,526	5,221	6,353	1,728	1,583	226
Change associated with current period hedging	(383)	(2,277)	(4,459)	289	(1,509)	(5,117)
Reclassification into earnings	302	281	275	1,024	199	(314)
Balance	$ 9,467	$ (1,978)	$ (5,203)	$ (3,418)	$ (6,593)	(8,039)	$ 9,467	(3,418)
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2018-02 [Member] | Cash Flow Hedge [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance						422		422
Cumulative Effect, Period of Adoption, Adjustment [Member] | ASU 2018-02 [Member] | Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Balance						$ 422		$ 422

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Incentive Compensation Plans (Narrative) (Details) - Omnibus Incentive Plan [Member] $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2020 USD ($) shares	Dec. 31, 2020 USD ($) item shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense | $	$ 5,518	$ 10,971
Unrecognized compensation expense | $	$ 73,859	$ 73,859
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted in period | shares	107,520	5,832,321
Restricted Stock Units [Member] | Graded Vesting Schedule [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		4 years
Restricted Stock Units [Member] | Cliff Vesting Schedule [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		1 year
Cash Settled Restricted Stock Units CSRSU [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		1 year
Granted in period | shares	0	172,524
Vesting percentage		100.00%
Performance Stock Units PSU [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		3 years
Granted in period | shares	1,177,152	1,177,152
Number of tranches | item		2
eRx Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Liquidity event, percentage threshold of shares sold		25.00%
Compensation expense | $	$ 208	$ 1,675
Unrecognized compensation expense | $	$ 1,185	$ 1,185
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		1 year
Granted in period | shares		1
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		4 years

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Related Party Transactions (Narrative) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2020 USD ($) $ / employee	Dec. 31, 2019 USD ($)	Mar. 31, 2020 USD ($)
Related Party Transaction [Line Items]
Long-term debt, excluding current portion	$ 4,780,828		$ 4,780,828		$ 4,710,294
Option Agreement [Member[ | McKesson Corporation [Member]
Related Party Transaction [Line Items]
Maximum percentage of ownership in the outstanding units of the Joint Venture allowed for option to acquire can be exercised			5.00%
Transition Services Agreements [Member]
Related Party Transaction [Line Items]
Transition fee income	0	$ 0	$ 283	$ 0
Employer Healthcare Program Agreement [Member]
Related Party Transaction [Line Items]
Service fee per participating employee per month | $ / employee			1.00
Senior Credit Facilities [Member] | GSO-Managed Funds [Member]
Related Party Transaction [Line Items]
Long-term debt, excluding current portion	$ 168,200		$ 168,200		$ 151,301

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Related Party Transactions (Summary of Revenue Recognized/Amounts Paid Related to Service Provided to/from Portfolio Companies) (Details) - Blackstone Portfolio Companies [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
Revenue recognized related to services provided	$ 934		$ 2,815
Amount paid related to services received	$ 3,883		$ 13,341

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Segment Reporting (Narrative) (Details)	9 Months Ended
	Dec. 31, 2020 segment
Segment Reporting [Abstract]
Number of reportable segments	3

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Segment Reporting (Revenue and Adjusted EBITDA for each Reportable Segment) (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Segment Reporting Information [Line Items]
Net revenue	$ 785,141			$ 2,235,261
Adjusted EBITDA	233,424			662,119
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Income (loss) before income tax provision (benefit)	(2,366)		$ 65,975	(130,531)	$ (81,280)
Amortization of capitalized software developed for sale	460			550
Depreciation and amortization	151,143			436,552
Interest expense	61,439		$ 1	185,733	$ 1
Equity compensation	10,944			34,858
Acquisition accounting adjustments	20,601			103,826
Acquisition and divestiture-related costs	2,661			10,119
Integration and related costs	9,688			27,581
Strategic initiatives, duplicative and transition costs	4,324			13,169
Severance costs	2,591			10,467
Accretion and changes in estimate, net	(2,759)			8,429
Impairment of long-lived assets and other	658			14,418
Gain on sale of businesses	(32,217)			(60,487)
Contingent consideration				(3,000)
Loss on extinguishment of debt	6,145	$ 1,489		7,634
Other non-routine, net	112			2,801
Adjusted EBITDA	233,424			662,119
Postage and Eliminations [Member]
Segment Reporting Information [Line Items]
Net revenue	22,006			73,142
Purchase Accounting Adjustment [Member]
Segment Reporting Information [Line Items]
Net revenue	(24,179)			(118,088)
Software and Analytics [Member]
Segment Reporting Information [Line Items]
Net revenue	372,212			1,118,661
Adjusted EBITDA	120,779			382,103
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Adjusted EBITDA	120,779			382,103
Network Solutions [Member]
Segment Reporting Information [Line Items]
Net revenue	192,588			519,509
Adjusted EBITDA	103,847			268,858
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Adjusted EBITDA	103,847			268,858
Technology-Enabled Services [Member]
Segment Reporting Information [Line Items]
Net revenue	222,514			642,037
Adjusted EBITDA	8,798			11,158
Reconciliation of income (loss) before tax provision (benefit) to Adjusted EBITDA
Adjusted EBITDA	8,798			11,158
Postage [Member]
Segment Reporting Information [Line Items]
Net revenue	49,877			145,672
Postage [Member] | Postage and Eliminations [Member]
Segment Reporting Information [Line Items]
Net revenue	$ 49,877			$ 145,672

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Subsequent Events (Narrative) (Details)	Jan. 05, 2021 $ / shares
Subsequent Event [Member] | Change Healthcare LLC [Member]
Subsequent Event [Line Items]
Business acquisition, share price	$ 25.75