Related Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions [Abstract]

Related Party Transactions

RELATED PARTY TRANSACTIONS

MedCloud Depot, LLC Relationship

On August 1, 2022, the Company appointed a Chief Operating Officer ("COO"). The COO owns 20% of MedCloud Depot, LLC ("MedCloud"), a Florida-based software development firm that specializes in health information technology and data warehousing. The Company has a license agreement with MedCloud pursuant to which MedCloud has granted the Company a non-exclusive, non-transferable license to use their software. The Company recorded payments which amounted to $0.8 million and $0.3 million for three months ended June 30, 2022 and 2021, respectively, and $1.2 million and $0.7 million for six months ended June 30, 2022 and 2021, respectively, which were recorded within the caption selling, general and administrative expenses. Additionally, as of June 30, 2022 the Company owed $0.3 million to MedCloud.

Dental Excellence and Onsite Dental Relationships

On April 14, 2022, CD Support, LLC ("Onsite Dental") acquired Dental Excellence Partners, LLC ("DEP"), a company formerly owned by the spouse of the Chief Executive Officer ("CEO"), and entered into a dental services agreement with the Company. The spouse of the CEO became a minority shareholder of Onsite Dental upon closing of the acquisition.

The Company has various sublease agreements with Onsite Dental. The Company recognized sublease income of approximately $0.3 million and $0.2 million, during the six months ended June 30, 2022 and 2021, respectively, and $0.2 million and $0.1 million during the three months ended June 30, 2022 and 2021, respectively, which was recorded within the caption "Other Income (Expense)" in the accompanying unaudited condensed consolidated statements of operations. As of June 30, 2022, an immaterial amount was due to the Company in relation to these agreements and recorded in the caption accounts receivable.

On October 9, 2020, the Company entered into a dental services agreement with DEP pursuant to which DEP agreed to provide dental services for managed care members of the Company. The Company recognized approximately $1.5 million and $1.9 million during the six months ended June 30, 2022 and 2021, respectively, and an immaterial amount and $1.2 million during the three months Ended June 30, 2022 and 2021. As of June 30, 2022, no balance was due to DEP. Subsequent to Onsite Dental acquiring DEP, the Company entered into a new dental services administration agreement with Onsite Dental to provide dental services for managed care members of the Company. The Company recognized expenses in the amount of approximately $3.1 million for the three and six months ended June 30, 2022. As of June 30, 2022, $0.7 million was due to Onsite.

Humana Relationship

In 2020, the Company entered into multi-year agreements with Humana, a managed care organization, agreeing that Humana will be the exclusive health plan for Medicare Advantage products in certain centers in San Antonio and Las Vegas but allowing services to non-Humana members covered by original Medicare, Medicaid, and commercial health plans in those centers. Pursuant to the agreements, Humana is obligated to pay the Company an administrative payment in exchange for the Company providing certain care coordination services. The care coordination payments are refundable to Humana on a pro-rata basis if the Company ceases to provide services at the centers within the specified contract term. The Company identified one performance obligation per center to stand-ready to provide care coordination services to patients and recognizes revenue ratably over the contract term. Care coordination revenue is included in other revenue along with other ancillary healthcare revenues.

In addition, in 2020, the Company and Primary Care (ITC), LLC entered into multi-year agreements with Humana and its affiliates whereby Primary Care (ITC) Holdings, LLC entered into a note purchase agreement with Humana for a convertible note due October 2022 with an aggregate principal amount of $60.0 million. The note accrued interest at a rate of 8.0% per annum through March 2020 and 10.0% per annum thereafter, payable in kind. The note was convertible to Class A-4 units of Primary Care (ITC) Holdings, LLC at the option of Humana in the event Primary Care (ITC) Holdings, LLC and affiliates seek to consummate a sale transaction and could be settled in cash at the option of Humana. While the multi-year agreement still exists between the Company and Humana, the note was converted and settled in cash upon the consummation of the Business Combination on June 3, 2021. As such, as of December 31, 2021 and for the six months ended June 30, 2022, Humana was not a related party due to the repayment of the note.

The multi-year agreements also contain an arrangement for a license fee that is payable by the Company to Humana for the Company’s use of certain Humana owned or leased medical centers to provide health care services. The license fee is a reimbursement to Humana for its costs of owning or leasing and maintaining the clinics, including rental payments, maintenance or repair expenses, equipment expenses, special assessments, cost of upgrades, taxes, leasehold improvements, and other expenses identified by Humana. The Company recorded $0.5 million and $0.3 million in operating lease expense related to its use of Humana clinics during the three and six months ended June 30, 2021, respectively..

Prior to entering into the agreements, the Company had existing payor relationships with Humana related to existing revenue arrangements within the Company. The Company recognized in its consolidated statements of operations revenue from Humana, including its subsidiaries, of $128.4 million and $308.2 million for the three and six months ended June 30, 2021. respectively. The Company recognized third-party medical expenses of $116.0 million and $249.8 million for the three and six months ended June 30, 2021, respectively.

In addition, we have entered into expansion agreements with Humana which provide a roadmap to opening new Humana-funded medical centers in the southwestern U.S. by 2024. Humana may decline to fund additional medical centers, which would have an adverse effect on our growth and future prospects.

Operating Leases

The Company leased several offices and medical spaces from an employee of the company who is a beneficial shareholder of the Company. Monthly rent expense in aggregate totaled approximately $0.1 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $0.1 million and $1.4 million for the six months ended June 30, 2022 and 2021, respectively.

General Contractor Agreements

As of December 31, 2018, the Company has entered into various general contractor agreements with a company that is controlled by the father of the CEO of the Company to perform leasehold improvements at various Company locations as well as various repairs and related maintenance as deemed necessary. Payments made pursuant to the general contractor agreements as well as amounts paid for repairs and maintenance to this related party totaled approximately $1.9 million and $1.2 million for the three months ended June 30, 2022 and 2021, respectively and $3.6 million and $2.4 million for the six months ended June 30, 2022 and 2021, respectively,