Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Under the provisions of ASC 350-10, Intangibles-Goodwill and Other, goodwill is not amortized. Rather, an entity’s goodwill is subject to periodic impairment testing. ASC 350 requires that an entity assign its goodwill to reporting units and test each reporting unit’s goodwill for impairment at least on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Accordingly, we perform our goodwill test annually as of October 1 and between annual tests whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value of any of our reporting units below its respective carrying value. Additionally, we consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

The goodwill impairment test compares a reporting unit’s fair value to its carrying amount to identify any potential impairment. We apply judgment in determining the fair value of our reporting units for purposes of performing the goodwill impairment test. We rely on widely accepted valuation techniques, including discounted cash flow and market multiple analysis approaches, which capture both the future income potential of the reporting unit and the market behaviors and actions of market participants in the industry that includes the reporting unit. These types of analyses require us to make assumptions and estimates regarding future cash flows, industry-specific economic factors, and the profitability of future business strategies. The discounted cash flow approach uses a projection of estimated operating results and cash flows that are discounted using a weighted average cost of capital. Under the discounted cash flow approach, the projection uses management’s best estimates of the amount and timing of expected future cash flows impacted by economic and market conditions over the projected period for each reporting unit. Significant estimates and assumptions include terminal value growth rates, changes in working capital requirements, and weighted average cost of capital. The market multiple analysis estimates fair value by applying revenue and earnings multiples to the reporting unit’s operating results. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting units.

We evaluate the reasonableness of the estimated fair value of our reporting units by reconciling the aggregate fair value of our reporting units to our total market capitalization as of our impairment testing date, taking into account an appropriate control premium. The determination of a control premium requires the use of judgment and is based upon control premiums observed in comparable market transactions.

The changes in the carrying value of goodwill of the Patient Care operating segment for the years ended December 31, 2021 and 2020 are as follows:


(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
Balance at December 31, 2019	$	660,912	$	(428,668)	$	232,244
Additions from acquisitions	45,144		—		45,144
Measurement period adjustments (1)	(165)		—		(165)
Balance at December 31, 2020	705,891		(428,668)		277,223
Additions from acquisitions	86,124		—		86,124
Measurement period adjustments (2)	207		—		207
Balance at December 31, 2021	$	792,222	$	(428,668)	$	363,554

(1) Measurement period adjustments relate to 2020 and prior years acquisitions of approximately $(0.2) million and are primarily attributable to adjustments to the preliminary allocations of acquired assets.

(2) Measurement period adjustments relate to 2021 and prior years acquisitions of approximately $0.2 million and are primarily attributable to adjustments to the preliminary allocations of acquired assets.

As of December 31, 2017, goodwill of approximately $139.3 million within the Products and Services operating segment was impaired in full.

See Note G - “Acquisitions” within these consolidated financial statements for details surrounding goodwill acquired during the years ended December 31, 2021 and 2020.

As of October 1, 2021 and 2019, we performed a qualitative assessment of goodwill impairment for the Patient Care reporting unit, which resulted in our determination that it was more likely than not that the carrying value of the reporting unit was less than its fair value. As of October 1, 2020, we performed a quantitative assessment of goodwill impairment for the Patient Care reporting unit, which resulted in our determination that it was more likely than not that the carrying value of the reporting unit was less than its fair value.

Other Intangible Assets

Under the provisions of ASC 360-10, Property, plant, and equipment, an intangible asset that has a finite life should be amortized over its estimated useful life and should be tested for recoverability by comparing the net carrying value of the asset or asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset or asset group when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of a definite-lived asset or asset group is not recoverable, the fair value of the asset or asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized.

Under the provisions of ASC 350, Intangibles-goodwill and other, an indefinite-lived intangible asset is not amortized but should be tested for impairment annually and between annual tests if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The indefinite-lived intangible asset impairment standard allows an entity first to assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. We perform our annual test for recoverability as of October 1.

The balances related to other intangible assets as of December 31, 2021 and 2020 are as follows:


	As of December 31, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	28,624	$	(9,973)	$	—	$	18,651
Trade name	255		(202)		—		53
Patents and other intangibles	9,572		(6,501)		—		3,071
Definite-lived intangible assets	38,451		(16,676)		—		21,775
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	47,521	$	(16,676)	$	(4,953)	$	25,892


	As of December 31, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	16,879	$	(5,845)	$	—	$	11,034
Trade name	255		(176)		—		79
Patents and other intangibles	9,011		(5,810)		—		3,201
Definite-lived intangible assets	26,145		(11,831)		—		14,314
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	35,215	$	(11,831)	$	(4,953)	$	18,431

The fair value of acquired customer list intangibles is estimated using an excess earnings model. Key assumptions utilized in the valuation model include pro-forma projected cash flows adjusted for market-participant assumptions, forecasted customer retention rates, and discount rates. Existing customer intangibles are amortized using the straight-line method over an estimated useful life of four to ten years. The fair value of non-compete agreements are estimated at management’s discretion using a discounted cash flow model or using potential loss exposure of acquired clinicians based on an average amount of revenue generated by clinicians utilizing internal data. Due to the inherent judgmental nature of these assumptions, management will perform a sensitivity analysis on an acquisition by acquisition basis, considering the facts and circumstances of each acquisition. The related intangible assets are amortized, using the straight-line method, over their contractual term which ranges from two to twelve years. Other definite-lived intangible assets are recorded at cost and are amortized, using the straight-line method, over their estimated useful lives of up to nineteen years. The fair value associated with trade names is estimated using the relief-from-royalty method with the primary assumptions being the royalty rate and expected revenues associated with the trade names. These assets, some of which have indefinite lives, are primarily included in the Products & Services segment. Indefinite-lived trade name intangible assets are assessed for impairment in the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. There was no impairment on our indefinite-lived trade name for the years ended December 31, 2021, 2020, and 2019, respectively. Trade name intangible assets with definite lives are amortized over their estimated useful lives of up to ten years.

Amortization expense related to other intangible assets was approximately $4.9 million, $6.0 million, and $5.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Estimated aggregate amortization expense for definite-lived intangible assets for each of the next five years ended December 31, and thereafter is as follows:


(in thousands)
2022	$	6,307
2023	6,045
2024	4,554
2025	3,366
2026	1,500
Thereafter	3
Total	$	21,775