Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

4. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:

	December 31, 2016							December 31, 2015
	Gross							Gross
	Carrying		Accumulated			Intangible		Carrying		Accumulated			Intangible
(In thousands)	Amount		Amortization			Assets, Net		Amount		Amortization			Assets, Net
Intangibles subject to amortization:
Proprietary technology	$	627,819	$	(347,477	)	$	280,342	$	450,852	$	(302,284	)	$	148,568
Customer contracts and relationships		813,021		(430,960	)		382,061		552,395		(405,317	)		147,078
Total	$	1,440,840	$	(778,437	)	$	662,403	$	1,003,247	$	(707,601	)	$	295,646

Intangibles not subject to amortization:
Registered trademarks						$	79,000						$	52,000
Goodwill							1,924,052							1,222,601
Total						$	2,003,052						$	1,274,601

During 2016, in an effort to further streamline and align our operating structure around our key ambulatory, acute and population health management solutions, we made several changes to our organizational and reporting structure. These changes included (i) the separation of the former Touchworks strategic business unit and its dedicated leadership team into acute and ambulatory businesses, (ii) the transfer of several ancillary analytics-type products between our existing Clinical and Financial Solutions and Population Health reportable segments, both effective as of January 1, 2016, and (iii) the establishment of the FollowMyHealth® and EPSi^TM business units effective September 30, 2016.

As a result of these changes, we assessed our revised reporting units and allocated the goodwill previously assigned to our former Touchworks reporting unit to our new Acute and Ambulatory reporting units based on the relative fair value allocation method as applied to the separate Touchworks acute and ambulatory businesses.

During the second quarter of 2016, we completed the Netsmart Transaction and recorded additional goodwill and intangible assets relating to the acquisition of Netsmart, Inc. As noted above, the formation of Netsmart resulted in the merger of our Homecare^TM business with Netsmart, Inc.’s behavioral health technology business. Netsmart is deemed to be a separate reportable segment. Prior to the Netsmart Transaction, our Homecare^TM business was included as part of the Population Health segment. As a result, we allocated part of the goodwill assigned to our Population Health segment to the Homecare^TM business based on the relative fair value allocation method. Refer to Note 2, “Business Combinations and Other Investments,” for additional information regarding the Netsmart Transaction.

We performed interim goodwill impairment tests (i) as of January 1, 2016 in conjunction with the organizational change within our Clinical and Financial Solutions reportable segment, (ii) as of March 31, 2016 in conjunction with the Netsmart Transaction and related carve-out of our Homecare^TM business, and (iii) as of September 30, 2016 in conjunction with reporting structure changes of our FollowMyHealth^®and EPSi^TM businesses. The January 1, 2016 goodwill impairment test was performed on a before and after basis, which included impairment tests for each of the separate Touchworks acute and ambulatory businesses and for each of the new Acute and Ambulatory reporting units. The fair values of the separate Touchworks acute and ambulatory businesses and of the Acute and Ambulatory reporting units substantially exceeded their carrying values and no indicators of impairment were identified as a result of each of these goodwill impairment tests. The March 31, 2016 goodwill impairment test was performed on a before and after basis, which included impairment tests for the separate Homecare^TM business and the Population Health segment excluding Homecare^TM. The fair values of the separate Homecare^TM business and the Population Health segment excluding Homecare^TM substantially exceeded their carrying values and no indicators of impairment were identified as a result of each of these goodwill impairment tests. The September 30, 2016 goodwill impairment test was performed on a before and after basis, which included impairment tests for each of the separate FollowMyHealth^®and EPSi^TM businesses and the Population Health segment excluding FollowMyHealth^®and EPSi^TM. The fair values of the separate businesses and the Population Health segment excluding FollowMyHealth^®and EPSi^TM substantially exceeded their carrying values and no indicators of impairment were identified as a result of each of these goodwill impairment tests. We also performed the annual impairment tests of our reporting units as of October 1, 2016, with the exception of the Netsmart reporting unit for the which the test was performed as of December 31, 2016. The fair value of each reporting unit substantially exceeded its carrying value and no indicators of impairment were identified. All of the impairment tests performed during 2016 consisted of quantitative analyses.

We determined the fair value of each of our reporting units using both a discounted cash flow analysis and a market approach considering benchmark company market multiples. A discount rate of 10% to 11% was applied to the cash flows used in the discounted cash flow analysis. We also considered our market capitalization as of the date of each test.

There were no accumulated impairment losses associated with our goodwill as of December 31, 2016 or 2015, and no impairments were recorded during the years ended December 31, 2016, 2015 and 2014. Changes in the carrying amounts of goodwill by reportable segment for the years ended December 31, 2016 and 2015 were as follows:

	Clinical and			Population
(In thousands)	Financial Solutions			Health			Netsmart		Total
Balance as of December 31, 2014	$	774,512		$	426,234		$	0	$	1,200,746
Other additions		22,319			0			0		22,319
Foreign exchange translation		(464	)		0			0		(464	)
Balance as of December 31, 2015	$	796,367		$	426,234		$	0	$	1,222,601
Additions arising from business acquisitions:
Netsmart		0			0			619,283		619,283
HealthMEDX		0			0			18,457		18,457
Other additions		49,093			16,241			0		65,334
Total additions to goodwill		49,093			16,241			637,740		703,074
Reallocation		0			(37,600	)		37,600		0
Foreign exchange translation		(1,623	)		0			0		(1,623	)
Balance as of December 31, 2016	$	843,837		$	404,875		$	675,340	$	1,924,052

Other additions during the years ended December 31, 2016 and 2015 relate to goodwill arising from our acquisition of several third parties. The goodwill reallocation during the year ended December 31, 2016 relates to the allocation of goodwill associated with our Homecare^TM business during the second quarter of 2016 as a result of the Netsmart Transaction. Refer to Note 2, “Business Combinations and Other Investments,” for additional information regarding these acquisitions.

Intangible assets are being amortized over their estimated useful lives and amortization expense related to intangible assets was as follows:

	Year Ended December 31,
(In thousands)	2016		2015		2014
Proprietary technology amortization included in cost of revenue	$	45,357	$	35,144	$	35,924
Intangible amortization included in operating expenses		25,847		23,172		31,280
Total intangible amortization expense	$	71,204	$	58,316	$	67,204

The increase in amortization expense for the year ended December 31, 2016 compared with the year ended December 31, 2015 was primarily driven by acquisitions in 2016, partly offset by amortization associated with intangible assets that were fully amortized in the second half of 2015. The decrease in amortization expense for the year ended December 31, 2015 compared with the year ended December 31, 2014 was primarily driven by amortization associated with intangible assets that were fully amortized in 2014. Estimated future amortization expense for the intangible assets that exist as of December 31, 2016, based on foreign currency exchange rates in effect as of such date, is as follows:


Year Ended December 31,	(In thousands)
2017	$	83,501
2018		80,953
2019		80,531
2020		78,766
2021		72,227
Thereafter		266,425
Total	$	662,403

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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