SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Management has assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context of the unknown future impacts of the global COVID pandemic using information that is reasonably available to the Company at the time. Significant estimates and assumptions are used for, but not limited to: (i) the valuation of accounts receivable; (ii) goodwill, trade names, and other intangible assets; (iii) other long-lived assets; (iv) revenue recognition; (v) accruals for health, workers’ compensation, and professional liability claims; (vi) valuation of deferred tax assets; (vii) legal contingencies; and (viii) income taxes. Accrued insurance claims and reserves include estimated settlements from known claims and actuarial estimates for claims incurred but not reported. As additional information becomes available to the Company, its future assessment of these estimates, including management's expectations at the time regarding the duration, scope, and severity of the pandemic, as well as other factors, could materially and adversely impact the Company's consolidated financial statements in future reporting periods. Actual results could differ from those estimates.

Risks and Uncertainties

The Company’s future results of operations and liquidity could be materially adversely affected by macroeconomic factors contributing to delays in payments from clients and inflationary pressure, uncertain or reduced demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its clients.

The Company is also subject to additional risks and uncertainties due to the ongoing COVID pandemic. The extent of the impact on the Company’s business is highly uncertain and difficult to predict.

Accounts Receivable, net

The timing of revenue recognition, billings, and collections results in billed and unbilled accounts receivable from customers, which are classified as accounts receivable on the condensed consolidated balance sheets and are presented net of allowances for doubtful accounts and sales allowances. Estimated revenue for the Company employees', subcontracted employees', and independent contractors’ time worked but not yet billed at September 30, 2022 and December 31, 2021 totaled $161.2 million and $140.0 million, respectively.

The Company generally does not require collateral and mitigates its credit risk by performing credit evaluations and monitoring at-risk accounts. The allowance for doubtful accounts is established for losses expected to be incurred on accounts receivable balances. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible. Judgment is required in the estimation of the allowance and the Company evaluates the collectability of its accounts receivable and contract assets based on a combination of factors. The Company bases its allowance for doubtful account estimates on its historical write-off experience, current conditions, an analysis of the aging of outstanding receivable and customer payment patterns, and specific reserves for customers in adverse condition adjusted for current expectations for the customers or industry. Based on the information currently available, the Company also considered current expectations of future economic conditions, including the impact of COVID, when estimating its allowance for doubtful accounts.

The opening balance of the allowance for doubtful accounts is reconciled to the closing balance for expected credit losses as follows:




	2022		2021
	(amounts in thousands)
Balance at January 1	$	6,087	$	3,416
Bad Debt Expense	2,369		504
Write-Offs, net of Recoveries	(365)		(699)
Balance at March 31	8,091		3,221
Bad Debt Expense	3,192		466
Write-Offs, net of Recoveries	(426)		(358)
Balance at June 30	$	10,857	$	3,329
Bad Debt Expense	1,101		1,441
Write-Offs, net of Recoveries	(593)		(138)
Balance at September 30	$	11,365	$	4,632

In addition to the allowance for doubtful accounts, the Company maintains a sales allowance for billing-related adjustments which may arise in the ordinary course of business and adjustments to the reserve are recorded as contra-revenue. The balance of this allowance as of September 30, 2022 and December 31, 2021 was $1.4 million and $0.8 million, respectively.

The Company’s contract terms typically require payment between 30 to 60 days from the date of invoice and are considered past due based on the particular negotiated contract terms. The majority of the Company's customers are U.S. based healthcare systems with a significant percentage in acute-care facilities. No single customer accounted for more than 10% of the Company’s revenue for the three and nine months ended September 30, 2022 and 2021, or the accounts receivable balance as of September 30, 2022 and December 31, 2021.

Restructuring Costs

The Company considers restructuring activities to be programs whereby it fundamentally changes its operations, such as closing and consolidating facilities, reducing headcount, and realigning operations in response to changing market conditions. As a result, restructuring (benefits) costs on the condensed consolidated statements of operations primarily include employee termination costs and lease-related exit costs.

Reconciliation of the employee termination costs and lease-related exit costs (benefits) beginning and ending liability balance is presented below:



	Employee Termination		Lease-Related
	(amounts in thousands)
Balance at January 1, 2022	$	160	$	2,423
Charged to restructuring(a)	—		389
Payments and adjustments	(160)		(192)
Balance at March 31, 2022	—		2,620
Charged to restructuring(a)	200		(1,379)
Payments	—		(202)
Balance at June 30, 2022	$	200	$	1,039
Charged to restructuring(a)	735		1,755
Payments	(24)		(254)
Balance at September 30, 2022	$	911	$	2,540

________________

(a) Restructuring costs in the condensed consolidated statements of operations for the nine months ended September 30, 2022 include a benefit of $1.4 million in the second quarter of 2022 associated with the early termination of the lease for one of the Company's corporate offices which was previously restructured.