þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 02-0698101 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
401 North Michigan Avenue Suite 2700 Chicago, Illinois | 60611 |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer | o | Accelerated filer | ý | Non-accelerated filer | o | Smaller reporting company | o | Emerging growth company | o |
(Do not check if a smaller reporting company) |
ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS |
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 142.8 | $ | 181.2 | ||||
Accounts receivable, net | 7.7 | 4.0 | ||||||
Accounts receivable, net - related party | 18.0 | 1.8 | ||||||
Prepaid income taxes | 0.9 | 3.8 | ||||||
Prepaid expenses and other current assets | 16.1 | 13.8 | ||||||
Total current assets | 185.5 | 204.6 | ||||||
Property, equipment and software, net | 50.2 | 32.8 | ||||||
Non-current deferred tax assets | 105.8 | 169.9 | ||||||
Restricted cash equivalents | 1.5 | 1.5 | ||||||
Other assets | 11.4 | 6.3 | ||||||
Total assets | $ | 354.4 | $ | 415.1 | ||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Accounts payable | 6.9 | 7.9 | ||||||
Current portion of customer liabilities | 0.9 | 69.7 | ||||||
Current portion of customer liabilities - related party | 20.1 | 14.2 | ||||||
Accrued compensation and benefits | 29.2 | 24.8 | ||||||
Other accrued expenses | 16.1 | 18.5 | ||||||
Total current liabilities | 73.2 | 135.1 | ||||||
Non-current portion of customer liabilities | 0.3 | 1.0 | ||||||
Non-current portion of customer liabilities - related party | 9.1 | 110.0 | ||||||
Other non-current liabilities | 12.2 | 9.7 | ||||||
Total liabilities | $ | 94.8 | $ | 255.8 | ||||
8.00% Series A convertible preferred stock: par value $0.01 per share, 370,000 authorized, 223,023 shares issued and outstanding as of September 30, 2017 (aggregate liquidation value of $227.5); 370,000 authorized, 210,160 shares issued and outstanding as of December 31, 2016 (aggregate liquidation value of $214.4) | 184.7 | 171.6 | ||||||
Stockholders’ equity (deficit) | ||||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 116,639,819 shares issued and 104,505,034 shares outstanding at September 30, 2017; 116,425,524 shares issued and 106,659,542 shares outstanding at December 31, 2016 | 1.2 | 1.2 | ||||||
Additional paid-in capital | 339.8 | 349.2 | ||||||
Accumulated deficit | (204.3 | ) | (304.7 | ) | ||||
Accumulated other comprehensive loss | (2.2 | ) | (2.8 | ) | ||||
Treasury stock, at cost, 12,134,785 shares as of September 30, 2017; 9,765,982 shares as of December 31, 2016 | (59.6 | ) | (55.2 | ) | ||||
Total stockholders’ equity (deficit) | 74.9 | (12.3 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 354.4 | $ | 415.1 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Net services revenue ($112.2 million and $275.3 million for the three and nine months ended September 30, 2017, respectively, and $22.7 and $366.2 million for the three and nine months ended September 30, 2016 from related party, respectively) | $ | 123.2 | $ | 125.5 | $ | 309.5 | $ | 486.4 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of services | 111.8 | 47.4 | 289.1 | 137.6 | ||||||||||||
Selling, general and administrative | 15.1 | 16.2 | 41.6 | 58.4 | ||||||||||||
Other | 1.4 | 0.5 | 2.6 | 20.0 | ||||||||||||
Total operating expenses | 128.3 | 64.1 | 333.3 | 216.0 | ||||||||||||
Income (loss) from operations | (5.1 | ) | 61.4 | (23.8 | ) | 270.4 | ||||||||||
Net interest income | — | 0.1 | 0.1 | 0.2 | ||||||||||||
Income (loss) before income tax provision | (5.1 | ) | 61.5 | (23.7 | ) | 270.6 | ||||||||||
Income tax provision (benefit) | (1.5 | ) | 24.1 | (5.1 | ) | 106.6 | ||||||||||
Net income (loss) | $ | (3.6 | ) | $ | 37.4 | $ | (18.6 | ) | $ | 164.0 | ||||||
Net income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.08 | ) | $ | 0.18 | $ | (0.31 | ) | $ | 0.62 | ||||||
Diluted | $ | (0.08 | ) | $ | 0.18 | $ | (0.31 | ) | $ | 0.62 | ||||||
Weighted average shares used in calculating net income (loss) per common share: | ||||||||||||||||
Basic | 102,225,422 | 100,934,561 | 102,022,129 | 99,870,685 | ||||||||||||
Diluted | 102,225,422 | 102,176,280 | 102,022,129 | 101,018,450 | ||||||||||||
Consolidated statements of comprehensive income (loss) | ||||||||||||||||
Net income (loss) | (3.6 | ) | 37.4 | (18.6 | ) | 164.0 | ||||||||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation adjustments | (0.2 | ) | 0.2 | 0.6 | — | |||||||||||
Comprehensive income (loss) | $ | (3.8 | ) | $ | 37.6 | $ | (18.0 | ) | $ | 164.0 |
Reconciliation of net income (loss) to income (loss) available to common shareholders: | ||||||||||||||||
Basic: | ||||||||||||||||
Net income (loss) | $ | (3.6 | ) | $ | 37.4 | $ | (18.6 | ) | $ | 164.0 | ||||||
Less dividends on preferred shares | (4.4 | ) | (4.1 | ) | (13.1 | ) | (58.5 | ) | ||||||||
Less income allocated to preferred shareholders | — | (15.1 | ) | — | (43.4 | ) | ||||||||||
Net income (loss) available/allocated to common shareholders - basic | $ | (8.0 | ) | $ | 18.2 | $ | (31.7 | ) | $ | 62.1 | ||||||
Diluted: | ||||||||||||||||
Net income (loss) | $ | (3.6 | ) | $ | 37.4 | $ | (18.6 | ) | $ | 164.0 | ||||||
Less dividends on preferred shares | (4.4 | ) | (4.1 | ) | (13.1 | ) | (58.5 | ) | ||||||||
Less income allocated to preferred shareholders | — | (15.0 | ) | — | (43.1 | ) | ||||||||||
Net income (loss) available/allocated to common shareholders - diluted | $ | (8.0 | ) | $ | 18.3 | $ | (31.7 | ) | $ | 62.4 |
Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated other comprehensive (loss) | Total | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance at December 31, 2016 | 116,425,524 | $ | 1.2 | (9,765,982 | ) | $ | (55.2 | ) | $ | 349.2 | $ | (304.7 | ) | $ | (2.8 | ) | $ | (12.3 | ) | |||||||||||
Impact of adoption of Topic 606 | — | — | — | — | — | 113.4 | — | 113.4 | ||||||||||||||||||||||
Impact of adoption of ASU 2016-09 | — | — | — | — | 1.5 | (0.9 | ) | — | 0.6 | |||||||||||||||||||||
Adjusted Balance at January 1, 2017 | 116,425,524 | 1.2 | (9,765,982 | ) | (55.2 | ) | 350.7 | (192.2 | ) | (2.8 | ) | 101.7 | ||||||||||||||||||
Share-based compensation expense | — | — | — | — | 8.6 | — | — | 8.6 | ||||||||||||||||||||||
Issuance of common stock related to share-based compensation plans | 155,535 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Exercise of vested stock options | 58,760 | — | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||||||
Dividends paid/accrued dividends | — | — | — | — | (13.1 | ) | — | — | (13.1 | ) | ||||||||||||||||||||
Acquisition of treasury stock related to equity award plans | — | — | (728,798 | ) | — | — | — | — | — | |||||||||||||||||||||
Treasury stock purchases and forfeitures | — | — | (1,640,005 | ) | (4.4 | ) | — | — | — | (4.4 | ) | |||||||||||||||||||
Reclassification of excess share-based compensation | — | — | — | — | (6.5 | ) | 6.5 | — | — | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 0.6 | 0.6 | ||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | (18.6 | ) | — | (18.6 | ) | ||||||||||||||||||||
Balance at September 30, 2017 | 116,639,819 | $ | 1.2 | (12,134,785 | ) | $ | (59.6 | ) | $ | 339.8 | $ | (204.3 | ) | $ | (2.2 | ) | $ | 74.9 |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Operating activities | ||||||||
Net income (loss) | $ | (18.6 | ) | $ | 164.0 | |||
Adjustments to reconcile net income (loss) to net cash used in operations: | ||||||||
Depreciation and amortization | 11.5 | 7.3 | ||||||
Share-based compensation | 8.2 | 25.2 | ||||||
Loss on disposal | 0.2 | — | ||||||
Provision (recovery) for doubtful receivables | 0.1 | 0.1 | ||||||
Deferred income taxes | (5.6 | ) | 106.5 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and related party accounts receivable | (15.4 | ) | 1.2 | |||||
Prepaid income taxes | 3.0 | 0.2 | ||||||
Prepaid expenses and other assets | (6.7 | ) | (7.9 | ) | ||||
Accounts payable | 0.3 | (1.4 | ) | |||||
Accrued compensation and benefits | 4.3 | 8.3 | ||||||
Other liabilities | (0.3 | ) | 3.0 | |||||
Customer liabilities and customer liabilities - related party | 14.7 | (375.8 | ) | |||||
Net cash used in operating activities | (4.3 | ) | (69.3 | ) | ||||
Investing activities | ||||||||
Purchases of property, equipment, and software | (30.1 | ) | (10.4 | ) | ||||
Proceeds from maturation of short-term investments | — | 1.0 | ||||||
Net cash used in investing activities | (30.1 | ) | (9.4 | ) | ||||
Financing activities | ||||||||
Series A convertible preferred stock and warrant issuance, net of issuance costs | — | 178.7 | ||||||
Exercise of vested stock options | — | 0.1 | ||||||
Purchase of treasury stock | (2.0 | ) | (2.0 | ) | ||||
Shares withheld for taxes | (2.4 | ) | — | |||||
Net cash (used in) provided by financing activities | (4.4 | ) | 176.8 | |||||
Effect of exchange rate changes in cash | 0.4 | 0.3 | ||||||
Net increase (decrease) in cash and cash equivalents | (38.4 | ) | 98.4 | |||||
Cash and cash equivalents, at beginning of period | 181.2 | 103.5 | ||||||
Cash and cash equivalents, at end of period | $ | 142.8 | $ | 201.9 | ||||
Supplemental disclosures of cash flow information | ||||||||
Accrued dividends payable to Preferred Stockholders | $ | 4.5 | $ | 6.1 | ||||
Accrued liabilities related to purchases of property, equipment and software | $ | 2.6 | $ | 0.5 | ||||
Accounts payable related to purchases of property, equipment and software | $ | 0.6 | $ | — | ||||
Income taxes paid | $ | (1.1 | ) | $ | (0.7 | ) | ||
Income taxes refunded | $ | 3.4 | $ | 0.6 |
• | Level 1: Observable inputs such as quoted prices in active markets for identical assets and liabilities; |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices |
• | Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Beginning balance | $ | 151 | $ | 41 | $ | 66 | $ | 99 | |||||||
Provision (recoveries) | (6 | ) | 114 | 85 | 87 | ||||||||||
Write-offs | — | (7 | ) | (6 | ) | (38 | ) | ||||||||
Ending balance | $ | 145 | $ | 148 | $ | 145 | $ | 148 |
September 30, 2017 | December 31, 2016 | |||||||
Computer and other equipment | $ | 29.2 | $ | 23.3 | ||||
Leasehold improvements | 21.4 | 16.0 | ||||||
Software | 42.8 | 28.1 | ||||||
Office furniture | 7.4 | 4.9 | ||||||
Property, equipment and software, gross | 100.8 | 72.3 | ||||||
Less accumulated depreciation and amortization | (50.6 | ) | (39.5 | ) | ||||
Property, equipment and software, net | $ | 50.2 | $ | 32.8 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Cost of services | $ | 4.0 | $ | 2.6 | $ | 10.4 | $ | 6.9 | ||||||||
Selling, general and administrative | 0.5 | 0.1 | 1.1 | 0.4 | ||||||||||||
Total depreciation and amortization | $ | 4.5 | $ | 2.7 | $ | 11.5 | $ | 7.3 |
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | |||||||
RCM services: net operating fees | $ | 104.6 | $ | 255.4 | ||||
RCM services: incentive fees | 7.5 | 20.2 | ||||||
RCM services: other | 2.8 | 9.8 | ||||||
Other services fees | 8.3 | 24.1 | ||||||
Total net service revenue | $ | 123.2 | $ | 309.5 |
September 30, 2017 | At adoption | |||
Receivables, which are included in accounts receivable, net | 25.7 | 30.5 | ||
Contract assets | — | — | ||
Contract liabilities | 12.5 | 20.9 |
Three Months Ended September 30, 2017 | ||||
Contract assets | Contract liabilities | |||
Revenue recognized that was included in the contract liability balance at the beginning of the period | — | 40.9 | ||
Increases due to cash received, excluding amounts recognized as revenue during the period | — | 1.9 | ||
Transferred to receivables from contract assets recognized at the beginning of the period | — | — | ||
Increases as a result of cumulative catch-up adjustment arising from changes in the estimate of the stage of completion, excluding amounts transferred to receivables during the period | — | — |
RCM | Other | ||||||||||||
Net operating fees | Incentive fees | Other | Other Services fees | ||||||||||
2017 | $ | 3.4 | $ | 6.1 | $ | 1.4 | $ | — | |||||
2018 | 13.5 | 9.7 | 2.9 | — | |||||||||
2019 | — | — | 2.7 | — | |||||||||
2020 | — | — | 2.2 | — | |||||||||
Thereafter | — | — | 11.3 | — | |||||||||
Total | $ | 16.9 | $ | 15.8 | $ | 20.5 | $ | — |
i. | Consolidated balance sheets |
Impact of changes in accounting policies | ||||||||||||
As reported September 30, 2017 | Adjustments | Balances without adoption of Topic 606 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 142.8 | $ | — | $ | 142.8 | ||||||
Accounts receivable, net | 7.7 | (0.3 | ) | 7.4 | ||||||||
Accounts receivable, net - related party | 18.0 | (11.2 | ) | 6.8 | ||||||||
Prepaid income taxes | 0.9 | — | 0.9 | |||||||||
Prepaid expenses and other current assets | 16.1 | (0.3 | ) | 15.8 | ||||||||
Total current assets | 185.5 | (11.8 | ) | 173.7 | ||||||||
Property, equipment and software, net | 50.2 | — | 50.2 | |||||||||
Non-current deferred tax assets | 105.8 | 158.4 | 264.2 | |||||||||
Restricted cash equivalents | 1.5 | — | 1.5 | |||||||||
Other assets | 11.4 | 0.2 | 11.6 | |||||||||
Total assets | $ | 354.4 | $ | 146.8 | $ | 501.2 | ||||||
Liabilities | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | 6.9 | (1.1 | ) | 5.8 | ||||||||
Current portion of customer liabilities | 0.9 | 41.9 | 42.8 | |||||||||
Current portion of customer liabilities - related party | 20.1 | (1.2 | ) | 18.9 | ||||||||
Accrued compensation and benefits | 29.2 | — | 29.2 | |||||||||
Other accrued expenses | 16.1 | (1.3 | ) | 14.8 | ||||||||
Total current liabilities | 73.2 | 38.3 | 111.5 | |||||||||
Non-current portion of customer liabilities | 0.3 | — | 0.3 | |||||||||
Non-current portion of customer liabilities - related party | 9.1 | 360.2 | 369.3 | |||||||||
Other non-current liabilities | 12.2 | — | 12.2 | |||||||||
Total liabilities | $ | 94.8 | $ | 398.5 | $ | 493.3 | ||||||
— | ||||||||||||
8.00% Series A convertible preferred stock | 184.7 | — | 184.7 | |||||||||
Stockholders’ equity (deficit) | ||||||||||||
Common stock | 1.2 | — | 1.2 | |||||||||
Additional paid-in capital | 339.8 | — | 339.8 | |||||||||
Accumulated deficit | (204.3 | ) | (251.7 | ) | (456.0 | ) | ||||||
Accumulated other comprehensive loss | (2.2 | ) | — | (2.2 | ) | |||||||
Treasury stock | (59.6 | ) | — | (59.6 | ) | |||||||
Total stockholders’ equity (deficit) | 74.9 | (251.7 | ) | (176.8 | ) | |||||||
Total liabilities and stockholders’ equity (deficit) | $ | 354.4 | $ | 146.8 | $ | 501.2 |
ii. | Consolidated statements of operations and comprehensive income (loss) - |
Impact of changes in accounting policies | ||||||||||||||||||||||||
As reported three months ended September 30, 2017 | Adjustments | Balances without adoption of Topic 606 | As reported nine months ended September 30, 2017 | Adjustments | Balances without adoption of Topic 606 | |||||||||||||||||||
Net services revenue | $ | 123.2 | $ | (82.4 | ) | $ | 40.8 | $ | 309.5 | $ | (236.5 | ) | $ | 73.0 | ||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of services | 111.8 | (3.8 | ) | 108.0 | 289.1 | (10.3 | ) | 278.8 | ||||||||||||||||
Selling, general and administrative | 15.1 | — | 15.1 | 41.6 | — | 41.6 | ||||||||||||||||||
Other | 1.4 | — | 1.4 | 2.6 | — | 2.6 | ||||||||||||||||||
Total operating expenses | 128.3 | (3.8 | ) | 124.5 | 333.3 | (10.3 | ) | 323.0 | ||||||||||||||||
Income (loss) from operations | (5.1 | ) | (78.6 | ) | (83.7 | ) | (23.8 | ) | (226.2 | ) | (250.0 | ) | ||||||||||||
Net interest income | — | — | — | 0.1 | — | 0.1 | ||||||||||||||||||
Income (loss) before income tax provision | (5.1 | ) | (78.6 | ) | (83.7 | ) | (23.7 | ) | (226.2 | ) | (249.9 | ) | ||||||||||||
Income tax provision (benefit) | (1.5 | ) | (30.1 | ) | (31.6 | ) | (5.1 | ) | (87.9 | ) | (93.0 | ) | ||||||||||||
Net income (loss) | $ | (3.6 | ) | $ | (48.5 | ) | $ | (52.1 | ) | $ | (18.6 | ) | $ | (138.3 | ) | $ | (156.9 | ) | ||||||
Consolidated statements of comprehensive income (loss) | ||||||||||||||||||||||||
Net income (loss) | $ | (3.6 | ) | $ | (48.5 | ) | $ | (52.1 | ) | $ | (18.6 | ) | $ | (138.3 | ) | $ | (156.9 | ) | ||||||
Other comprehensive loss: | ||||||||||||||||||||||||
Foreign currency translation adjustments | (0.2 | ) | — | (0.2 | ) | 0.6 | — | 0.6 | ||||||||||||||||
Comprehensive income (loss) | $ | (3.8 | ) | $ | (48.5 | ) | $ | (52.3 | ) | $ | (18.0 | ) | $ | (138.3 | ) | $ | (156.3 | ) |
iii. | Consolidated statements of cash flows - |
Impact of changes in accounting policies | ||||||||||||
As reported September 30, 2017 | Adjustments | Balances without adoption of Topic 606 | ||||||||||
Operating activities | ||||||||||||
Net income (loss) | $ | (18.6 | ) | $ | (138.3 | ) | $ | (156.9 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operations: | ||||||||||||
Depreciation and amortization | 11.5 | — | 11.5 | |||||||||
Share-based compensation | 8.2 | — | 8.2 | |||||||||
Loss on disposal | 0.2 | — | 0.2 | |||||||||
Provision (recovery) for doubtful receivables | 0.1 | — | 0.1 | |||||||||
Deferred income taxes | (5.6 | ) | (87.9 | ) | (93.5 | ) | ||||||
Changes in operating assets and liabilities: | — | |||||||||||
Accounts receivable and related party accounts receivable | (15.4 | ) | 6.9 | (8.5 | ) | |||||||
Prepaid income taxes | 3.0 | — | 3.0 | |||||||||
Prepaid expenses and other assets | (6.7 | ) | — | (6.7 | ) | |||||||
Accounts payable | 0.3 | (1.1 | ) | (0.8 | ) | |||||||
Accrued compensation and benefits | 4.3 | — | 4.3 | |||||||||
Other liabilities | (0.3 | ) | (1.4 | ) | (1.7 | ) | ||||||
Customer liabilities and customer liabilities - related party | 14.7 | 221.8 | 236.5 | |||||||||
Net cash used in operating activities | (4.3 | ) | — | (4.3 | ) | |||||||
Investing activities | ||||||||||||
Purchases of property, equipment, and software | (30.1 | ) | — | (30.1 | ) | |||||||
Proceeds from maturation of short-term investments | — | — | — | |||||||||
Net cash used in investing activities | (30.1 | ) | — | (30.1 | ) | |||||||
Financing activities | ||||||||||||
Series A convertible preferred stock and warrant issuance, net of issuance costs | — | — | — | |||||||||
Exercise of vested stock options | — | — | — | |||||||||
Purchase of treasury stock | (2.0 | ) | — | (2.0 | ) | |||||||
Shares withheld for taxes | (2.4 | ) | — | (2.4 | ) | |||||||
Net cash (used in) provided by financing activities | (4.4 | ) | — | (4.4 | ) | |||||||
Effect of exchange rate changes in cash | 0.4 | — | 0.4 | |||||||||
Net increase (decrease) in cash and cash equivalents | (38.4 | ) | — | (38.4 | ) | |||||||
Cash and cash equivalents, at beginning of period | 181.2 | — | 181.2 | |||||||||
Cash and cash equivalents, at end of period | $ | 142.8 | $ | — | $ | 142.8 |
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
Deferred customer billings, current | $ | — | $ | 68.2 | |||
Accrued service costs, current (1) | 17.6 | 14.8 | |||||
Customer deposits, current | — | 0.9 | |||||
Refund liabilities, current (1) | 0.3 | — | |||||
Deferred revenue (contract liabilities), current (1) | 3.1 | — | |||||
Current portion of customer liabilities | $ | 21.0 | $ | 83.9 | |||
Deferred customer billings, non-current (2) | $ | — | $ | 110.0 | |||
Refund liabilities, non-current | — | — | |||||
Customer deposits, non-current | — | — | |||||
Deferred revenue (contract liabilities), non-current (2) | 9.4 | 1.0 | |||||
Non current portion of customer liabilities | $ | 9.4 | $ | 111.0 | |||
Total customer liabilities | $ | 30.4 | $ | 194.9 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Share-Based Compensation Expense Allocation Details: | ||||||||||||||||
Cost of services | $ | 1.2 | $ | 1.3 | $ | 3.3 | $ | 4.8 | ||||||||
Selling, general and administrative | 1.2 | 3.5 | 4.8 | 18.7 | ||||||||||||
Other | — | — | 0.1 | 1.8 | ||||||||||||
Total share-based compensation expense (1) | $ | 2.4 | $ | 4.8 | $ | 8.2 | $ | 25.3 |
Nine Months Ended September 30, | ||||||
2017 | 2016 | |||||
Expected dividend yield | — | — | ||||
Risk-free interest rate | 1.8% to 2.3% | 1.2% to 1.9% | ||||
Expected volatility | 40% to 45% | 45% to 50% | ||||
Expected term (in years) | 2.34 to 6.29 | 6.25 | ||||
Forfeitures | —% | 5.68% annually |
Shares | Weighted- Average Exercise Price | ||||||
Outstanding at December 31, 2016 | 20,418,607 | $ | 6.26 | ||||
Granted | 3,581,904 | 3.32 | |||||
Exercised | (58,760 | ) | 2.37 | ||||
Canceled/forfeited | (5,897,038 | ) | 9.42 | ||||
Outstanding at September 30, 2017 | 18,044,713 | 4.66 | |||||
Outstanding, vested and exercisable at September 30, 2017 | 5,676,001 | $ | 8.99 | ||||
Outstanding, vested and exercisable at December 31, 2016 | 7,993,168 | $ | 11.34 |
Shares | Weighted- Average Grant Date Fair Value | ||||||
Outstanding and unvested at December 31, 2016 | 5,862,712 | $ | 3.01 | ||||
Granted | — | — | |||||
Vested | (2,675,782 | ) | 3.50 | ||||
Forfeited | (728,798 | ) | 1.31 | ||||
Outstanding and unvested at September 30, 2017 | 2,458,132 | $ | 2.98 |
Shares | Weighted- Average Grant Date Fair Value | ||||||
Outstanding and unvested at December 31, 2016 | 1,346,774 | $ | 2.35 | ||||
Granted | 265,345 | 2.88 | |||||
Vested | (155,535 | ) | 2.35 | ||||
Forfeited | (250,960 | ) | 2.35 | ||||
Outstanding and unvested at September 30, 2017 | 1,205,624 | $ | 2.47 |
Shares | Weighted- Average Grant Date Fair Value | ||||||
Outstanding and unvested at June 30, 2017 | — | $ | — | ||||
Granted | 3,117,297 | 3.21 | |||||
Vested | — | — | |||||
Forfeited | (17,230 | ) | 3.21 | ||||
Outstanding and unvested at September 30, 2017 | 3,100,067 | $ | 3.21 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Severance and employee benefits | $ | — | $ | (0.3 | ) | $ | 0.3 | $ | 2.5 | ||||||
Facility charges | — | — | — | 0.7 | |||||||||||
Non-cash share based compensation | — | — | 0.1 | 1.8 | |||||||||||
Reorganization-related | — | (0.3 | ) | 0.4 | 5.0 | ||||||||||
Transaction fees (1) | — | — | — | 13.3 | |||||||||||
Defined contribution plan contributions (2) | — | — | — | 0.9 | |||||||||||
Restatement costs | — | 0.8 | — | 0.8 | |||||||||||
Acquisition related diligence and costs (3) | 1.4 | — | 1.4 | — | |||||||||||
Transitioned employees restructuring expense (4) | — | — | 0.8 | — | |||||||||||
Other | 1.4 | 0.8 | 2.2 | 15.0 | |||||||||||
Total other | $ | 1.4 | $ | 0.5 | $ | 2.6 | $ | 20.0 |
Severance and Employee Benefits | Facilities and Other Costs | Total | |||||||||
Reorganization liability at December 31, 2016 | $ | 1.6 | $ | 0.5 | $ | 2.1 | |||||
Restructuring charges | 0.4 | — | 0.4 | ||||||||
Cash payments | (1.7 | ) | (0.5 | ) | (2.2 | ) | |||||
Non-cash charges | (0.1 | ) | $ | — | (0.1 | ) | |||||
Reorganization liability at September 30, 2017 | $ | 0.2 | $ | — | $ | 0.2 |
Preferred Stock | |||||||
Shares Issued and Outstanding | Carrying Value | ||||||
Balance at December 31, 2016 | 210,160 | $ | 171.6 | ||||
Dividends paid/accrued dividends | 12,863 | 13.1 | |||||
Balance at September 30, 2017 | 223,023 | $ | 184.7 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Basic EPS: | ||||||||||||||||
Net income (loss) | $ | (3.6 | ) | $ | 37.4 | $ | (18.6 | ) | $ | 164.0 | ||||||
Less dividends on preferred shares | (4.4 | ) | (4.1 | ) | (13.1 | ) | (58.5 | ) | ||||||||
Less income allocated to preferred shareholders | — | (15.1 | ) | — | (43.4 | ) | ||||||||||
Net income (loss) available/(allocated) to common shareholders - basic | $ | (8.0 | ) | $ | 18.2 | $ | (31.7 | ) | $ | 62.1 | ||||||
Diluted EPS: | ||||||||||||||||
Net income (loss) | (3.6 | ) | 37.4 | (18.6 | ) | 164.0 | ||||||||||
Less dividends on preferred shares | (4.4 | ) | (4.1 | ) | (13.1 | ) | (58.5 | ) | ||||||||
Less income allocated to preferred shareholders | — | (15.0 | ) | — | (43.1 | ) | ||||||||||
Net income (loss) available/(allocated) to common shareholders - diluted | $ | (8.0 | ) | $ | 18.3 | $ | (31.7 | ) | $ | 62.4 | ||||||
Basic weighted-average common shares | 102,225,422 | 100,934,561 | 102,022,129 | 99,870,685 | ||||||||||||
Add: Effect of dilutive securities | — | 1,241,719 | — | 1,147,765 | ||||||||||||
Diluted weighted average common shares | 102,225,422 | 102,176,280 | 102,022,129 | 101,018,450 | ||||||||||||
Net income (loss) per common share (basic) | $ | (0.08 | ) | $ | 0.18 | $ | (0.31 | ) | $ | 0.62 | ||||||
Net income (loss) per common share (diluted) | $ | (0.08 | ) | $ | 0.18 | $ | (0.31 | ) | $ | 0.62 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended September 30, | 2017 vs. 2016 Change | Nine Months Ended September 30, 2017 | 2017 vs. 2016 Change | ||||||||||||||||||||||||
2017 | 2016 | Amount | % | 2017 | 2016 | Amount | % | ||||||||||||||||||||
(In millions except percentages) | |||||||||||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||||||||||
RCM services: net operating fees | $ | 104.6 | $ | 49.0 | $ | 55.6 | 113.5 | % | 255.4 | 300.3 | $ | (44.9 | ) | (15.0 | )% | ||||||||||||
RCM services: incentive fees | 7.5 | 68.5 | (61.0 | ) | (89.1 | )% | 20.2 | 166.5 | (146.3 | ) | (87.9 | )% | |||||||||||||||
RCM services: other | 2.8 | 3.8 | (1.0 | ) | (26.3 | )% | 9.8 | 8.3 | 1.5 | 18.1 | % | ||||||||||||||||
Other service fees | 8.3 | 4.2 | 4.1 | 97.6 | % | 24.1 | 11.3 | 12.8 | 113.3 | % | |||||||||||||||||
Total net services revenue | 123.2 | 125.5 | (2.3 | ) | (1.8 | )% | 309.5 | 486.4 | (176.9 | ) | (36.4 | )% | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Cost of services | 111.8 | 47.4 | 64.4 | 135.9 | % | 289.1 | 137.6 | 151.5 | 110.1 | % | |||||||||||||||||
Selling, general and administrative | 15.1 | 16.2 | (1.1 | ) | (6.8 | )% | 41.6 | 58.4 | (16.8 | ) | (28.8 | )% | |||||||||||||||
Other | 1.4 | 0.5 | 0.9 | 180.0 | % | 2.6 | 20.0 | (17.4 | ) | (87.0 | )% | ||||||||||||||||
Total operating expenses | 128.3 | 64.1 | 64.2 | 100.2 | % | 333.3 | 216.0 | 117.3 | 54.3 | % | |||||||||||||||||
Income (loss) from operations | (5.1 | ) | 61.4 | (66.5 | ) | (108.3 | )% | (23.8 | ) | 270.4 | (294.2 | ) | (108.8 | )% | |||||||||||||
Net interest income | — | 0.1 | (0.1 | ) | (100.0 | )% | 0.1 | 0.2 | (0.1 | ) | (50.0 | )% | |||||||||||||||
Net income (loss) before income tax provision | (5.1 | ) | 61.5 | (66.6 | ) | (108.3 | )% | (23.7 | ) | 270.6 | (294.3 | ) | (108.8 | )% | |||||||||||||
Income tax provision (benefit) | (1.5 | ) | 24.1 | (25.6 | ) | (106.2 | )% | (5.1 | ) | 106.6 | (111.7 | ) | (104.8 | )% | |||||||||||||
Net income (loss) | $ | (3.6 | ) | $ | 37.4 | $ | (41.0 | ) | (109.6 | )% | (18.6 | ) | 164.0 | $ | (182.6 | ) | (111.3 | )% |
• | Gross and net cash generated from customer contracting activities include invoiced or accrued net operating fees, and collected incentive fees which may be subject to adjustment or concession prior to the end of a contract or "other contractual agreement event"; |
• | Gross and net cash generated from customer contracting activities include progress billings on incentive fees that have been collected for a number of our RCM contracts. These progress billings have, from time-to-time been subject to adjustments, and the fees included in these non-GAAP measures may be subject to adjustments in the future; |
• | Adjusted EBITDA and net cash generated from customer contracting activities do not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA and net cash generated from customer contracting activities do not reflect share-based compensation expense; |
• | Adjusted EBITDA and net cash generated from customer contracting activities do not reflect income tax expenses or cash requirements to pay taxes; |
• | Adjusted EBITDA and net cash generated from customer contracting activities do not reflect certain Other expenses which may require cash payments; |
• | Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither adjusted EBITDA nor net cash generated from customer contracting activities reflect cash requirements for such replacements or other purchase commitments, including lease commitments; and |
• | Other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Three Months Ended September 30, | 2017 vs. 2016 Change | Nine Months Ended September 30, 2017 | 2017 vs. 2016 Change | |||||||||||||||||||||||||
2017 | 2016 | Amount | % | 2017 | 2016 | Amount | % | |||||||||||||||||||||
(In millions except percentages) | ||||||||||||||||||||||||||||
RCM services: net operating fees | $ | 104.6 | $ | 49.0 | $ | 55.6 | 113.5 | % | 255.4 | 300.3 | $ | (44.9 | ) | (15.0 | )% | |||||||||||||
RCM services: incentive fees | 7.5 | 68.5 | (61.0 | ) | (89.1 | )% | 20.2 | 166.5 | (146.3 | ) | (87.9 | )% | ||||||||||||||||
RCM services: other | 2.8 | 3.8 | (1.0 | ) | (26.3 | )% | 9.8 | 8.3 | 1.5 | 18.1 | % | |||||||||||||||||
Other services fees | 8.3 | 4.2 | 4.1 | 97.6 | % | 24.1 | 11.3 | 12.8 | 113.3 | % | ||||||||||||||||||
Net services revenue | 123.2 | 125.5 | (2.3 | ) | (1.8 | )% | 309.5 | 486.4 | (176.9 | ) | (36.4 | )% | ||||||||||||||||
Change in deferred customer billings (non-GAAP) (1) | n.a. | (65.8 | ) | n.m. | n.m. | n.a. | (347.5) | n.m. | n.m. | |||||||||||||||||||
Gross cash generated from customer contracting activities (non-GAAP) | n.a. | $ | 59.7 | n.m. | n.m. | n.a | 138.9 | n.m. | n.m. |
(1) | Deferred customer billings include the portion of both (i) invoiced or accrued net operating fees and (ii) cash collections on incentive fees, in each case, that have not met our revenue recognition criteria. Deferred customer billings are included in the detail of our customer liabilities account in the consolidated balance sheet. Deferred customer billings are reduced by revenue recognized when revenue recognition occurs. Change in deferred customer billings represents the net change in the cumulative net operating fees and incentive fees that have not met revenue recognition criteria under Topic 605. |
Three Months Ended September 30, | 2017 vs. 2016 Change | Nine Months Ended September 30, 2017 | 2017 vs. 2016 Change | |||||||||||||||||||||||||||
2017 | 2016 | Amount | % | 2017 | 2016 | Amount | % | |||||||||||||||||||||||
(In millions except percentages) | ||||||||||||||||||||||||||||||
Net income (loss) | (3.6 | ) | 37.4 | $ | (41.0 | ) | (109.6 | )% | (18.6 | ) | 164.0 | $ | (182.6 | ) | (111.3 | )% | ||||||||||||||
Net interest income | — | (0.1 | ) | 0.1 | (100.0 | )% | $ | (0.1 | ) | — | (0.2 | ) | 0.1 | (50.0 | )% | |||||||||||||||
Income tax provision (benefit) | (1.5 | ) | 24.1 | (25.6 | ) | (106.2 | )% | (5.1 | ) | 106.6 | (111.7 | ) | (104.8 | )% | ||||||||||||||||
Depreciation and amortization expense | 4.5 | 2.7 | 1.8 | 66.7 | % | 11.5 | 7.3 | 4.2 | 57.5 | % | ||||||||||||||||||||
Share-based compensation expense (1) | 2.4 | 4.8 | (2.4 | ) | (50.0 | )% | 8.2 | 23.5 | (15.3 | ) | (65.1 | )% | ||||||||||||||||||
Other (2) | 1.4 | 0.5 | 0.9 | 180.0 | % | 2.6 | 20.0 | (17.4 | ) | (87.0 | )% | |||||||||||||||||||
Adjusted EBITDA (non-GAAP) | 3.1 | 69.4 | (66.3 | ) | (95.5 | )% | (1.6 | ) | 321.2 | (322.8 | ) | (100.5 | )% | |||||||||||||||||
Change in deferred customer billings (non-GAAP) (3) | n.a. | (65.8 | ) | n.m. | n.m. | n.a. | (347.5 | ) | n.m. | n.m. | ||||||||||||||||||||
Net cash generated from customer contracting activities (non-GAAP) | n.a. | $ | 3.6 | n.m. | n.m. | n.a. | $ | (26.4 | ) | n.m. | n.m. |
(1) | Share-based compensation expense represents the expense associated with stock options, restricted stock units and restricted stock awards granted, as reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 9, Share-Based Compensation, to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the detail of the amounts of share-based compensation expense. |
(2) | Other costs consist of the following (in millions): |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Severance and employee benefits | $ | — | $ | (0.3 | ) | $ | 0.3 | $ | 2.5 | ||||||
Facility charges | — | — | — | 0.7 | |||||||||||
Non-cash share based compensation | — | — | 0.1 | 1.8 | |||||||||||
Reorganization-related | — | (0.3 | ) | 0.4 | 5.0 | ||||||||||
Transaction fees (i) | — | — | — | 13.3 | |||||||||||
Defined contribution plan contributions (ii) | — | — | — | 0.9 | |||||||||||
Restatement costs | — | 0.8 | — | 0.8 | |||||||||||
Acquisition related diligence and costs (iii) | 1.4 | — | 1.4 | — | |||||||||||
Transitioned employees restructuring expense (iv) | — | — | 0.8 | — | |||||||||||
Other | 1.4 | 0.8 | 2.2 | 15.0 | |||||||||||
Total other | $ | 1.4 | $ | 0.5 | $ | 2.6 | $ | 20.0 |
(3) | Deferred customer billings include the portion of both (i) invoiced or accrued net operating fees and (ii) cash collections on incentive fees, in each case, that have not met our revenue recognition criteria. Deferred customer billings are included in the detail of our customer liabilities account in the consolidated balance sheet. Deferred customer billings are reduced by revenue recognized when revenue recognition occurs. Change in deferred customer billings represents the net change in the cumulative net operating fees and incentive fees that have not met revenue recognition criteria. |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(In millions) | ||||||||
Net cash used in provided by operating activities | $ | (4.3 | ) | $ | (69.3 | ) | ||
Net cash used in investing activities | (30.1 | ) | (9.4 | ) | ||||
Net cash (used in) provided by financing activities | (4.4 | ) | 176.8 |
2017 | 1,919 | ||
2018 | 7,645 | ||
2019 | 6,940 | ||
2020 | 7,144 | ||
2021 | 6,907 | ||
2022 | 3,964 | ||
Thereafter | 19,037 | ||
Total | $ | 53,556 |
Item 3. | Qualitative and Quantitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Number of Shares Purchased (1) | Average Price Paid per Share (3) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Plans or Programs (in millions) (2) | |||||||||||
July 1, 2017 through July 31, 2017 | 342,130 | $ | 3.67 | — | $ | 49.0 | |||||||||
August 1, 2017 through August 31, 2017 | 19,988 | $ | 3.30 | — | $ | 49.0 | |||||||||
September 1, 2017 through September 30, 2017 | — | $ | — | — | $ | 49.0 |
(1) | Amounts include strategic repurchases and repurchases of our stock related to employees’ tax withholding upon vesting of 19,988 RSAs for the month ended August 31, 2017. See Note 9, Share-Based Compensation, to our consolidated financial statements included in this Annual Report on Form 10-Q. |
(2) | On November 13, 2013, the Board authorized, subject to the completion of the Restatement, the repurchase of up to $50.0 million of our common stock from time to time in the open market or in privately negotiated transactions (the "2013 Repurchase Program"). The timing and amount of any shares repurchased under the 2013 Repurchase Program will be determined by our management based on its evaluation of market conditions and other factors. The 2013 Repurchase Program may be suspended or discontinued at any time. See Note 8, Stockholders' Equity, to our consolidated financial statements included in this Annual Report on Form 10-Q. |
(3) | Average price paid per share of common stock repurchased under the 2013 Repurchase Program is the execution price, including commissions paid to brokers. |
Item 3. | Defaults upon Senior Securities |
Item 4. | Mine Safety Disclosure |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit Number | Exhibit Description |
101.INS | XBRL Instance Document |
101.SCH | XBRL Schema Document |
101.CAL | XBRL Calculation Linkbase Document |
101.LAB | XBRL Labels Linkbase Document |
101.DEF | XBRL Taxonomy Extension Document |
101.PRE | XBRL Presentation Linkbase Document |
R1 RCM INC. | |
By: | /s/ Joseph Flanagan |
Joseph Flanagan | |
President and Chief Executive Officer | |
By: | /s/ Christopher Ricaurte |
Christopher Ricaurte | |
Chief Financial Officer and Treasurer |
Level of Performance | Average Per Share Price | Percentage for which the Performance-Based Condition is Satisfied |
Below Threshold | <$4.00 | 0% |
Threshold | $4.00 | 50% |
Target | $5.00 | 100% |
Above Target | $7.00 | 150% |
Maximum | $9.00 or higher | 200% |
Level of Performance | Average Per Share Price | Percentage for which the Performance-Based Condition is Satisfied |
Below Threshold | <$4.00 | 0% |
Threshold | $4.00 | 50% |
Target | $5.00 | 100% |
Maximum | $7.00 or higher | 150% |
1. | Your employment with the Company is “at will,” meaning it is terminable at any time by either you or the Company, subject to the provisions of this Letter Agreement. |
2. | Your employment with the Company, as well as your role as an officer of the Company or any subsidiary, will terminate: |
a. | upon at least thirty days’ prior written notice to the Company of your voluntary termination of employment (which the Company may, in its sole discretion, make effective earlier than any notice date); |
b. | as specified in a written notice by the Company to you of a termination of employment for Cause or without Cause (other than for Disability); |
c. | immediately upon your death; or |
d. | upon at least ten days’ prior written notice by the Company to you of your termination of employment due to Disability. |
3. | Severance. |
a. | In the event of your termination of employment from the Company by reason of your death, Disability, or by the Company for Cause, you will be entitled to receive: |
i. | any unpaid Base Salary through the date of termination, |
ii. | except in the case of your termination by the Company for Cause, any annual bonus earned but unpaid with respect to the fiscal year ending on or preceding the date of termination, payable at the same time as it would have been paid had you not undergone a termination of employment; |
iii. | reimbursement in accordance with applicable Company policy for any unreimbursed business expenses incurred through the date of termination; |
iv. | any accrued but unused vacation time in accordance with Company policy; and |
i. | all other payments, benefits or fringe benefits to which you are entitled under the terms of any applicable compensation or equity arrangement or employee benefit plan or program of the Company (collectively, the foregoing payment and benefits described in clauses (i)-(v) will be hereafter referred to as the “Accrued Benefits”). |
b. | In the event of your termination of employment from the Company by the Company without Cause, the Company shall pay or provide you with the following severance benefits in addition to the Accrued Benefits: |
i. | subject to your continued compliance with all of your post-termination obligations to the Company, an amount equal to your monthly Base Salary rate, paid monthly for a period of twelve months following such termination, provided that, in the event that you obtain other full-time employment, you must notify the company of such employment and you will not be entitled to any such payment in respect of the period beginning on the effective date of such new employment; and |
ii. | subject to (A) your timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), (B) your continued copayment of premiums at the same level and cost to you as if you were an employee of the Company (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars), and (C) your continued compliance with all of your post-termination obligations to the Company, continued participation in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan) which covers you (and your eligible dependents) for a period of twelve months following such termination at the Company’s expense; provided that you are eligible and remain eligible for COBRA coverage; and provided, further, that in the event that you obtain other employment that offers group health benefits, such continuation of coverage by the Company will immediately cease. Notwithstanding the foregoing, the Company will not be obligated to provide the foregoing continuation coverage if it would result in the imposition of excise taxes on the Company for failure to comply with the nondiscrimination requirements of the Patient Protection and Affordable Care Act of 2010, as amended, and the Health Care and Education Reconciliation Act of 2010, as amended (to the extent applicable). |
c. | Payment of all amounts described in part (b) above, excluding the Accrued Benefits (the “Severance Payments”) will only be payable if you deliver to the Company and do not revoke a general release of claims in favor of the Company and its affiliates in a form reasonably satisfactory to the Company. Such release must be executed and delivered (and no longer subject to revocation, if applicable) within sixty days following termination. To the extent that payment of any amount of the Severance Payments constitutes “nonqualified deferred compensation” for purposes of “Code Section 409A” (as defined below), any such payment scheduled to occur during the first sixty days following the termination of employment will not be paid until the sixtieth day following such termination of employment and will include payment of any amount that was otherwise scheduled to be paid prior thereto. |
d. | In the event that a Change of Control occurs while you have been in the continuous employment of the Company, each equity award (or, if applicable, any securities granted or issued to you in respect of such equity award in connection with a Change of Control) shall become fully vested and immediately exercisable in full if, within the twelve month period following the date of the consummation of such Change of Control, your employment with the Company or the acquiring or succeeding corporation is terminated without Cause by the Company or the acquiring or succeeding corporation. |
1. | For purposes of this Agreement: |
a. | “Cause” means: (i) your conviction for, or plea of guilty or nolo contendere to, a felony; (ii) your engaging in conduct that constitutes gross neglect or willful misconduct and that, in either case, results in material economic or reputational harm to the Company; (iii) your willful breach of any provision of this Agreement or any applicable non-disclosure, non-competition, non-solicitation or other similar restrictive covenant obligation owed to the Company; (iv) your repeated refusal, or failure to undertake good faith efforts, to perform your material employment duties and responsibilities for the Company; or (v) your engaging in willful misconduct resulting in or intended to result in direct personal gain to you at the Company’s expense. |
b. | “Change of Control” means |
i. | the consummation of any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than fifty percent (50%) of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any); |
ii. | any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company to a Third Party Purchaser; |
iv. | the consummation of a Take Private Change of Control; or |
v. | any liquidation or dissolution of the Company; |
c. | “Disability” means you have been unable, with or without reasonable accommodation and due to physical or mental incapacity, to substantially perform your duties and responsibilities hereunder for a period of one hundred eighty days out of any consecutive three hundred sixty-five days. |
d. | “Person” means any individual, entity or group, within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding (i) the Company and any of its subsidiaries, (ii) any employee stock ownership or other employee benefit plan maintained by the Company, and (iii) an underwriter or underwriting syndicate that has acquired the Company’s securities solely in connection with a public offering thereof. |
e. | “Take Private Change of Control” means the consummation of any transaction or series of transactions following which no shares of the Company (or of its ultimate parent corporation) are listed on the New York Stock Exchange or the NASDAQ, on any other United States stock exchange, or are otherwise listed on a public trading market (including the OTC Markets Group, Inc.). |
f. | “Third Party Purchaser” means any Person or group of Persons, none of whom is, immediately prior to the subject transaction, TowerBrook, Ascension, a TB/AS Co-Investment Vehicle, or any Affiliate thereof. |
2. | General. You, by virtue of your role with the Company, have access to, and are involved in the formulation of, certain confidential and secret information of the Company regarding its operations and you could materially harm the business of the Company by competing with the Company or soliciting employees or customers of the Company. |
3. | Non-Solicitation. During the time in which you perform services for the Company and for a period of eighteen months after you cease to perform services for the Company, regardless of the reason, you shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation: |
a. | Hire, recruit, solicit or otherwise attempt to employ or retain or enter into any business relationship with, any person who is or was an employee of the Company within the twelve-month period immediately preceding the cessation of your service with the Company; or |
b. | Solicit the sale of any products or services that are similar to or competitive with products or services offered by, manufactured by, designed by, or distributed by Company, to any person, company or entity which was or is a customer or potential customer of Company for such products or services. |
4. | Non-Disclosure. |
a. | You will not, without the Company’s prior written permission, directly or indirectly, utilize for any purpose other than for a legitimate business purpose solely on behalf of the |
b. | Return of Company Property. You agree that, in the event that your service to the Company is terminated for any reason, you shall immediately return all of the Company’s property, including without limitation, (i) tools, pagers, computers, printers, key cards, documents or other tangible property of the Company, and (ii) the Company’s Confidential Information in any media, including paper or electronic form, and Participant shall not retain in your possession any copies of such information. |
c. | Ownership of Software and Inventions. All discoveries, designs, improvements, ideas, inventions, software, whether patentable or copyrightable or not, shall be works-made-for-hire and Company shall be deemed the sole owner throughout the universe of any and all rights of whatsoever nature therein, with the rights to use the same in perpetuity in any manner the Company determines in its sole discretion without any further payment to you whatsoever. If, for any reason, any of such results and proceeds which relate to the business shall not legally be a work-for-hire and/or there are any rights which do not accrue to the Company under the preceding sentence, then you hereby irrevocably assigns and agrees to quitclaim any and all of your right, title and interest thereto including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed to the Company, and the Company shall have the right to use the same in perpetuity throughout the universe in any manner the Company determines without any further payment to you whatsoever. You shall, from time to time, as may be reasonably requested by the Company, at the Company’s expense, do any and all things which the Company may deem useful or desirable to establish or document the Company’s exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent you have any rights in the results and proceeds of your services that cannot be assigned in the manner described above, you unconditionally and irrevocably waives the enforcement of such rights. Notwithstanding anything to the contrary set forth herein, works developed by you (i) which are developed independently from the work developed for the Company regardless of whether such work was developed before or after you performed services for the Company; or (ii) applications independently developed which are unrelated to the business and which you develop during non-business hours using non-business property shall not be deemed work for hire and shall not be the exclusive property of the Company. |
d. | Non-Competition. |
i. | During the time of your employment for the Company and for a period of twelve months after the termination of your employment for the Company, regardless of the reason, you shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation, within the Restricted Area, own, manage, operate, or participate in the ownership, management, operation, or control of, or be employed by or provide services to, any entity which is in competition with the Company. |
ii. | Notwithstanding anything to the contrary, nothing in this Paragraph (d) prohibits you from being a passive owner of not more than one percent of the outstanding stock of any class of a corporation which is publicly traded, so long as you have no active participation in the business of such corporation. |
e. | Acknowledgments. You acknowledge and agree that the restrictions contained in this Letter Agreement with respect to time, geographical area and scope of activity are reasonable and do not impose a greater restraint than is necessary to protect the goodwill and other legitimate business interests of the Company and that you have the opportunity to review the provisions of this Letter Agreement with your legal counsel. In particular, you agree and acknowledge (i) that the Company is currently engaging in business and actively marketing its services and products throughout the United States, (ii) that your duties and responsibilities for the Company are co-extensive with the entire scope of the Company's business, (iii) that the Company has spent significant time and effort developing and protecting the confidentiality of its methods of doing business, technology, customer lists, long term customer relationships and trade secrets, and (iv) that such methods, technology, customer lists, customer relationships and trade secrets have significant value. |
f. | Enforcement. You agree that the restrictions contained in this Letter Agreement are necessary for the protection of the business, the Confidential Information, customer relationships and goodwill of the Company and are considered by you to be reasonable for that purpose and that the scope of restricted activities, the geographic scope and the duration of the restrictions set forth in this Letter Agreement are considered by you to be reasonable. You further agree that any breach of any of the restrictive covenants in this Letter Agreement would cause the Company substantial, continuing and irrevocable harm for which money damages would be inadequate and therefore, in the event of any such breach or any threatened breach, in addition to such other remedies as may be available, the Company shall be entitled to specific performance and injunctive relief. This Agreement shall not in any way limit the remedies in law or equity otherwise available to the Company or its Affiliates. You further agree that to the extent any provision or portion of the restrictive covenants of this Letter Agreement shall be held, found or deemed to be unreasonable, unlawful or unenforceable by a court of competent jurisdiction, then any such provision or portion thereof shall be deemed to be modified to the extent necessary in order that any such provision or portion thereof shall be legally enforceable to the fullest extent permitted by applicable law. |
g. | Severability; Modification. It is expressly agreed by you that: |
i. | Modification. If, at the time of enforcement of this Letter Agreement, a court holds that the duration, geographical area or scope of activity restrictions stated herein are unreasonable under circumstances then existing or impose a greater restraint than is necessary to protect the goodwill and other business interests of the Company, you agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law, in all cases giving effect to the intent of the parties that the restrictions contained herein be given effect to the broadest extent possible; and |
ii. | Severability. Whenever possible, each provision of this Letter Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Letter Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, such invalidity, illegality or unenforceability will not affect any other provision, but this Letter Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. |
h. | Non-Disparagement. You understand and agree that you will not disparage the Company, its officers, directors, administrators, representatives, employees, contractors, consultants or customers and will not engage in any communications or other conduct which might interfere with the relationship between the Company and its current, former, or prospective employees, contractors, consultants, customers, suppliers, regulatory entities, and/or any other persons or entities. |
i. | Definitions. |
i. | Confidential Information. “Confidential Information” as used in this Letter Agreement shall include the Company’s trade secrets as defined under Illinois law, as well as any other information or material which is not generally known to the public, and which (A) is generated, collected by or utilized in the operations of the Company’s business and relates to the actual or anticipated business, research or development of the Company; or (B) is suggested by or results from any task assigned to you by the Company or work performed by you for or on behalf of the Company. Confidential Information shall not be considered generally known to the public if you or others improperly reveal such information to the public without the Company’s express written consent and/or in violation of an obligation of confidentiality to the Company. Examples of Confidential Information include, but are not limited to, all customer, client, supplier and vendor lists, budget information, contents of any database, contracts, product designs, technical know-how, engineering data, pricing and cost information, research and development work, software, business plans, proprietary data, projections, market research, perceptual studies, strategic plans, marketing information, financial information (including financial statements), sales information, training manuals, employee lists and compensation of employees, and all other competitively sensitive information with respect to the Company, whether or not it is in tangible form, and including without limitation |
ii. | Restricted Area. For purposes of this Agreement, the term “Restricted Area” shall mean the United States of America. |
5. | It is intended that all payments and benefits under this Letter Agreement, the Annual Bonus Plan, the LTI, the 2010 Stock Incentive Plan, and any other plan under which you receive compensation shall comply with, or be exempt from, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, to the maximum extent permitted, this Letter Agreement and such other agreements and plans will be interpreted in accordance with such intention. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification will be made in good faith and will, to the maximum extent reasonably possible, maintain the original intent and economic benefit to you and the Company of the applicable provision without violating the provisions of Code Section 409A. The Company represents and covenants that payments and benefits to be paid to you under this Letter Agreement, the Annual Bonus Plan, the LTI, the 2010 Stock Incentive Plan, and any other plan under which you will receive compensation are not and will not be subject to any additional tax or interest under Code Section 409A. The Company and you agree to take any action, or refrain from taking any action, reasonably requested by you or the Company, as applicable, to comply with the terms of any correction procedure promulgated under Code Section 409A. |
6. | A termination of employment will not be deemed to have occurred for purposes of any provision of this Letter Agreement providing for the payment of any amount or benefit that is “nonqualified deferred compensation” under Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Letter Agreement, references to a “termination,” “termination of employment” or like terms will mean a “separation from service.” If on the date of your termination you are a “specified employee” for purposes of Code Section 409A, any payment or benefit that is “nonqualified deferred compensation” that is payable on account of a “separation from service” (as such terms are defined for purposes of Code Section 409A), such payment or benefit will be made or provided at the date that is the earliest of (a) the expiration of the six (6)-month period measured from the date of your “separation from service,” (b) the date of your death, or (c) such other date that such payment or benefit may be provided without incurring any additional tax or interest under Code Section 409A. Upon the expiration of the foregoing delay period, any payments and benefits delayed pursuant to the previous sentence will be paid or made available to you in a lump sum and all remaining benefits payments and benefits due will be paid or provided in accordance with the normal payment dates specified for them herein. |
7. | With regard to any reimbursement to you of any costs and expenses or the provision of any in-kind benefits, except as otherwise permitted by Code Section 409A, (a) the right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit, (b) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year will not affect the expenses eligible for reimbursement, or in-kind to be provided, in any other taxable year, and (c) such payments will be made on or before the last day of your taxable year following the taxable year in which the expense occurred (it being understood that notwithstanding this (c), any reimbursements to you will be made promptly after |
8. | Your right to receive any installment payments under this Letter Agreement, the Annual Bonus Plan, the LTI, the 2010 Stock Incentive Plan, or any other plan under which you receive compensation shall be treated as a right to receive a series of separate payments, and each such payment shall be a separately identified and determinable amount, to the maximum extent permitted under Code Section 409A. Whenever a payment under this Letter Agreement specifies a payment within a period of days, the actual date of payment within such specified period will be within the sole discretion of the Company. |
9. | In no event will any payment that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A. |
10. | Governing Law. This Letter Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws provisions. |
11. | Exclusive Jurisdiction/Venue. All disputes that arise from or relate to this Letter Agreement shall be decided exclusively by binding arbitration in Cook County, Illinois under the Commercial Arbitration Rules of the American Arbitration Association. The parties agree that the arbitrator’s award shall be final, and may be filed with and enforced as a final judgment by any court of competent jurisdiction. Notwithstanding the foregoing, any disputes related to the enforcement of the restrictive covenants contained in this Letter Agreement shall be subject to and determined under Delaware law and adjudicated in Illinois courts. |
12. | Notices. Any notice hereunder by you shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to you in writing and such notice shall be deemed duly given only upon receipt thereof at such address as you may have on file with the Company. |
13. | Headings. The titles and headings of the various sections of this Letter Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Letter Agreement. |
14. | Counterparts. This Letter Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. |
15. | Severability. The invalidity or unenforceability of any provisions of this Letter Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Letter Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Letter Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. |
16. | Binding Agreement; Assignment. This Letter Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns and you. You shall not |
17. | Entire Agreement; Precedence; Amendment. The Offer Letter and this Letter Agreement together contain the entire agreement between the parties hereto with respect to the subject matter contained herein and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. In the event that any term of this Letter Agreement provides any right to or imposes any obligation on you that conflicts with the terms of the Offer Letter, then the Offer Letter shall prevail over this Letter Agreement. This Letter Agreement may be modified or amended by a writing signed by both the Company and you. |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 28, 2017 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | R1 RCM INC. | |
Entity Central Index Key | 0001472595 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filter Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 104,515,603 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 116,639,819 | 116,425,524 |
Common stock, shares outstanding (in shares) | 104,505,034 | 106,659,542 |
Treasury stock, shares (in shares) | 12,134,785 | 9,765,982 |
Redeemable Convertible Preferred Stock | ||
Preferred stock, dividend rate | 8.00% | 8.00% |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares issued (in shares) | 223,023 | 210,160 |
Preferred stock, shares outstanding (in shares) | 223,023 | 210,160 |
Preferred stock, shares authorized (in shares) | 370,000 | 370,000 |
Preferred stock, aggregate liquidation value | $ 227.5 | $ 214.4 |
Consolidated Statements of Operations and Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||
Net services revenue, from related party | $ 112.2 | $ 22.7 | $ 275.3 | $ 366.2 |
Business Description and Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Description and Basis of Presentation | Business Description and Basis of Presentation Business Description R1 RCM Inc. (the "Company") is a leading provider of revenue cycle management ("RCM") services and physician advisory services ("PAS") to healthcare providers. The Company helps healthcare providers generate sustainable improvements in their operating margins and cash flows while also enhancing patient, physician and staff satisfaction for its customers. The Company achieves these results for its customers by managing healthcare providers’ revenue cycle operations, which encompass processes including patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections from patients and payers. The Company does so by deploying a unique operating model that leverages its extensive healthcare site experience, innovative technology and process excellence. The Company's primary service offering consists of end-to-end RCM, which encompasses patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections. The Company deploys its RCM services through a co-managed relationship or an operating partner relationship. Under a co-managed relationship, the Company leverages its customers’ existing RCM staff and processes, and supplements them with the Company's infused management, subject matter specialists, proprietary technology and other resources. Under an operating partner relationship, the Company provides comprehensive revenue cycle infrastructure to providers, including all revenue cycle personnel, technology, and process workflow. The Company also offers modular services, allowing customers to engage the Company for only specific components of its end-to-end RCM service offering. The Company's PAS offering complements the Company's RCM offering by strengthening customer’s compliance with certain third-party payer requirements and limiting denials of claims. For example, the Company's PAS offering helps customers determine whether to classify a hospital visit as an in-patient or an out-patient observation case for billing purposes. On February 16, 2016, the Company entered into a long-term strategic partnership with Ascension Health Alliance, the parent of the Company's largest customer and the nation’s largest Catholic and non-profit health system, and TowerBrook Capital Partners ("TowerBrook"), an investment management firm (the "Transaction"). As part of the Transaction, the Company amended and restated its Master Professional Services Agreement ("A&R MPSA") with Ascension Health ("Ascension") effective February 16, 2016 with a term of ten years. Pursuant to the A&R MPSA and with certain limited exceptions, the Company will become the exclusive provider of RCM services and PAS with respect to acute care services provided by the hospitals affiliated with Ascension that execute supplement agreements with the Company. Basis of Presentation The accompanying unaudited consolidated financial statements reflect the Company's financial position as of September 30, 2017, the results of operations for the three and nine months ended September 30, 2017 and 2016, and the cash flows of the Company for the nine months ended September 30, 2017 and 2016. These financial statements include the accounts of R1 RCM Inc. and its wholly owned subsidiaries. All material intercompany amounts have been eliminated in consolidation. These financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial reporting and as required by the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the interim financial information, have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2017. Beginning with the quarter ended March 31, 2017, the Company changed the presentation in its financial statements to be stated in millions instead of thousands. Therefore, previously reported amounts for fiscal 2016 may differ due to rounding. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. For a more complete discussion of the Company’s significant accounting policies and other information, the unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 10-K"). As of January 1, 2017, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") and ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). See Note 6, Revenue Recognition, and Note 9, Share-Based Compensation, for discussion on the impact of the adoption of these standards on the Company's policies for revenue and stock compensation, respectively. |
Recent Accounting Pronouncements |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Standards and Disclosures In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which supersedes existing guidance on accounting for leases in Topic 840, Leases. ASU 2016-02 generally requires all leases to be recognized in the consolidated balance sheet. The provisions of ASU 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this prospective guidance on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 is intended to reduce diversity in practice in the classification and presentation of changes in restricted cash on the Consolidated Statement of Cash Flows. ASU 2016-18 requires that the Consolidated Statement of Cash Flows explain the change in total cash and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. ASU 2016-18 also requires a reconciliation between the total of cash and cash equivalents and restricted cash presented in the Consolidated Statement of Cash Flows and the cash and cash equivalents balance presented in the Consolidated Balance Sheet. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of the adoption of this prospective guidance on its consolidated financial statements. |
Fair Value of Financial Instruments |
9 Months Ended | ||||||||||||
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Sep. 30, 2017 | |||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company records its financial assets and liabilities at fair value. The accounting standard for fair value (i) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, (ii) establishes a framework for measuring fair value, (iii) establishes a hierarchy of fair value measurements based upon the ability to observe inputs used to value assets and liabilities, (iv) requires consideration of nonperformance risk and (v) expands disclosures about the methods used to measure fair value. The accounting standard establishes a three-level hierarchy of measurements based upon the reliability of observable and unobservable inputs used to arrive at fair value. Observable inputs are independent market data, while unobservable inputs reflect the Company’s assumptions about valuation. The three levels of the hierarchy are defined as follows:
The carrying amounts of the Company’s financial instruments, which include financial assets such as cash and cash equivalents, restricted cash equivalents, accounts receivable, net, and certain other current assets, as well as financial liabilities such as accounts payable, accrued service costs, accrued compensation and benefits and certain other accrued expenses, approximate their fair values, due to the short-term nature of these instruments. The Company does not have any financial assets or liabilities that are required to be measured at fair value on a recurring basis. |
Accounts Receivable and Allowance for Doubtful Accounts |
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is comprised of unpaid balances pertaining to non-RCM services fees and net receivable balances for RCM customers after considering cost reimbursements owed to such customers, including related accrued balances. The Company maintains an estimated allowance for doubtful accounts to reduce its accounts receivable to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay, the length of time a balance has been outstanding, input from key customer resources assigned to each customer, and the status of any ongoing operations with each applicable customer. Movements in the allowance for doubtful accounts are as follows (in thousands):
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Property, Equipment, and Software |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Equipment, and Software | Property, Equipment and Software Property, equipment and software consist of the following (in millions):
The following table summarizes the allocation of depreciation and amortization expense between cost of services and selling, general and administrative expenses (in millions):
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Revenue Recognition |
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Revenue Recognition | Revenue Recognition The Company follows the guidance under Topic 606, Revenue from Contracts with Customers, (“Topic 606”). Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contact term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Periods prior to January 1, 2017 Revenue is generally recognized when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Net service fees, as reported in the consolidated statement of operations and comprehensive income (loss), consist of: (a) RCM services fees and (b) professional service fees earned on a fixed fee, transactional fee or time and materials basis. The Company’s primary source of revenue is RCM services fees. RCM services fees are primarily contingent, but along with fixed fees are generally viewed as one deliverable. To the extent that certain RCM services fees are fixed and not subject to refund, adjustment or concession, such fees are generally recognized as revenue on a straight-line basis over the term of the contract. On a limited basis, the Company enters into contracts with multiple accounting elements which may include a combination of fixed fee or transactional fee elements. The selling price of each element is determined by using management's best estimate of selling price. Revenues are recognized in accordance with the accounting policies for the separate elements. RCM services fees that are contingent in nature are recognized as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or other contractual agreement event. Revenue is recognized for RCM services fees upon the contract reaching the end of its stated term (such that the contractual relationship will not continue in its current form) to the extent that: (i) cash has been received for invoiced fees and (ii) there are no disputes at the conclusion of the term of the contract. If fees or services are disputed by a customer at the end of a contract, a settlement agreement entered into with the customer triggers revenue recognition. An other "contractual agreement event" occurs when a renewal, amendment to an existing contract, or other settlement agreement is executed in which the parties reach agreement on prior fees. Revenue is recognized up to the amount covered by such agreements. RCM services fees consist of the following contingent fees: (i) Net Operating Fees and (ii) Incentive Fees. Net Operating Fees The Company generates net operating fees to the extent the Company is able to assist customers in reducing the cost of revenue cycle operations. In limited cases, the Company earns a fixed fee instead of a fee based on the mechanics described below. The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; less iii) any cost savings the Company shares with customers. Net operating fees are recorded as deferred customer billings until the Company recognizes revenue for a customer contract at the end of a contract or reaches an "other contractual agreement event". The amount of unpaid costs of customers’ revenue cycle operations and shared cost savings are reported as accrued service costs within customer liabilities in the consolidated balance sheets. Incentive Fees The Company generates revenue in the form of performance-based fees when the Company improves the customers’ financial or operational metrics. These performance metrics vary by customer contract. However, certain contracts contain a contract-to-date performance metric that is not resolved until the end of the term of the contract. Periods commencing January 1, 2017 Nature of Goods and Services The Company's primary source of revenue is its end-to-end RCM services fees. The Company also generates revenue through its modular RCM services, where customers will engage the Company for only specific components of its end-to-end RCM service offering on a fixed-fee or transactional basis, as well as its PAS offering. Revenue Cycle Management RCM services fees are primarily variable and performance related, and are generally viewed as the consideration earned in satisfaction of a single performance obligation. RCM services fees consist of net operating fees, incentive fees, and other fees. Net Operating Fees The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs. The Company recognizes revenue related to net operating fees ratably as the performance obligation for the RCM services is satisfied. Base fees are typically billed in advance of the quarter and paid in three monthly payments as the entity performs and the customer simultaneously receives and consumes the benefits provided by the services provided. The costs of customers’ revenue cycle operations which the company pays pursuant to its RCM agreements are accrued based on the service period. Incentive Fees The Company recognizes revenue related to incentive fees ratably as the performance obligation for RCM services is satisfied, to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Incentive fees are structured to reflect quarterly or annual, performance and are evaluated on a contract-by-contract basis. Incentive fees are typically billed and paid on a quarterly basis. RCM Other The Company recognizes revenue related to other RCM fees as RCM services are provided. These services typically consist of the Company's modular RCM services offering, which consists of an obligation to provide services for a specific component of its end-to-end RCM service offering. Fees are typically variable in nature with the entire amount being included in revenue in the month of service. The customer simultaneously receives and consumes the benefits provided by the services and the fees are typically billed on a monthly basis with payment terms of up to 30 days. To the extent that certain service fees are fixed and not subject to refund, adjustment or concession, these fees are generally recognized into revenue ratably as the performance obligation is satisfied. Other Services The Company recognizes revenue from PAS in the period in which the service is performed. The Company’s PAS arrangements typically consist of an obligation to provide specific services to customers on a when and if needed basis. These services are provided under a fixed price per unit arrangement. These contracts are evaluated on a contract-by-contract basis. Fees for the Company's PAS arrangements are typically billed on a monthly basis with 30 to 60 day payment terms. Bundled Services Modular RCM services may be sold separately or bundled in a contract and end-to-end RCM services are typically sold separately but may be bundled with PAS services. PAS services are commonly sold separately. The typical length of an end-to-end RCM contract is three to ten years (subject to the parties' respective termination rights) but varies from customer to customer. PAS and modular RCM agreements generally vary in length between one and three years. For bundled arrangements, the Company accounts for individual services as a separate performance obligation if a service is separately identifiable from other items in the bundled arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The transaction price is allocated between separate services in a bundle based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells its RCM, PAS, or modular services. PAS services are provided at a customer’s election but do not represent material rights as the services are priced at standalone selling price throughout the life of the agreement. In certain situations, the Company allocates variable consideration to a distinct service, or services, within a contract. The Company allocates variable payments to one or more, but not all, of the distinct services in a contract when (i) the variable payment relates specifically to the Company’s efforts to transfer the distinct service and (ii) the variable payment is for an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to its customer. Disaggregation of Revenue In the following table, revenue is disaggregated by source of revenue (in millions):
Contract Balances The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers (in millions):
The Company recognized revenue of $0.3 million for the three months ended September 30, 2017 related to changes in transaction price estimates during the quarter for certain revenue cycle management contracts. The Company recognized a decrease in revenue of $0.4 million during the three months ended September 30, 2017, which amount was included in contract liabilities at the beginning of the period. A receivable is recognized in the period the Company provides services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30-60 days. Significant changes in the contract assets and the contract liabilities balances during the three months ended September 30, 2017 are as follows (in millions):
Transaction Price Allocated to the Remaining Performance Obligation The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in millions). The estimated revenue does not include amounts of variable consideration that are constrained.
The amounts presented in the table above primarily consist of fixed fees which are typically recognized ratably as the performance obligation is satisfied or incentive fees which are measured cumulatively over the contractually defined performance period. Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services within the Company's PAS contracts that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services. The Company has elected certain of the optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. Accordingly, the Company applies the practical expedient in paragraph 606-10-55-18 to its stand-alone PAS contracts and modular RCM services and does not disclose information about variable consideration from remaining performance obligations for which the Company recognizes revenue. PAS performance obligations are typically short in duration (often less than 1 day) with any uncertainty related to the associated variable consideration resolved as each increment of service (completion of a level of care review or an appeal) is completed which reflects the value the Customer receives from the Company’s fulfillment of the performance obligation. Modular RCM services performance obligations for variable consideration are of short duration with fees corresponding to the value the customer has realized, for example, patient accounts collected on behalf of the Customer or medical record lines transcribed. The Company also applies the guidance in paragraph 606-10-50-14A(b) to variable consideration within its end-to-end RCM contracts and does not disclose information about remaining, wholly unsatisfied performance obligations for variable consideration that the Company is able to allocate to one or more, but not-all, of the performance obligations in its contracts in accordance with paragraph 606-10-32-40. The Company’s end-to-end RCM services performance obligations are satisfied over time and are substantially the same from period to period under either a co-managed or operating partner model. Fees are variable and consist of net operating fees and incentive fees with the uncertainty related to net operating fees and certain incentive fees being resolved quarterly with the uncertainty of other incentive fees being resolved annually. The information presented in the table above includes estimates for incentive fees where the uncertainty related to the final fee is resolved on longer than a quarterly basis and to the extent the Company does not believe the associated consideration is constrained. Changes in Accounting Policies Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements. The Company adopted Topic 606 with a date of the initial application of January 1, 2017. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company adopted Topic 606, effective January 1, 2017, using the modified retrospective method, applying Topic 606 to contracts that were not complete as of the date of initial application. Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. The details of the significant changes and quantitative impact of the changes are set out below. RCM services fees RCM services fees that are variable in nature were recognized under Topic 605 as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or other contractual agreement event. Revenue previously has been recognized for RCM service fees upon the contract reaching the end of its stated term (such that the contract relationship will not continue in its current form) to the extent that cash has been received for invoiced fees and there are no disputes at the conclusion of the term of the contract. Under Topic 606, the Company recognizes service fees that are variable in nature over time as the service is provided to the customer to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty related to the estimated revenue is subsequently resolved. Net operating fees are typically recognized on a quarterly basis as the RCM services are rendered and measurement of the net operating fees earned during the distinct performance period is objectively determinable. Incentive fees are calculated quarterly based upon contractually defined agreed-upon performance metrics and are recognized as revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty related to the estimated revenue is subsequently resolved. Fixed fees are generally recognized over the term of the contract on a ratable basis as the performance obligation is satisfied. Other services fees The PAS contract between the Company and customer typically stipulates the price per unit the Company is entitled to for each unit of service performed. Certain contracts include minimum fees and volume discounts but the Company does not know the quantity or mix of service types the customer will request until the request is made. The length of time it takes the Company to perform each service can vary depending on the nature of the service or complexity of the specific situation or case. Revenue previously had been recognized for PAS service fees when the service was completed. Under Topic 606, the Company recognizes revenue on a monthly basis when services are completed during the month consistent with recognition under Topic 605. Deferred contract costs Eligible, one-time, nonrecurring fulfillment costs associated with the initial phases of the Ascension A&R MPSA and with the transition of additional Ascension hospitals under separate contracts are deferred and subsequently amortized. These costs are amortized on a straight-line basis over the expected period of benefit. Under Topic 606, the Company will continue to amortize associated assets over the remaining life of the contract as services are provided. Impacts on Financial Statements The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2017 (in millions, except per share data):
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Customer Liabilities |
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Customer Liabilities | Customer Liabilities Customer liabilities include (i) accrued service costs (amounts due and accrued for cost reimbursements), (ii) deferred customer billings (net operating fees invoiced or accrued and incentive fees collected that have not met all revenue recognition criteria), (iii) refund liabilities (amounts potentially due as a refund to the Company's customers on incentive fees), (iv) customer deposits (consisting primarily of net operating fees under the Company’s RCM contracts that are paid prior to the service period and amounts due as a refund to the Company's customers on incentive fees) and (v) Deferred Revenue (contract liabilities) (fixed or variable fees amortized to revenue over the service period). Deferred customer billings are classified as current based on the customer contract end dates or other termination events that fall within twelve months of the balance sheet dates. Accrued service cost, refund liabilities and contract liabilities are classified as current or non-current based on the anticipated period in which the liabilities are expected to be settled or the revenue is expected to be recognized. Customer liabilities consist of the following (in millions):
(1) Includes $17.6 million, $0.3 million and $2.2 million in current accrued service costs, refund liabilities and deferred revenue respectively, for a related party that are included in the current portion of customer liabilities - related party in the accompanying consolidated balance sheets at September 30, 2017. Includes $13.2 million and $1.0 million in current accrued service costs and customer deposits, respectively, for a related party that are included in the current portion of customer liabilities - related party in the accompanying consolidated balance sheet at December 31, 2016. (2) Includes $9.1 million in deferred revenue for a related party that are included in the non-current portion of customer liabilities - related party in the accompanying consolidated balance sheet at September 30, 2017. Includes $110.0 million in deferred customer billings for a related party that are included in the non-current portion of customer liabilities - related party in the accompanying consolidated balance sheet at December 31, 2016. |
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Equity [Abstract] | |
Stockholders' Equity (Deficit) | Stockholders’ Equity (Deficit) Preferred Stock and Warrant The Company has 5,000,000 shares of authorized preferred stock, each with a par value of $0.01. The preferred stock may be issued from time to time in one or more series. The board of directors of the Company ("Board") is authorized to determine the rights, preferences, privileges and restrictions of the Company’s authorized but unissued shares of preferred stock. On February 16, 2016, at the close of the Transaction, the Company issued to TCP-ASC ACHI Series LLLP, a limited liability limited partnership jointly owned by Ascension Health Alliance and investment funds affiliated with TowerBrook (the "Investor"): (i) 200,000 shares of its 8.00% Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock" or "Preferred Stock"), for an aggregate price of $200 million and (ii) an exercisable warrant to acquire up to 60 million shares of its common stock with an exercise price of $3.50 per common share and a term of ten years. The Series A Preferred Stock is immediately convertible into shares of common stock. As of September 30, 2017 and December 31, 2016, the Company had 223,023 and 210,160 shares of preferred stock outstanding, respectively. See Note 12, 8% Series A Convertible Preferred Stock, for additional information. Common Stock Each outstanding share of the Company's common stock, par value $0.01 per share ("common stock"), is entitled to one vote per share on all matters submitted to a vote by shareholders. Subject to the rights of any preferred stock which may from time to time be outstanding, the holders of outstanding shares of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive pro rata all assets legally available for distribution to stockholders. No dividends were declared or paid on the common stock during 2017 or 2016. Treasury Stock On November 13, 2013, the Board authorized a repurchase of up to $50.0 million of the Company’s common stock in the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time at the sole discretion of the Board. Any repurchased shares will be available for use in connection with the Company’s stock plans and for other corporate purposes. The Company funds the repurchases from cash on hand. During the year ended December 31, 2016, the Company repurchased 158,557 shares of the Company stock for $0.4 million. During the three and nine months ended September 30, 2017, 342,130 and 855,474 shares were repurchased for $1.3 million and $2.5 million, respectively. No shares have been retired. As of September 30, 2017 and December 31, 2016, the Company held in treasury 5,341,481 and 4,465,919 shares of repurchased stock, respectively. Treasury stock also includes repurchases of Company stock related to employees’ tax withholding upon vesting of restricted shares. For the three and nine months ended September 30, 2017, the Company repurchased 19,988 and 784,531 shares related to employees’ tax withholding upon vesting of restricted shares. Additionally, treasury stock includes restricted stock awards that have been canceled or forfeited. See Note 9, Share-Based Compensation. |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation The share-based compensation expense relating to the Company’s stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs") and performance-based restricted stock units ("PBRSUs") for the three months ended September 30, 2017 and 2016 was $2.4 million and $4.8 million, respectively, with related tax benefits of approximately $0.9 million and $1.9 million, respectively. The share-based compensation expense relating to the Company’s stock options, RSAs, RSUs and PBRSUs for the nine months ended September 30, 2017 and 2016 was $8.2 million and $25.3 million, respectively, with related tax benefits of approximately $3.2 million and $10.0 million, respectively. As of January 1, 2017, the Company adopted ASU 2016-09. The Company elected to change its accounting policy to account for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded to increase accumulated deficit by $1.0 million, increase additional paid-in capital by $1.5 million and increase non-current deferred tax assets by $0.5 million as of January 1, 2017. Excess tax benefits and shortfalls for share-based payments are now included in operating activities rather than in financing activities. The changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted. Amendments related to accounting for excess tax benefits and shortfalls have been adopted prospectively, resulting in recognition of excess tax benefits and shortfalls in income tax expenses (benefit) rather than additional paid-in capital. For the three and nine months ended September 30, 2017, the Company recognized $0.0 million and $0.9 million of income tax expense from shortfalls associated with vesting and exercises of equity awards. Total share-based compensation costs that have been included in the Company’s consolidated statements of operations were as follows (in millions):
(1) Includes $0 million and $0.1 million in share-based compensation expense paid in cash during the three and nine months ended September 30, 2016, respectively. In addition to the share-based compensation expense recorded above, $0.1 million and $0.4 million of share-based compensation expense was capitalized to deferred contract costs for the three and nine months ended September 30, 2017, respectively. See Note 16, Deferred Contract Costs, for further discussion. The Company uses the Black-Scholes option pricing model to estimate the fair value of its service-based options as of its grant date. The Company uses Monte Carlo simulations to estimate the fair value of its PBRSUs. The PBRSUs vest upon satisfaction of both time-based requirements and performance targets based on share price. Expected life is based on the market condition to which the vesting is tied. The following table sets forth the significant assumptions used in the Black-Scholes option pricing model and the Monte Carlo simulations and the calculation of share-based compensation expense for the nine months ended September 30, 2017 and 2016:
The risk-free interest rate input is based on U.S. Treasury instruments, and expected volatility of the share price based upon review of the historical volatility levels of the Company’s common stock in conjunction with that of public companies that operate in similar industries or are similar in terms of stage of development or size and a projection of this information toward its future expected volatility. The Company used the simplified method to estimate the expected option life for 2017 and 2016 option grants. The simplified method was used due to the lack of sufficient historical data available to provide a reasonable basis upon which to estimate the expected term of each stock option. Stock options A summary of the options activity during the nine months ended September 30, 2017 is shown below:
On May 12, 2017, the Company offered certain employees and directors an opportunity to elect to exchange certain stock options for new options covering a fewer number of shares of common stock. Under this offer, the Company accepted for exchange 4,279,463 options. All surrendered options were canceled and the Company issued 1,728,795 new stock options in exchange for such tendered options. The exchange ratios were established with the intent not to generate incremental share-based compensation expense and were established just prior to commencement of the offer. The incremental compensation associated with the fluctuations in the Company’s common stock price between the date the exchange ratios were established and the commencement of the offer was insignificant. Restricted stock awards A summary of the restricted stock activity during the nine months ended September 30, 2017 is shown below:
RSA vesting is based on the passage of time. The amount of share-based compensation expense is based on the fair value of the Company's common stock on the respective grant dates and is recognized ratably over the vesting period. The Company's RSA agreements allow employees to surrender to the Company shares of common stock upon vesting of their RSAs in lieu of their payment of the required personal employment-related taxes. During the nine months ended September 30, 2017 and 2016, employees delivered to the Company 733,769 and 981,505 shares of stock, respectively, which the Company recorded at a cost of approximately $1.8 million and $2.0 million, respectively. Shares surrendered for payment of personal employment-related taxes are held in treasury. Restricted stock units A summary of the restricted stock activity during the nine months ended September 30, 2017 is shown below:
The Company's RSU agreements allow employees to surrender to the Company shares of common stock upon vesting of their RSUs in lieu of their payment of the required personal employment-related taxes. During the nine months ended September 30, 2017 and 2016, employees delivered to the Company 50,762 and no shares of stock, respectively, which the Company recorded at a cost of approximately $0.2 million and $0.0 million, respectively. Shares surrendered for payment of personal employment-related taxes are held in treasury. Performance-based restricted stock units In the third quarter of 2017, the Company began to grant PBRSUs to its employees. The PBRSUs vest upon satisfaction of both time-based requirements and performance targets based on share price with certain awards vesting on December 31, 2019 and certain awards vesting on December 31, 2020. If certain price targets are reached, the number of shares vesting could be up to 150% or, in certain cases, up to 200% of the number of PBRSUs originally granted. A summary of the PBRSU activity during the three months ended September 30, 2017 is shown below:
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Other |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | Other Other costs are comprised of reorganization-related and certain other costs. For the three months ended September 30, 2017 and 2016, the Company incurred $1.4 million and $0.5 million in other costs, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred $2.6 million and $20.0 million in other costs, respectively. Other costs consist of the following (in millions):
(1) Costs related to retention payments and legal fees paid in connection with the closing of the Transaction (see Note 12). (2) Additional contributions to the Company's defined contribution plan for the year ended December 31, 2016. (3) Costs related to evaluating and pursuing acquisition opportunities as part of the Company’s inorganic growth strategy. (4) As part of the transition of Ascension personnel to the Company in conjunction with the A&R MPSA, the Company has agreed to reimburse Ascension for certain severance and retention costs related to certain Ascension employees who will not be transitioned to the Company. Reorganization-related During the second and fourth quarters of 2016, the Company initiated restructuring plans consisting of reductions in its workforce in order to align the size and composition of its workforce to its current client base, better position itself for already committed future growth, and enable the Company to more efficiently serve contracted demand. The Company's reorganization activity was as follows (in millions):
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Income Taxes |
9 Months Ended |
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Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant and infrequent or unusual items which are required to be discretely recognized within the current interim period. The Company’s intention is to permanently reinvest its foreign earnings outside the United States. As a result, the effective tax rates in the periods presented are largely based upon the projected annual pre-tax earnings by jurisdiction and the allocation of certain expenses in various taxing jurisdictions where the Company conducts its business. These taxing jurisdictions apply a broad range of statutory income tax rates. The income tax benefit for the three and nine months ended September 30, 2017 was lower than the amount derived by applying the federal statutory tax rate of 35% primarily due to discrete items recognized in the period. The income tax expense for the three and nine months ended September 30, 2016 was higher than the amount derived by applying the federal statutory tax rate of 35% primarily due to discrete items as well as the impact of state taxes. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. U.S. federal income tax returns since 2013 are currently open for examination. State jurisdictions vary for open tax years. The statute of limitations for most states ranges from three to six years. As of January 1, 2017, the Company adopted ASU 2016-09. The Company elected to change its accounting policy to account for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded to increase non-current deferred tax assets by $0.5 million as of January 1, 2017. Excess tax benefits for share-based payments are now included in net cash used in operating activities rather than net cash used in financing activities. The changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted. Amendments related to accounting for excess tax benefits and shortfalls have been adopted prospectively, resulting in recognition of excess tax benefits and shortfalls as part of income tax expense rather than additional paid-in capital. For the three and nine months ended September 30, 2017, the Company recognized $0.0 and $0.9 million of income tax expense from shortfalls associated with vesting and exercises of equity awards. The Company wrote-off approximately $0.4 million and $1.5 million of deferred tax assets due to the expiration of shared-based awards and recognized as discrete expense during the three and nine months ended September 30, 2017. During 2016, deferred tax assets written-off due to the expiration of share-based awards were recognized as a reduction in additional paid-in capital. During the nine months ended September 30, 2017, the Company corrected the deferred tax asset balance associated with share-based compensation. In 2015 and 2016, the Company incorrectly recorded excess share-based compensation of approximately $2.6 and $4.0 million. This excess share-based compensation expense resulted in deferred tax assets of approximately $2.5 million being erroneously recorded in the consolidated balance sheet at December 31, 2016. The Company has determined these amounts are immaterial to the quarterly and annual periods in 2015, 2016 and 2017. In addition to correcting the deferred tax balance, the Company reclassified approximately $6.5 million from additional paid-in-capital to accumulated deficit to correct for the excess share-based compensation expense recorded in 2015 and 2016. At December 31, 2016, the Company had deferred tax assets of $169.9 million, of which $71.0 million related to net operating loss carryforwards. In conjunction with the adoption of ASU 2016-09 and Topic 606, a cumulative effect adjustment was recorded to increase deferred tax assets by $0.5 million for ASU 2016-09 and decrease deferred tax assets by $70.3 million for Topic 606 as of January 1, 2017. The majority of the Company's carryforwards were generated in 2013, 2014 and 2015 when the Company incurred substantial expenses related to the restatement. The Company expects its business growth contracted for under the Ascension A&R MPSA will be profitable and allow the Company to utilize its NOL carryforwards and other deferred tax assets. Accordingly, the Company believes that it is more likely than not that the remaining deferred tax assets will be realized. Should the Company not operationally execute as expected, and the growth in the Ascension business not be as profitable as expected, such realizability assessment may change. |
8.00% Series A Convertible Preferred Stock |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8.00% Series A Convertible Preferred Stock | 8.00% Series A Convertible Preferred Stock At the close of the Transaction on February 16, 2016 (as described in Note 1), the Company issued to the Investor: (i) 200,000 shares of Preferred Stock, for an aggregate price of $200 million, and (ii) a warrant with a term of ten years to acquire up to 60 million shares of common stock, par value $0.01 per share (“common stock”), at an exercise price of $3.50 per share, on the terms and subject to the conditions set forth in the Warrant Agreement (“Warrant”). The Preferred Stock is immediately convertible into shares of common stock. During the twelve months ended December 31, 2016, the Company incurred direct and incremental expenses of $21.3 million (including $14.0 million in closing fees paid to the Investor) relating to financial advisory fees, closing costs, legal expenses and other offering-related expenses in connection with the Transaction. These direct and incremental expenses reduced the carrying amount of the Preferred Stock. In connection with the issuance of the Preferred Stock, a beneficial conversion feature of $48.3 million was recognized. Since the Preferred Stock is presently convertible into common stock, this amount was subsequently accreted to the carrying amount of the Preferred Stock, and treated as a deemed preferred stock dividend in the calculation of earnings per share. Dividend Rights The holders of the Preferred Stock are entitled to receive cumulative dividends January 1, April 1, July 1 and October 1 of each year (dividend payment dates), which commenced on April 1, 2016, at a rate equal to 8% per annum (preferred dividend) multiplied by the liquidation preference per share, initially $1,000 per share adjusted for any unpaid cumulative preferred dividends. For the first seven years after issuance, the dividends on the Preferred Stock will be paid-in-kind. As of September 30, 2017, the Company had accrued dividends of $4.5 million associated with the Preferred Stock, which was paid in additional shares of Preferred Stock in October 2017. Conversion Features Each share of the Preferred Stock may be converted to common stock on any date at the option of the holder into the per share amount (as defined in the Certificate of Designations of the 8.00% Series A Convertible Preferred Stock (the "Series A COD")). Fractional shares resulting from any conversion will be rounded to the nearest whole share. Redemption Rights Since the redemption of the Preferred Stock is contingently or optionally redeemable and therefore not certain to occur, the Preferred Stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Preferred Stock is redeemable at the option of the holders upon a fundamental change (as defined in the Series A COD) and is redeemable in certain circumstances upon the occurrence of an event that is not solely within the Company's control, the Company has classified the Preferred Stock in mezzanine equity on the Consolidated Balance Sheets. In the event the Company believes that redemption of the Preferred Stock is probable, the Company would be required to accrete changes in the carrying value to the redemption value over the period until the expected redemption date. Voting Rights Each holder of the Preferred Stock is entitled to vote with the common stock on an as-converted basis, and has full voting rights and powers equal to the voting rights and powers of the holders of common stock. The following summarizes the Preferred Stock activity for the nine months ended September 30, 2017:
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Earnings (Loss) Per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic net income per share is computed by dividing net income, less any dividends, accretion or decretion, redemption or induced conversion on the Preferred Stock, by the weighted average number of common shares outstanding during the period. As the Preferred Stock participates in dividends alongside the Company’s common stock (per their participating dividends), the Preferred Stock would constitute participating securities under ASC 260-10 and are applied to earnings per share using the two-class method. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. Diluted net income per share is calculated using the more dilutive of the if-converted or the two-class method. For the three and nine months ended September 30, 2017 and 2016, the two-class method was more dilutive and was computed by adjusting the denominator used in the basic net income per share computation by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, shares issuable upon vesting of RSAs, RSUs, PBRSUs and Preferred Stock. Basic and diluted net income (loss) per common share are calculated as follows (in millions, except share and per share data):
Because of their anti-dilutive effect, 24,808,536 common share equivalents comprised of stock options, RSAs, PBRSUs and RSUs have been excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2017. 16,706,526 and 12,967,519 common share equivalents were excluded for the three and nine months ended September 30, 2016 due to their anti-dilutive effect. Additionally, the Investor's exercisable warrant to acquire up to 60 million shares of the Company's common stock has been excluded from the diluted earnings per share calculation because it is anti-dilutive for all periods presented. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings Other than as described below, the Company is not presently a party to any material litigation or regulatory proceeding and is not aware of any pending or threatened litigation or regulatory proceeding against the Company which, individually or in the aggregate, could have a material adverse effect on its business, operating results, financial condition or cash flows. On July 22, 2014, the Company was named as a defendant in a putative class action lawsuit filed in the U.S. District Court for the Eastern District of Michigan (Anger v. Accretive Health, Inc.), seeking statutory damages, injunctive relief and attorneys’ fees. The primary allegations are that the Company attempted to collect debts without providing the notice required by the Fair Debt Collection Practices Act ("FDCPA") and Michigan Fair Debt Collection Practices Act and failed to abide by the terms of an agreed payment plan in violation of those same statutes. On August 27, 2015, the Court granted in part and denied in part the Company’s motion to dismiss. An amended complaint was filed on November 30, 2015. Discovery was underway, but on July 15, 2016, the court postponed all deadlines in the case as the parties attempted to finalize a confidential agreement in principle to settle the case. On February 23, 2017, the parties reached a settlement in principle and filed the proposed class action settlement with the Court, which conducted a Class Action Fairness Act (CAFA) hearing on whether to approve of the settlement. Members of the putative class were notified of the settlement and were given an opportunity to object or opt-out of the settlement. No objections to the settlement were entered before or at the CAFA hearing on October 4, 2017, and the Court approved the settlement by Order dated October 11, 2017. Accordingly, the Company will pay the $1.3 million settlement amount, less amounts already paid, to a settlement fund to assist members of the class Ascension Michigan ministry patients pay off healthcare debt, to pay for class notice and administration, to pay $15,000 to each of the named class representatives and to reimburse plaintiff’s attorneys’ fees. In April 2015, the Company was named among other defendants in an employment action brought by a former employee before the Maine Human Rights Commission ("MHRC"), alleging improper termination in retaliation for uncovering alleged Medicare fraud. The Company filed its response with the MHRC on May 19, 2015 seeking that the Company be dismissed entirely from the action. On June 23, 2015, the MHRC issued its Notice of Right to Sue and decision to terminate its process with respect to all charges asserted by the former employee. The plaintiff filed a parallel qui tam action in the District of Maine (Worthy v. Eastern Maine Healthcare Systems) making the same allegations, and seeking money damages, False Claims Act penalties and plaintiff’s attorneys’ fees. The U.S. Department of Justice declined to intervene in the federal court action, and the case was unsealed in April 2015. The Company and other defendants filed motions to dismiss the Third Amended Complaint on March 21, 2016. Those motions were granted with respect to the retaliation claims, but denied with respect to the False Claims Act claims by the federal district court in January 2017. The parties mediated the case before the Magistrate Judge on July 24, 2017 and reached an agreement in principle, and subsequently resolved an additional contingency in order to settle the case. The settlement, which is now finalized, did not have a material impact to the consolidated financial statements. In May 2016, the Company was served with a False Claims Act case brought by a former emergency department service associate who worked at a hospital of one of the Company’s customers, MedStar Inc.’s Washington Hospital Center (“WHC”), along with WHC and three other hospitals that were PAS clients and a place holder, John Doe hospital, representing all PAS clients (USA ex rel. Graziosi vs. Accretive Health, Inc. et. al.), and seeking money damages, False Claims Act penalties and plaintiff’s attorneys’ fees. The Second Amended Complaint alleges that the Company’s PAS business violates the federal False Claims Act. The case was originally filed under seal in 2013 in the federal district court in Chicago, was presented to the U.S. Attorney in Chicago twice, and the U.S. Attorneys declined to intervene. The Company filed a motion to dismiss the Second Amended Complaint on July 29, 2016. On March 22, 2017, the district court dismissed all claims against all hospital defendants other than Medstar Inc.’s WHC, and dismissed all claims related to TriCare-related episodes of care. The parties are currently engaged in an initial discovery phase in which the plaintiff has sought broad discovery and brought a motion to compel discovery relating to the defendants that have been dismissed. The motion was denied and the Company believes that it has meritorious defenses to all claims in the case, and intends to vigorously defend itself against these claims. The outcome is not presently determinable. |
Related Party Transactions |
9 Months Ended |
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Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions As a result of the closing of the Transaction on February 16, 2016 and Ascension's ownership interest in the Investor, Ascension became a related party to the Company. See Note 12, 8% Series A Convertible Preferred Stock, for additional information. The Company provides RCM and PAS services to Ascension. The execution of the A&R MPSA, as discussed in Note 1, Business Description and Basis of Presentation, was a contractual settlement agreement of the prior Master Professional Services Agreement between the Company and Ascension. The Company recorded revenue of $22.7 million and $366.2 million in connection with these services for the three and nine months ended September 30, 2016. For the three and nine months ended September 30, 2017, the Company recorded revenue of $112.2 million and $275.3 million from services provided to Ascension, respectively. At September 30, 2017, the Company had $20.1 million in current portion of customer liabilities for a related party, consisting of $17.6 million, $0.3 million and $2.2 million in current accrued service costs, refund liabilities and deferred revenue. The Company had $9.1 million in non-current portion of customer liabilities for a related party related to non-current deferred revenue as of September 30, 2017. At December 31, 2016, the Company had $14.2 million in current portion of customer liabilities for a related party, consisting of $13.2 million in current accrued service costs and $1.0 million in current customer deposits. The Company had $110.0 million in non-current portion of customer liabilities for a related party related to deferred customer billings as of December 31, 2016. At September 30, 2017 and December 31, 2016, the Company had $18.0 million and $1.8 million in accounts receivable with Ascension, respectively. As part of the transition of Ascension personnel to the Company in conjunction with the A&R MPSA, the Company has agreed to reimburse Ascension for certain severance and retention costs related to certain Ascension employees who will not be transitioned to the Company. As of September 30, 2017 and December 31, 2016, the Company had $0.7 million and $1.7 million in accrued compensation and benefits related to these costs, respectively. As Ascension is the Company's largest customer, a significant percentage of the Company's cost of services is associated with providing services to Ascension. However, due to the nature of the Company's shared services and information technology operations, it is impractical to assign the dollar amount associated with services provided to Ascension. |
Deferred Contract Costs |
9 Months Ended |
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Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Deferred Contract Costs | Deferred Contract Costs One-time, non-recurring costs associated with the initial phases of the Ascension A&R MPSA and with the transition of additional Ascension hospitals are deferred. These fulfillment costs relate directly to the Company’s responsibilities under the A&R MPSA, generate or enhance resources of the Company that will be used in satisfying its performance obligations under the A&R MPSA in the future, and are expected to be recovered through the margins realized under the A&R MPSA. At September 30, 2017, the Company had $10.6 million in total deferred contract costs and $4.8 million at December 31, 2016. Of the $10.6 million in deferred eligible costs, $1.3 million is included in prepaid expenses and other current assets and $9.3 million is included in other assets in the accompanying consolidated balance sheets. As of December 31, 2016, deferred eligible costs were included in the other current assets in the accompanying consolidated balance sheets. The associated assets are amortized as services are transferred to the customer over the remaining life of the contract. For the three and nine months ended September 30, 2017, total amortization was $0.2 million and $0.6 million, respectively, and there were no associated impairment losses. For the three and nine months ended September 30, 2016, $1.9 million and $2.8 million amounts had been capitalized, respectively, and no amounts had been amortized. |
Segments and Customer Concentrations |
9 Months Ended |
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Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segments and Customer Concentrations | Segments and Customer Concentrations The Company has determined that it has a single operating segment in accordance with how its business activities are managed and evaluated. All of the Company’s significant operations are organized around the single business of providing end-to-end management services of revenue cycle operations for U.S.-based hospitals and other medical providers. Accordingly, for purposes of segment disclosures, the Company has only one reporting segment. All of the Company’s net services revenue and trade accounts receivable are derived from healthcare providers domiciled in the United States. Hospital systems affiliated with Ascension have accounted for a significant portion of the Company’s net services revenue each year since the Company’s formation. For the three months ended September 30, 2017 and 2016, net services revenue from hospitals affiliated with Ascension accounted for 91% and 18% of the Company's total net services revenue, respectively. For the nine months ended September 30, 2017 and 2016, net services revenue from hospitals affiliated with Ascension accounted for 89% and 75% of the Company's total net services revenue, respectively. The loss of customers within the Ascension health system would have a material adverse impact on the Company’s operations. As of September 30, 2017 and 2016, the Company had a concentration of credit risk with hospitals affiliated with Ascension accounting for 70% and 31% of accounts receivable, respectively. |
Recent Accounting Pronouncements (Policies) |
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Sep. 30, 2017 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements reflect the Company's financial position as of September 30, 2017, the results of operations for the three and nine months ended September 30, 2017 and 2016, and the cash flows of the Company for the nine months ended September 30, 2017 and 2016. These financial statements include the accounts of R1 RCM Inc. and its wholly owned subsidiaries. All material intercompany amounts have been eliminated in consolidation. These financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial reporting and as required by the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the interim financial information, have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2017. Beginning with the quarter ended March 31, 2017, the Company changed the presentation in its financial statements to be stated in millions instead of thousands. Therefore, previously reported amounts for fiscal 2016 may differ due to rounding. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. |
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Recently Issued Accounting Standards and Disclosures | Recently Issued Accounting Standards and Disclosures In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which supersedes existing guidance on accounting for leases in Topic 840, Leases. ASU 2016-02 generally requires all leases to be recognized in the consolidated balance sheet. The provisions of ASU 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this prospective guidance on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 is intended to reduce diversity in practice in the classification and presentation of changes in restricted cash on the Consolidated Statement of Cash Flows. ASU 2016-18 requires that the Consolidated Statement of Cash Flows explain the change in total cash and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. ASU 2016-18 also requires a reconciliation between the total of cash and cash equivalents and restricted cash presented in the Consolidated Statement of Cash Flows and the cash and cash equivalents balance presented in the Consolidated Balance Sheet. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of the adoption of this prospective guidance on its consolidated financial statements. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company records its financial assets and liabilities at fair value. The accounting standard for fair value (i) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, (ii) establishes a framework for measuring fair value, (iii) establishes a hierarchy of fair value measurements based upon the ability to observe inputs used to value assets and liabilities, (iv) requires consideration of nonperformance risk and (v) expands disclosures about the methods used to measure fair value. The accounting standard establishes a three-level hierarchy of measurements based upon the reliability of observable and unobservable inputs used to arrive at fair value. Observable inputs are independent market data, while unobservable inputs reflect the Company’s assumptions about valuation. The three levels of the hierarchy are defined as follows:
The carrying amounts of the Company’s financial instruments, which include financial assets such as cash and cash equivalents, restricted cash equivalents, accounts receivable, net, and certain other current assets, as well as financial liabilities such as accounts payable, accrued service costs, accrued compensation and benefits and certain other accrued expenses, approximate their fair values, due to the short-term nature of these instruments. The Company does not have any financial assets or liabilities that are required to be measured at fair value on a recurring basis. |
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is comprised of unpaid balances pertaining to non-RCM services fees and net receivable balances for RCM customers after considering cost reimbursements owed to such customers, including related accrued balances. The Company maintains an estimated allowance for doubtful accounts to reduce its accounts receivable to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay, the length of time a balance has been outstanding, input from key customer resources assigned to each customer, and the status of any ongoing operations with each applicable customer. |
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Revenue Recognition | Revenue Recognition The Company follows the guidance under Topic 606, Revenue from Contracts with Customers, (“Topic 606”). Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contact term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Periods prior to January 1, 2017 Revenue is generally recognized when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Net service fees, as reported in the consolidated statement of operations and comprehensive income (loss), consist of: (a) RCM services fees and (b) professional service fees earned on a fixed fee, transactional fee or time and materials basis. The Company’s primary source of revenue is RCM services fees. RCM services fees are primarily contingent, but along with fixed fees are generally viewed as one deliverable. To the extent that certain RCM services fees are fixed and not subject to refund, adjustment or concession, such fees are generally recognized as revenue on a straight-line basis over the term of the contract. On a limited basis, the Company enters into contracts with multiple accounting elements which may include a combination of fixed fee or transactional fee elements. The selling price of each element is determined by using management's best estimate of selling price. Revenues are recognized in accordance with the accounting policies for the separate elements. RCM services fees that are contingent in nature are recognized as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or other contractual agreement event. Revenue is recognized for RCM services fees upon the contract reaching the end of its stated term (such that the contractual relationship will not continue in its current form) to the extent that: (i) cash has been received for invoiced fees and (ii) there are no disputes at the conclusion of the term of the contract. If fees or services are disputed by a customer at the end of a contract, a settlement agreement entered into with the customer triggers revenue recognition. An other "contractual agreement event" occurs when a renewal, amendment to an existing contract, or other settlement agreement is executed in which the parties reach agreement on prior fees. Revenue is recognized up to the amount covered by such agreements. RCM services fees consist of the following contingent fees: (i) Net Operating Fees and (ii) Incentive Fees. Net Operating Fees The Company generates net operating fees to the extent the Company is able to assist customers in reducing the cost of revenue cycle operations. In limited cases, the Company earns a fixed fee instead of a fee based on the mechanics described below. The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; less iii) any cost savings the Company shares with customers. Net operating fees are recorded as deferred customer billings until the Company recognizes revenue for a customer contract at the end of a contract or reaches an "other contractual agreement event". The amount of unpaid costs of customers’ revenue cycle operations and shared cost savings are reported as accrued service costs within customer liabilities in the consolidated balance sheets. Incentive Fees The Company generates revenue in the form of performance-based fees when the Company improves the customers’ financial or operational metrics. These performance metrics vary by customer contract. However, certain contracts contain a contract-to-date performance metric that is not resolved until the end of the term of the contract. Periods commencing January 1, 2017 Nature of Goods and Services The Company's primary source of revenue is its end-to-end RCM services fees. The Company also generates revenue through its modular RCM services, where customers will engage the Company for only specific components of its end-to-end RCM service offering on a fixed-fee or transactional basis, as well as its PAS offering. Revenue Cycle Management RCM services fees are primarily variable and performance related, and are generally viewed as the consideration earned in satisfaction of a single performance obligation. RCM services fees consist of net operating fees, incentive fees, and other fees. Net Operating Fees The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs. The Company recognizes revenue related to net operating fees ratably as the performance obligation for the RCM services is satisfied. Base fees are typically billed in advance of the quarter and paid in three monthly payments as the entity performs and the customer simultaneously receives and consumes the benefits provided by the services provided. The costs of customers’ revenue cycle operations which the company pays pursuant to its RCM agreements are accrued based on the service period. Incentive Fees The Company recognizes revenue related to incentive fees ratably as the performance obligation for RCM services is satisfied, to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Incentive fees are structured to reflect quarterly or annual, performance and are evaluated on a contract-by-contract basis. Incentive fees are typically billed and paid on a quarterly basis. RCM Other The Company recognizes revenue related to other RCM fees as RCM services are provided. These services typically consist of the Company's modular RCM services offering, which consists of an obligation to provide services for a specific component of its end-to-end RCM service offering. Fees are typically variable in nature with the entire amount being included in revenue in the month of service. The customer simultaneously receives and consumes the benefits provided by the services and the fees are typically billed on a monthly basis with payment terms of up to 30 days. To the extent that certain service fees are fixed and not subject to refund, adjustment or concession, these fees are generally recognized into revenue ratably as the performance obligation is satisfied. Other Services The Company recognizes revenue from PAS in the period in which the service is performed. The Company’s PAS arrangements typically consist of an obligation to provide specific services to customers on a when and if needed basis. These services are provided under a fixed price per unit arrangement. These contracts are evaluated on a contract-by-contract basis. Fees for the Company's PAS arrangements are typically billed on a monthly basis with 30 to 60 day payment terms. Bundled Services Modular RCM services may be sold separately or bundled in a contract and end-to-end RCM services are typically sold separately but may be bundled with PAS services. PAS services are commonly sold separately. The typical length of an end-to-end RCM contract is three to ten years (subject to the parties' respective termination rights) but varies from customer to customer. PAS and modular RCM agreements generally vary in length between one and three years. For bundled arrangements, the Company accounts for individual services as a separate performance obligation if a service is separately identifiable from other items in the bundled arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The transaction price is allocated between separate services in a bundle based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells its RCM, PAS, or modular services. PAS services are provided at a customer’s election but do not represent material rights as the services are priced at standalone selling price throughout the life of the agreement. In certain situations, the Company allocates variable consideration to a distinct service, or services, within a contract. The Company allocates variable payments to one or more, but not all, of the distinct services in a contract when (i) the variable payment relates specifically to the Company’s efforts to transfer the distinct service and (ii) the variable payment is for an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to its customer. |
Accounts Receivable and Allowance for Doubtful Accounts (Tables) |
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Schedule of Allowance for Doubtful Accounts | Movements in the allowance for doubtful accounts are as follows (in thousands):
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Property, Equipment, and Software (Tables) |
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Schedule of Property, Equipment, and Software | Property, equipment and software consist of the following (in millions):
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Summary Depreciation and Amortization Expense | The following table summarizes the allocation of depreciation and amortization expense between cost of services and selling, general and administrative expenses (in millions):
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregated Revenue By Source | In the following table, revenue is disaggregated by source of revenue (in millions):
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Schedule of Assets and Liabilities | The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers (in millions):
Significant changes in the contract assets and the contract liabilities balances during the three months ended September 30, 2017 are as follows (in millions):
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Schedule of Transaction Price Allocated to the Remaining Performance Obligation | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in millions). The estimated revenue does not include amounts of variable consideration that are constrained.
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Schedule of Financial Statement Impact | The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2017 (in millions, except per share data):
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Customer Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Customer Liabilities | Customer liabilities consist of the following (in millions):
(1) Includes $17.6 million, $0.3 million and $2.2 million in current accrued service costs, refund liabilities and deferred revenue respectively, for a related party that are included in the current portion of customer liabilities - related party in the accompanying consolidated balance sheets at September 30, 2017. Includes $13.2 million and $1.0 million in current accrued service costs and customer deposits, respectively, for a related party that are included in the current portion of customer liabilities - related party in the accompanying consolidated balance sheet at December 31, 2016. (2) Includes $9.1 million in deferred revenue for a related party that are included in the non-current portion of customer liabilities - related party in the accompanying consolidated balance sheet at September 30, 2017. Includes $110.0 million in deferred customer billings for a related party that are included in the non-current portion of customer liabilities - related party in the accompanying consolidated balance sheet at December 31, 2016. |
Share-Based Compensation (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation Expense | Total share-based compensation costs that have been included in the Company’s consolidated statements of operations were as follows (in millions):
(1) Includes $0 million and $0.1 million in share-based compensation expense paid in cash during the three and nine months ended September 30, 2016, respectively. In addition to the share-based compensation expense recorded above, $0.1 million and $0.4 million of share-based compensation expense was capitalized to deferred contract costs for the three and nine months ended September 30, 2017, respectively. See Note 16, Deferred Contract Costs, for further discussion. |
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Summary of Valuation Assumptions | The following table sets forth the significant assumptions used in the Black-Scholes option pricing model and the Monte Carlo simulations and the calculation of share-based compensation expense for the nine months ended September 30, 2017 and 2016:
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Schedule of Stock Option Activity | A summary of the options activity during the nine months ended September 30, 2017 is shown below:
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Schedule of Restricted Stock Awards Activity | A summary of the restricted stock activity during the nine months ended September 30, 2017 is shown below:
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Schedule of Restricted Stock Units Award Activity | A summary of the restricted stock activity during the nine months ended September 30, 2017 is shown below:
A summary of the PBRSU activity during the three months ended September 30, 2017 is shown below:
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Other (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Restructuring and Related Costs | Other costs consist of the following (in millions):
(1) Costs related to retention payments and legal fees paid in connection with the closing of the Transaction (see Note 12). (2) Additional contributions to the Company's defined contribution plan for the year ended December 31, 2016. (3) Costs related to evaluating and pursuing acquisition opportunities as part of the Company’s inorganic growth strategy. (4) As part of the transition of Ascension personnel to the Company in conjunction with the A&R MPSA, the Company has agreed to reimburse Ascension for certain severance and retention costs related to certain Ascension employees who will not be transitioned to the Company. |
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Reorganization Activity | The Company's reorganization activity was as follows (in millions):
|
8.00% Series A Convertible Preferred Stock (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Preferred Stock Activity | The following summarizes the Preferred Stock activity for the nine months ended September 30, 2017:
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Earnings (Loss) Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings (Loss) Per Share, Basic and Diluted | Basic and diluted net income (loss) per common share are calculated as follows (in millions, except share and per share data):
|
Business Description and Basis of Presentation - Narrative (Details) |
Feb. 16, 2016 |
---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Long term strategic partnership, term | 10 years |
Fair Value of Financial Instruments - Narrative (Details) - Fair Value, Measurements, Recurring |
Sep. 30, 2017
USD ($)
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Financial assets required to be measured at fair value | $ 0 |
Financial liabilities required to be measured at fair value | $ 0 |
Accounts Receivable and Allowance for Doubtful Accounts - Schedule of Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||||
Beginning balance | $ 151 | $ 41 | $ 66 | $ 99 |
Provision (recoveries) | (6) | 114 | 85 | 87 |
Write-offs | 0 | (7) | (6) | (38) |
Ending balance | $ 145 | $ 148 | $ 145 | $ 148 |
Property, Equipment, and Software - Schedule of Property, Equipment and Software (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | $ 100.8 | $ 72.3 |
Less accumulated depreciation and amortization | (50.6) | (39.5) |
Property, equipment and software, net | 50.2 | 32.8 |
Computer and other equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 29.2 | 23.3 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 21.4 | 16.0 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 42.8 | 28.1 |
Office furniture | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | $ 7.4 | $ 4.9 |
Property, Equipment, and Software - Allocation of Depreciation and Amortization Expense between Cost of Services and Selling, General and Administrative Expenses (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | $ 4.5 | $ 2.7 | $ 11.5 | $ 7.3 |
Cost of services | ||||
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | 4.0 | 2.6 | 10.4 | 6.9 |
Selling, general and administrative | ||||
Property, Plant and Equipment [Line Items] | ||||
Total depreciation and amortization | $ 0.5 | $ 0.1 | $ 1.1 | $ 0.4 |
Revenue Recognition - Narrative (Details) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2017
service
payment
|
|
Revenue from External Customer [Line Items] | ||
Base fees, number of monthly payments | payment | 3 | |
Number of distinct services, allocation of variable payments (or more) | service | 1 | |
Revenue recognized from changes in transaction prices | $ 0.3 | |
Decrease to revenue recognized that was included in the contract liability | $ 0.4 | |
End-To-End Contracts | Minimum | ||
Revenue from External Customer [Line Items] | ||
Contract length | 3 years | |
End-To-End Contracts | Maximum | ||
Revenue from External Customer [Line Items] | ||
Contract length | 10 years | |
PAS and Modular Agreements | Minimum | ||
Revenue from External Customer [Line Items] | ||
Contract length | 1 year | |
PAS and Modular Agreements | Maximum | ||
Revenue from External Customer [Line Items] | ||
Contract length | 3 years | |
PAS | ||
Revenue from External Customer [Line Items] | ||
Revenue performance obligation, period (often less than) | 1 day |
Revenue Recognition - Schedule of Disaggregated Revenue by Source (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2017 |
|
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Net service revenue | $ 123.2 | $ 309.5 |
RCM services: net operating fees | ||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Net service revenue | 104.6 | 255.4 |
RCM services: incentive fees | ||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Net service revenue | 7.5 | 20.2 |
RCM services: other | ||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Net service revenue | 2.8 | 9.8 |
Other services fees | ||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Net service revenue | $ 8.3 | $ 24.1 |
Revenue Recognition - Schedule of Contract Balances (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Receivables, which are included in accounts receivable, net | $ 25.7 | $ 30.5 |
Contract assets | 0.0 | 0.0 |
Contract liabilities | $ 12.5 | $ 20.9 |
Revenue Recognition - Schedule of Changes in Contra Assets and Contract Liabilities (Details) $ in Millions |
3 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Revenue from Contract with Customer [Abstract] | |
Revenue recognized that was included in the contract liability balance at the beginning of the period | $ 40.9 |
Increases due to cash received, excluding amounts recognized as revenue during the period | $ 1.9 |
Customer Liabilities - Schedule of Customer Liabilities (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Related Party Transaction [Line Items] | ||
Deferred customer billings, current | $ 0.0 | $ 68.2 |
Accrued service costs, current | 17.6 | 14.8 |
Customer deposits, current | 0.0 | 0.9 |
Refund liabilities, current | 0.3 | 0.0 |
Deferred revenue (contract liabilities), current | 3.1 | 0.0 |
Current portion of customer liabilities | 21.0 | 83.9 |
Deferred customer billings, non-current | 0.0 | 110.0 |
Refund liabilities, non-current | 0.0 | 0.0 |
Customer deposits, non-current | 0.0 | 0.0 |
Deferred revenue (contract liabilities), non-current | 9.4 | 1.0 |
Non current portion of customer liabilities | 9.4 | 111.0 |
Total customer liabilities | 30.4 | 194.9 |
Investor | ||
Related Party Transaction [Line Items] | ||
Accrued service costs, current | 17.6 | 13.2 |
Customer deposits, current | 1.0 | |
Refund liabilities, current | 0.3 | |
Deferred revenue (contract liabilities), current | 2.2 | |
Deferred revenue, non-current | $ 9.1 | $ 110.0 |
Share-Based Compensation - Assumptions (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend yield | 0.00% | 0.00% |
Risk-free interest rate, minimum | 1.80% | 1.20% |
Risk-free interest rate, maximum | 2.30% | 1.90% |
Expected volatility, minimum | 40.00% | 45.00% |
Expected volatility, maximum | 45.00% | 50.00% |
Expected term (in years) | 6 years 3 months | |
Forfeitures | 0.00% | 5.68% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 2 years 4 months 2 days | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 6 years 3 months 15 days |
Share-Based Compensation - Stock Option Activity (Details) - $ / shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Shares | ||
Outstanding at beginning of period (in shares) | 20,418,607 | |
Granted (in shares) | 3,581,904 | |
Exercised (in shares) | (58,760) | |
Canceled/forfeited (in shares) | (5,897,038) | |
Outstanding at end of period (in shares) | 18,044,713 | |
Outstanding, vested and exercisable at end of period (in shares) | 5,676,001 | 7,993,168 |
Weighted- Average Exercise Price | ||
Outstanding at beginning of period (in dollars per share) | $ 6.26 | |
Granted (in dollars per share) | 3.32 | |
Exercised (in dollars per share) | 2.37 | |
Canceled/forfeited (in dollars per share) | 9.42 | |
Outstanding at end of period (in dollars per share) | 4.66 | |
Outstanding, vested and exercisable at end of period (in dollars per share) | $ 8.99 | $ 11.34 |
Share-Based Compensation - Restricted Stock Award Activity (Details) - Restricted Stock Awards |
9 Months Ended |
---|---|
Sep. 30, 2017
$ / shares
shares
| |
Shares | |
Outstanding and unvested at beginning of period (in shares) | shares | 5,862,712 |
Granted (in shares) | shares | 0 |
Vested (in shares) | shares | (2,675,782) |
Forfeited (in shares) | shares | (728,798) |
Outstanding and unvested at end of period (in shares) | shares | 2,458,132 |
Weighted- Average Grant Date Fair Value | |
Outstanding and unvested at beginning of period (in dollars per share) | $ / shares | $ 3.01 |
Granted (in dollars per share) | $ / shares | 0.00 |
Vested (in dollars per share) | $ / shares | 3.50 |
Forfeited (in dollars per share) | $ / shares | 1.31 |
Outstanding and unvested at end of period (in dollars per share) | $ / shares | $ 2.98 |
Other - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Restructuring and Related Activities [Abstract] | ||||
Reorganization-related and certain other costs | $ 1.4 | $ 0.5 | $ 2.6 | $ 20.0 |
Other - Other Costs (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Restructuring and Related Activities [Abstract] | ||||
Severance and employee benefits | $ 0.0 | $ (0.3) | $ 0.3 | $ 2.5 |
Facility charges | 0.0 | 0.0 | 0.0 | 0.7 |
Non-cash share based compensation | 0.0 | 0.0 | 0.1 | 1.8 |
Reorganization-related | 0.0 | (0.3) | 0.4 | 5.0 |
Transaction fees | 0.0 | 0.0 | 0.0 | 13.3 |
Defined contribution plan contributions | 0.0 | 0.0 | 0.0 | 0.9 |
Restatement costs | 0.0 | 0.8 | 0.0 | 0.8 |
Acquisition related diligence and costs | 1.4 | 0.0 | 1.4 | 0.0 |
Transitioned employees restructuring expense | 0.0 | 0.0 | 0.8 | 0.0 |
Other | 1.4 | 0.8 | 2.2 | 15.0 |
Total other | $ 1.4 | $ 0.5 | $ 2.6 | $ 20.0 |
Other - Reorganization Liability Activity (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Restructuring Reserve [Roll Forward] | ||||
Reorganization liability, beginning of period | $ 2.1 | |||
Restructuring charges | $ 0.0 | $ (0.3) | 0.4 | $ 5.0 |
Cash payments | (2.2) | |||
Non-cash charges | (0.1) | |||
Reorganization liability, end of period | 0.2 | 0.2 | ||
Severance and Employee Benefits | ||||
Restructuring Reserve [Roll Forward] | ||||
Reorganization liability, beginning of period | 1.6 | |||
Restructuring charges | 0.4 | |||
Cash payments | (1.7) | |||
Non-cash charges | (0.1) | |||
Reorganization liability, end of period | 0.2 | 0.2 | ||
Facilities and Other Costs | ||||
Restructuring Reserve [Roll Forward] | ||||
Reorganization liability, beginning of period | 0.5 | |||
Restructuring charges | 0.0 | |||
Cash payments | (0.5) | |||
Non-cash charges | 0.0 | |||
Reorganization liability, end of period | $ 0.0 | $ 0.0 |
8.00% Series A Convertible Preferred Stock - Schedule of Preferred Stock Activity (Details) - Redeemable Convertible Preferred Stock $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
shares
| |
Shares Issued and Outstanding | |
Beginning Balance (in shares) | shares | 210,160 |
Dividends paid/accrued dividends (in shares) | shares | 12,863 |
Ending Balance (in shares) | shares | 223,023 |
Carrying Value | |
Beginning Balance | $ | $ 171.6 |
Dividends paid/accrued dividends | $ | 13.1 |
Ending Balance | $ | $ 184.7 |
Earnings (Loss) Per Share - Narrative (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 24,808,536 | 16,706,526 | 24,840,458 | 12,967,519 |
Warrant | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 60,000,000 | 60,000,000 | 60,000,000 | 60,000,000 |
Commitments and Contingencies - Narrative (Details) $ in Thousands |
1 Months Ended | |
---|---|---|
May 31, 2016
plaintiff
|
Sep. 30, 2017
USD ($)
|
|
Commitments and Contingencies Disclosure [Abstract] | ||
Potential settlement, less amounts already paid | $ 1,300 | |
Potential settlement per representative | $ 15 | |
Number of plaintiffs | plaintiff | 4 |
Deferred Contract Costs - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Guarantor Obligations [Line Items] | |||||
Deferred contract costs | $ 10,600,000 | $ 10,600,000 | $ 4,800,000 | ||
Amortization of deferred costs | 200,000 | $ 0 | 600,000 | $ 0 | |
Impairment losses | 0 | 0 | |||
Deferred costs capitalized in period | $ 1,900,000 | $ 2,800,000 | |||
Prepaid Expenses and Other Current Assets | |||||
Guarantor Obligations [Line Items] | |||||
Deferred contract costs | 1,300,000 | 1,300,000 | |||
Other Assets | |||||
Guarantor Obligations [Line Items] | |||||
Deferred contract costs | $ 9,300,000 | $ 9,300,000 |
Segments and Customer Concentrations - Narrative (Details) - segment |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Segment Reporting Information [Line Items] | ||||
Number of reportable segments | 1 | |||
Customer Concentration Risk | Sales Revenue, Services, Net | Ascension | ||||
Segment Reporting Information [Line Items] | ||||
Concentration percentage | 91.00% | 18.00% | 89.00% | 75.00% |
Customer Concentration Risk | Accounts Receivable | Ascension | ||||
Segment Reporting Information [Line Items] | ||||
Concentration percentage | 70.00% | 31.00% |
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