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Revenue Recognition

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

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.

Disaggregation of Revenue

In the following table, revenue is disaggregated by source (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net operating fees	$	252.9	$	181.7	$	494.2	$	309.3
Incentive fees	17.4		9.9		29.6		17.9
Other	24.7		16.3		47.1		28.0
Net service revenue	$	295.0	$	207.9	$	570.9	$	355.2

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers (in millions):



	June 30, 2019		December 31, 2018
Contract assets	$	1.8	$	1.2
Contract liabilities	22.5		22.3

The Company recognized an increase in revenue of $0.1 million and a decrease of revenue of $0.4 million for the three months ended June 30, 2019 and 2018, and an increase of revenue of $0.3 million and a decrease of revenue of $0.4 million for the six months ended June 30, 2019 and 2018 related to changes in transaction price estimates. The Company recognized revenue of $2.7 million and $0.0 million for the three months ended June 30, 2019 and 2018, and $3.9 million and $0.0 million for the six months ended June 30, 2019 and 2018 related to services performed in periods prior to the parties reaching an agreement that creates enforceable rights and obligations.

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 are as follows (in millions):



	Six Months Ended June 30, 2019					Six Months Ended June 30, 2018
	Contract assets		Contract liabilities			Contract assets		Contract liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	—	$	68.2		$	—	$	50.3
Increases due to cash received, excluding amounts recognized as revenue during the period	—		(0.3		)	—		5.9
Acquisitions	—		—			0.8		1.4

The Company recognized revenue of $68.2 million and $50.3 million during the six months ended June 30, 2019 and 2018, which amounts were included in contract liabilities at the beginning of the respective periods. These revenue amounts include $66.7 million and $47.8 million for the six months ended June 30, 2019 and 2018, respectively, related to advanced billings which become accounts receivable and contract liabilities on the first day of the respective service period.

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.



	Net operating fees		Incentive fees
2019	$	47.1	$	2.6
2020	31.3		—
2021	17.2		—
2022	8.7		—
Thereafter	15.4		—
Total	$	119.7	$	2.6

The amounts presented in the table above include variable fee estimates for the non-cancellable term of the Company's physician groups and EMS providers RCM services contracts, fixed fees which are typically recognized ratably as the performance obligation is satisfied, and 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 as revenues when the customer exercises its option to purchase additional goods or services.Deferred Contract Costs

Certain costs associated with the initial phases of customer contracts and the related transition of customer hospitals are deferred. These fulfillment costs relate directly to the Company’s responsibilities under the corresponding customer contracts, generate or enhance resources of the Company that will be used in satisfying its performance obligations in the future, and are expected to be recovered through the margins realized. The following table summarizes the breakout of deferred contract costs (in millions):



	June 30, 2019		December 31, 2018
Prepaid expenses and other current assets	$	3.4	$	2.8
Other assets	19.5		17.4
Total deferred contract costs	$	22.9	$	20.2

The associated assets are amortized as services are transferred to the customer over the remaining life of the contracts. For the three and six months ended June 30, 2019, total amortization was $0.8 million and $1.5 million, respectively, and there were no associated impairment losses. For the three and six months ended June 30, 2018, total amortization was $0.6 million and $1.0 million, respectively, and there were no associated impairment losses.