Deferred Contract Costs

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Deferred Contract Costs

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.

Disaggregation of Revenue

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

	Three Months Ended March 31,
	2020		2019
Net operating fees	$	280.9	$	241.3
Incentive fees	16.8		12.2
Other	22.8		22.4
Net services revenue	$	320.5	$	275.9

Contract Balances

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

	March 31, 2020		December 31, 2019
Receivables (1)	$	93.9	$	83.1
Contract assets (2)	2.1		2.0
Contract liabilities (2)	26.0		25.3

(1) Receivables are included in accounts receivable, net. The balance includes accounts receivable, net - related party.

(2) Contract assets and contract liabilities are included in other current assets and customer liabilities, respectively. The contract liabilities balance contains related party amounts, including $3.9 million and $4.2 million of current customer liabilities and $19.3 million and $18.6 million of non-current customer liabilities for the three months ended March 31, 2020 and year ended December 31, 2019, respectively.

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):

	Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
	Contract assets		Contract liabilities		Contract assets		Contract liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	—	$	86.0	$	—	$	67.5
Increases due to cash received, excluding amounts recognized as revenue during the period	—		0.8		—		0.5

The Company recognized revenue of $86.0 million and $67.5 million during the three months ended March 31, 2020 and 2019, which amounts were included in contract liabilities at the beginning of the respective periods. These revenue amounts include $85.0 million and $66.7 million for the three months ended March 31, 2020 and 2019, 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
2020	$	53.2	$	3.1
2021	21.8		—
2022	11.7		—
2023	8.2		—
2024	4.0		—
2025	4.0		—
Thereafter	0.5		—
Total	$	103.4	$	3.1

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 CostsCertain costs associated with the initial phases of customer contracts and the related transition of customer hospitals and physician groups 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):

	March 31, 2020		December 31, 2019
Prepaid expenses and other current assets	$	4.2	$	4.0
Other assets	21.1		20.8
Total deferred contract costs	$	25.3	$	24.8

The associated assets are amortized as services are transferred to the customer over the remaining life of the contracts. For the three months ended March 31, 2020 and 2019, total amortization was $1.1 million and $0.7 million, respectively, and there were no associated impairment losses.