Related Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions [Abstract]

Related Party Transactions

Note 17 – Related Party Transactions

Related party transactions included the following:

• The Physician LLCs employ the doctors who work in our hospitals. We have no direct ownership interest in these entities but they are owned and, in some instances, controlled by related parties including our CEO, Dr. Thomas Vo. The Physician LLCs are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to them in the event of cash shortages and received the benefit of their cash surpluses. Amounts due from Physician LLCs totaled $2,783,241 at June 30, 2022 and $1,891,147 at December 31, 2021. These amounts are eliminated in the consolidation of these VIEs except as noted below.

In connection with the merger with Clinigence, we forgave certain amounts due from Physician LLCs for past advances made by us in support of their operations. We recognized net expense of $1,506,650 in the six months ended June 30, 2022 as other expense in the consolidated statements of operations. No such expense was recognized in the three months ended June 30, 2022.

The Physician LLCs had outstanding obligations to their member owners, who are also Company stockholders, totaling $2,058,701 at June 30, 2022 and $2,675,195 at December 31, 2022 reported within accounts payable – related party in our consolidated balance sheets.

• Most of our hospital division facilities are leased from Real Estate Entities which own the land and hospital buildings. These leases are typically on a triple net basis where our hospital division is responsible for all operating costs, repairs and taxes on the facilities. Our obligations under these leases are presented in Note 9. During the three and six months ended June 30, 2022, we made cash payments for these lease obligations totaling $3,305,798 and $6,189,479, respectively. Cash payments for these lease obligations made in the three and six month ended June 30, 2021 totaled $2,707,276 and $5,373,106, respectively.

We received $1,245,000 of cash in the three months ended June 30, 2022 as a lease incentive from an affiliated Real Estate Entity not consolidated by us. This incentive was included in the determination of our financing lease obligations to this entity.

The consolidated Real Estate Entities have mortgage loans payable to third parties which are collateralized by the land and buildings. We have no direct ownership interest in these entities but they are owned and, in some instances, controlled by related parties including our CEO. The Real Estate Entities are consolidated by the Company as VIEs when they do not have sufficient equity at risk and our hospital entities are guarantors of their outstanding mortgage loans. We have been working with the third-party lenders to remove our guarantees of their outstanding mortgage loans. As these guarantees are released, the associated Real Estate Entity no longer qualifies as a VIE and is deconsolidated. During the second quarter of 2022, we deconsolidated 17 Real Estate Entities. At June 30, 2022, three Real Estate Entities continue to be consolidated in our financial statements.

In connection with the merger with Clinigence, we forgave certain amounts due from Real Estate Entities for past advances made by us. We recognized net expense totaling $0 and $553,259 in the three and six months ended June 30, 2022, respectively, as other expense in the consolidated statements of operations.

• We made advances to unconsolidated entities owned by related parties that we lease facilities from. These advances totaled $1,228,442 at June 30, 2022 and $1,288,354 at December 31, 2021 and are reported as accounts receivable – related party in our consolidated balance sheets. These amounts are due on demand and bear no interest.

• Accounts receivable – related party included $162,607 at June 30, 2022 and $600,044 at December 31, 2021 due from to non-controlling interest owners of consolidated ER Entities.

• Our CEO made advances to one of our hospital facilities, SE Texas ER. These advances totaled $1,424,948 at June 30, 2022 and December 31, 2021 and are reported as accounts payable – related party in our consolidated balance sheets. The advances have no stated maturity and bear no interest.

• Accounts payable – related party in our consolidated balance sheets included $130,676 at June 30, 2022 and $0 at December 31, 2021 for reimbursement of expenses incurred on our behalf.

• We provide managerial services to emergency centers owned and, in some instances, controlled by related parties including our CEO. We recognized $188,417 and $600,971 of managerial fees within the hospital division in the three and six months ended June 30, 2022 for these services. In the three and six months ended June 30, 2021, we recognized $226,532 and $874,440 of revenue for these services.

• Two of our ER Entities, Coppell and West Plano, are obligated under managerial services agreements with related parties commencing in 2022. Payments under these agreements totaled $1,235,486 and $1,558,680 for the three and six months ended June 30, 2022. These managerial services agreements require quarterly payments of 30% of Coppell’s operating income and 50% of West Plano’s operating income.