Goodwill and Identifiable Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identifiable Intangible Assets

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The change in the carrying amount of goodwill for the nine months ended September 30, 2023 was as follows (in thousands):


	Gross carrying amount
Balance at December 31, 2022	$	3,545,297
Goodwill from acquisitions	7,297
Net increase relating to measurement period adjustments	718
Impairment charge	(511,866)
Balance at September 30, 2023	$	3,041,446

Management is required to perform an assessment of the recoverability of goodwill on an annual basis and upon the identification of a triggering event. Triggering events potentially warranting an interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating results or cash flows, and sustained decreases in the Company’s stock price or market capitalization. While management cannot predict if or when future goodwill impairments may occur, a non-cash goodwill impairment charge could have a material adverse effect on the Company’s operating results, net assets and the Company’s cost of, or access to, capital.

During the quarters ended March 31, 2023 and June 30, 2023, the Company experienced a decline in its market capitalization as a result of a sustained decrease in the Company’s stock price. The Company considered such sustained decreases to represent a triggering event and performed goodwill impairment tests as of March 31, 2023 and June 30, 2023. Based on the results of the tests performed as of those dates, it was concluded that the estimated fair value of the Company’s reporting unit was greater than its carrying value, as such, the Company did not recognize a goodwill impairment charge during the periods ended March 31, 2023 and June 30, 2023. During the three months ended September 30, 2023, the Company experienced a further decline in its market capitalization as a result of a sustained decrease in the Company’s stock price and also revised its financial projections. The Company considered these items to represent a triggering event and performed a goodwill impairment test as of September 30, 2023. Based on the results of the test performed as of that date, it was concluded that the estimated fair value of the Company’s reporting unit was less than its carrying value, as such, the Company recognized a non-cash goodwill impairment charge of $511.9 million during the three and nine months ended September 30, 2023. If in future periods the Company were to experience a further decline in its market capitalization or expected results for a sustained period of time, the Company may be required to perform an additional goodwill impairment test at an interim or annual period and could be required to recognize a non-cash goodwill impairment charge at that time, which could be material.

Identifiable intangible assets that are separable and have determinable useful lives are valued separately and amortized over the period which reflects the pattern in which the economic benefits of the assets are expected to be

consumed. Identifiable intangible assets consisted of the following at September 30, 2023 and December 31, 2022 (dollars in thousands):


	September 30, 2023
			Weighted-Average Remaining Life (Years)
Tradenames, net of accumulated amortization of $35,111	$	77,689	6.8
Payor contracts, net of accumulated amortization of $26,166	55,834		6.8
Developed technology, net of accumulated amortization of $4,095	2,205		1.8
Identifiable intangible assets, net	$	135,728


	December 31, 2022
			Weighted-Average Remaining Life (Years)
Tradenames, net of accumulated amortization of $25,498	$	87,302	7.5
Payor contracts, net of accumulated amortization of $20,016	61,984		7.6
Contractual rental agreements, net of accumulated amortization of $43,863	10,337		0.8
Developed technology, net of accumulated amortization of $3,150	3,150		2.5
Identifiable intangible assets, net	$	162,773

Amortization expense related to identifiable intangible assets, which is included in depreciation and amortization, excluding patient equipment depreciation, in the accompanying statements of operations was $7.0 million and $27.0 million for the three and nine months ended September 30, 2023, respectively, and was $10.0 million and $30.0 million for the three and nine months ended September 30, 2022, respectively.

Future amortization expense related to identifiable intangible assets is estimated to be as follows (in thousands):


Twelve months ending September 30,
2024	$	22,276
2025	21,828
2026	19,617
2027	18,190
2028	17,936
Thereafter	35,881
Total	$	135,728

The Company did not recognize any impairment charges related to identifiable intangible assets during the nine months ended September 30, 2023 and 2022.