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Revenue Recognition and Accounts Receivable
 6 Months Ended
Jun. 30, 2024
Revenue from Contract with Customer [Abstract]  
Revenue Recognition and Accounts Receivable Revenue Recognition and Accounts Receivable
Revenue Recognition
The Company generates revenues for services and related products that the Company provides to patients for home medical equipment, related supplies, and other items. The Company’s revenues are recognized in the period in which services and related products are provided to customers and are recorded either at a point in time for the sale of supplies and disposables, over the fixed monthly service period for equipment, or in the month in which eligible members are entitled to receive healthcare services in connection with at-risk capitation arrangements.
Revenues are recognized when control of the promised good or service is transferred to customers, in an amount that reflects the consideration to which the Company expects to receive from patients or under reimbursement arrangements with Medicare, Medicaid and third-party payors, in exchange for those goods and services.
The Company determines the transaction price based on contractually agreed-upon amounts or rates, referred to as explicit price concessions, adjusted for estimates of variable consideration, such as implicit price concessions, based on historical reimbursement experience. The Company utilizes the expected value method to determine the amount of variable consideration, including implicit and explicit price concessions, that should be included to arrive at the transaction price, using contractual agreements and historical reimbursement experience. The Company applies constraint to the transaction price, such that net revenue is recorded only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in the future. If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known.
Sales revenue is recognized upon transfer of control of products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenues for the sale of sleep therapy equipment supplies (including CPAP resupply products), home medical equipment and related supplies (including wheelchairs, hospital beds and infusion pumps), diabetic medical devices and supplies (including CGM and insulin pumps), and other HME products and supplies are recognized when control of the promised good or service is transferred to customers, which is generally upon shipment for direct to consumer medical devices and supplies and upon delivery to the home for home medical equipment.
The Company provides certain equipment to patients which is reimbursed periodically in fixed monthly payments for as long as the patient is using the equipment and medical necessity continues (in certain cases, the fixed monthly payments are capped at a certain amount). The equipment provided to the patient is based upon medical necessity as documented by prescriptions and other documentation received from the patient’s physician. The patient generally does not negotiate or select the manufacturer or model of the equipment prescribed by their physician and delivered by the Company. Once initial delivery of this equipment is made to the patient for initial setup, a monthly billing process is established based on the initial setup service date. The Company recognizes the fixed monthly revenue ratably over the service period as earned, less estimated adjustments, and defers revenue for the portion of the monthly bill that is unearned. No separate revenue is earned from the initial setup process. Included in fixed monthly revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the payor. The estimate of net unbilled fixed monthly revenue recognized is based on historical trends and estimates of future collectability.

The Company receives a per member per month (“PMPM”) fee under certain at-risk capitation arrangements, which refers to a model in which the Company receives a PMPM fee from the third-party payor, and is responsible for managing a range of healthcare services and associated costs of its members. In at-risk capitation arrangements, the Company is responsible for the cost of contracted healthcare services required by those members in accordance with the terms of each agreement. Capitated revenue contracts with payors are generally multi-year arrangements and have a single monthly stand ready performance obligation to provide all aspects of necessary medical care to members for the contracted period in accordance with the scope of the agreements. The Company recognizes revenue in the month in which eligible members are entitled to receive healthcare services during the contract term. The Company’s revenue recognized under its capitation arrangements by core product line for the three and six months ended June 30, 2024 is included in the table below. The Company’s revenue recognized under its capitation arrangements for the three and six months ended June 30, 2023 is included in net sales revenue and net revenue from fixed monthly equipment reimbursements by core product line in the table below, which was immaterial for those periods.
The Company’s billing system contains payor-specific price tables that reflect the fee schedule amounts in effect or contractually agreed upon by various government and commercial insurance payors for each item of equipment or supply provided to a customer. Revenues are recorded based on the applicable fee schedule. The Company has established a contractual allowance, referred to as an explicit price concession, to account for adjustments that result from differences between the payment amount received and the expected realizable amount. If the payment amount received differs from the net realizable amount, an adjustment is recorded to revenues in the period that these payment differences are determined. The Company reports revenues in its consolidated financial statements net of such adjustments.
The Company recognizes revenue in the consolidated statements of operations and contract assets on the consolidated balance sheets only when services have been provided. Since the Company has performed its obligation under the contract, it has unconditional rights to the consideration recorded as contract assets and therefore classifies those billed and unbilled contract assets as accounts receivable.
Fixed monthly payments that the Company receives from customers in advance of providing services represent contract liabilities. Such payments primarily relate to patients who are billed monthly in advance and are recognized over the period as earned.
The Company disaggregates net revenue from contracts with customers by payor type and by core product lines. The Company believes that disaggregation of net revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The payment terms and conditions within the Company’s revenue-generating contracts vary by payor type and payor source.
The composition of net revenue by payor type for the three and six months ended June 30, 2024 and 2023 are as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Insurance$487,787 $474,828 $971,152 $911,612 
Government210,946 209,662 409,344 398,509 
Patient pay107,242 108,796 217,976 227,791 
Net revenue$805,975 $793,286 $1,598,472 $1,537,912 
The composition of net revenue by core product lines for the three and six months ended June 30, 2024 and 2023 are as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net sales revenue:
Sleep$233,361 $215,849 $458,887 $429,306 
Diabetes147,261 165,021 294,240 307,565 
Supplies to the home44,265 48,323 88,913 94,878 
Respiratory7,871 8,191 15,575 16,120 
HME25,963 27,237 51,585 55,800 
Other57,684 57,012 113,345 110,219 
Total net sales revenue$516,405 $521,633 $1,022,545 $1,013,888 
Net revenue from fixed monthly equipment reimbursements:
Sleep$82,053 $86,783 $162,743 $167,705 
Diabetes2,382 3,886 4,661 7,717 
Respiratory138,899 145,889 276,131 280,612 
HME23,355 23,974 45,921 46,315 
Other11,637 11,121 23,208 21,675 
Total net revenue from fixed monthly equipment reimbursements$258,326 $271,653 $512,664 $524,024 
Net revenue from capitated revenue arrangements:
Sleep$6,976 $— $14,028 $— 
Diabetes1,546 $— 3,144 — 
Supplies to the home3,080 $— 6,290 — 
Respiratory14,456 $— 29,582 — 
HME3,712 $— 7,210 — 
Other1,474 $— 3,009 — 
Total net revenue from capitated revenue arrangements$31,244 $— $63,263 $— 
Total net revenue:
Sleep$322,390 $302,632 $635,658 $597,011 
Diabetes151,189 168,907 302,045 315,282 
Supplies to the home47,345 48,323 95,203 94,878 
Respiratory161,226 154,080 321,288 296,732 
HME53,030 51,211 104,716 102,115 
Other70,795 68,133 139,562 131,894 
Total net revenue$805,975 $793,286 $1,598,472 $1,537,912 
Accounts Receivable
Due to the continuing changes in the healthcare industry and third-party reimbursement environment, certain estimates are required to record accounts receivable at their net realizable values. Inherent in these estimates is the risk that
they will have to be revised or updated as additional information becomes available. The complexity of third-party billing arrangements and laws and regulations governing Medicare and Medicaid may result in adjustments to amounts originally recorded.
The Company performs a periodic analysis to review the valuation of accounts receivable and collectability of outstanding balances. Management’s evaluation takes into consideration such factors as historical cash collections experience, business and economic conditions, trends in healthcare coverage, other collection indicators and information about specific receivables. The Company’s evaluation also considers the age and composition of the outstanding amounts in determining their estimated net realizable value.
Receivables are considered past due when not collected by established due dates. Specific patient balances are written off after collection efforts have been followed and the account has been determined to be uncollectible. Revisions in receivable estimates are considered implicit price concession adjustments and are recognized as an adjustment to net revenue in the period of revision. The Company does not have any material bad debt expense.
Included in accounts receivable are earned but unbilled accounts receivables. Billing delays, ranging from several days to several weeks, can occur due to the Company’s policy of compiling required payor specific documentation prior to billing for its services rendered. As of June 30, 2024 and December 31, 2023, the Company’s unbilled accounts receivable was $40.2 million and $68.4 million, respectively.