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Equity Method Investment in Change Healthcare LLC
12 Months Ended
Mar. 31, 2022
Equity Method Investment in Change Healthcare LLC [Abstract]  
Equity Method Investment in Change Healthcare LLC 17. Equity Method Investment in Change Healthcare LLC

Equity Method Investment in Change Healthcare LLC

In connection with the creation of the Joint Venture in March 2017, we exchanged our 45.615% investment in Change Healthcare Performance, Inc. (“Legacy CHC “) for 30% of the membership units of the Joint Venture. At this time, the Joint Venture issued debt and used the proceeds to acquire the remaining 54.385% of Legacy CHC.

In March 2017, the fair value of the Joint Venture was determined using a combination of the income and the market valuation approaches. Under the income approach, a discounted cash flow model was used in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, were discounted to their present value using an expected rate of return. Under the market approach, valuation multiples of reasonably similar publicly traded companies or guideline companies were applied to the Joint Venture’s operating results. These valuation approaches were considered a Level 3 fair value measurement because they required complex assumptions and judgments by management in projecting future operating results, selecting guideline companies for comparisons, determining appropriate market value multiples, selecting the discount rate to measure the risks inherent in the future cash flows and assessing the business’s life cycle and the competitive trends impacting the business, including considering technical, legal, regulatory, or economic barriers to entry.

Following our initial public offering in July 2019, the Company contributed the offering proceeds to the Joint Venture in exchange for 49,285,713 additional units of the Joint Venture, representing approximately 11% of additional ownership interest. As a result of the additional ownership interest acquired, the Company measured additional basis differences based on the fair value of the Joint Venture’s assets and liabilities as of the date of the initial public offering using valuation approaches substantially similar to those used at creation of the Joint Venture.

Prior to the Merger on March 10, 2020, we accounted for our investment in the Joint Venture using the equity method of accounting. During the period from April 1, 2019 to March 10, 2020, we recorded a proportionate share of the loss from this investment of $380,713, which included transaction and integration expenses incurred by the Joint Venture and basis adjustments, including amortization expenses, associated with equity method intangible assets. The amounts are included in Loss from Equity Method Investment in the Joint Venture in the consolidated statements of operations.

Following completion of the Merger, we consolidate the Joint Venture and no longer account for our ownership interest as an equity method investment.

Summarized financial information of the Joint Venture is as follows:

Period of

April 1, 2019 to

Statement of Operations Data:

March 10, 2020

Total revenue

$

3,092,875

Cost of operations (exclusive of depreciation and amortization)

$

1,263,244

Customer postage

$

215,448

Net income (loss)

$

123,771

Other Investments

At the time of our initial public offering, we invested in a unit purchase contract and a debt instrument of the Joint Venture on terms that substantially mirror the economics of the TEUs (see Note 16, Tangible Equity Units). Prior to the Merger, we accounted for these mirror arrangements as investments in debt and equity securities. After the Merger, our investments in the TEUs of the Joint Venture are eliminated in consolidation.

The following table presents a reconciliation of the activity related to the other investments:

Year Ended

March 31, 2020

Balance at beginning of period

$

Acquisition of forward purchase contracts

232,928

Acquisition of available-for-sale debt securities

45,946

Receipt of payments on debt securities

(7,332)

Change in fair value of forward purchase contracts

14,836

Change in fair value of debt securities

1,489

TEU conversions of forward purchase contracts

(31,000)

Settlement of investment in forward purchase contracts (1)

(216,764)

Elimination of investment in debt securities (2)

(40,103)

Balance at end of period

$

(1)Amount is included as part of the Merger purchase price. See Note 4, Business Combinations for additional information.

(2)Amount is eliminated as part of consolidation.