Discontinued Operations

3 Months Ended

Mar. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

On December 1, 2023, the Company notified CMS that it would no longer participate as a REACH ACO in connection with the 2024 performance year. The Company’s exit from the ACO REACH Program was made after the Company determined that it is in its best interest to fully exit the ACO REACH Program starting with the 2024 performance year, and follows the Company's November 2022 announcement of a strategic reduction in the number of ACO REACH participating physicians in 2023. The nature of the remaining activities relate to the settlement with CMS related to prior performance years which is expected to be completed during the second half of 2024.

A summary of the results from discontinued operations included in the Condensed Consolidated Statements of Operations and Comprehensive Loss follows:


	Three Months Ended March 31,
	2024		2023
	(in thousands)
Revenues:
Non-Insurance revenue	$	6,824	$	205,783
Total revenues	6,824		205,783

Operating Expenses:
Net medical claims incurred	$	2,235	$	197,701
General and administrative expenses	292		990
Restructuring costs	297		—
Total operating expenses	$	2,824	$	198,691
Gain from operations	4,000		7,092
Net income	$	4,000	$	7,092

A summary of the carrying amounts of major assets and liabilities, which were classified as held for settlement in the Condensed Consolidated Balance Sheets, follows:


	March 31, 2024		December 31, 2023
	(in thousands)
Assets(1)
Cash and cash equivalents	$	—	$	6,456
Surety bond and deposits	—		55,089
Non-Insurance receivable	10,926		10,926
Total assets	$	10,926	$	72,471

Liabilities(1)
Unpaid claims	$	858	$	2,856
Accounts payable and accrued expenses	297		—
Accrued salaries and benefits	—		110
Non-Insurance performance year obligation, current	9,657		15,568
Non-Insurance payable	39,810		41,565
Total liabilities	$	50,622	$	60,099

(1) The assets and liabilities of the disposal group classified are classified as current on the March 31, 2024 Condensed Consolidated Balance Sheet as the settlement with CMS is expected to occur within one year.

A summary of cash flows from discontinued operations included in the Condensed Consolidated Statements of Cash Flows follows:


	Three Months Ended March 31,
	2024		2023
	(in thousands)
Net cash (used in) provided by operating activities	$	(8,019)	$	17,109

Performance guarantees

Certain of the Company's arrangements with third-party providers require it to guarantee the performance of its care network to CMS. As a result of the Company's participation in the ACO REACH Model, the Company determined that it was making a performance guarantee with respect to providers under the Non-Insurance arrangement that should be recognized in the financial statements. The performance guarantee identified relates to the Company guaranteeing the performance of the third-party medical providers. Thus, the contract with CMS is accounted for as a performance guarantee under ASC 460-Guarantees. At the inception of the performance year, the Company measures and recognizes the performance guarantee receivable and obligation, issued in this standalone arm's length transaction, using the practical expedient to fair value as set forth in ASC 460-10-30-2(a). The Company estimates the annualized benchmark, which is the amount recognized in both the Non-Insurance performance year receivable and the Non-Insurance performance year obligation, current. This is consistent with ASC 460-10-25-4, which provides that a guarantor shall recognize in its statement of financial position a liability for that guarantee. In addition, when the guarantee is issued in a standalone transaction for a premium, the offsetting entry should be considered received (such as cash or a receivable) according to ASC 460-10-25-4. Thus the Company recognizes the Non-Insurance performance year receivable on its balance sheets.

To subsequently measure and recognize the performance guarantee, the Company follows ASC 460-10-35-2(b) and applies a systematic and rational approach to reflect its release from risk. Under this approach, the Company amortizes on a straight-line basis over the performance year, the obligation. The Company has determined this systematic and rational method is appropriate, as it matches the period in which the guarantee is fulfilled. In addition, ASC 460-10-35-2 provides further guidance on the subsequent measurement related to the Company's performance guarantee. Per ASC 460-10-35-2, depending on the nature of the guarantee, the guarantor's release from risk typically can be recognized over the term of the guarantee using one of three methods: (1) upon expiration or settlement, (2) by systematic or rational amortization, or (3) as the fair value of the guarantee changes. The Company has determined that method (2) is the appropriate method of recognition as discussed above.

With respect to each performance year in which the ACO is a participant, the final consideration due to the ACO from CMS ("shared savings") or the consideration due to CMS from the ACO ("shared loss") is reconciled in the subsequent years following the performance year. The shared savings or loss is measured periodically and will be applied to the Non-Insurance performance obligation, current or Non-Insurance performance receivable if the Company is in a probable loss position or probable savings position, respectively. The ACO has entered into an agreement with CMS and a third-party to cover the financial threshold determined by CMS.

In April 2021, the Company began participating in the Global and Professional Direct Contracting of the Centers for Medicare & Medicaid Services ("CMS"), which utilizes a structured model intended to reduce expenditures and preserve or enhance quality of care for people with Medicare fee-for-service ("FFS"). CMS rebranded the DC Model and renamed the model the ACO Realizing Equity, Access, and Community Health (REACH) Model ("ACO REACH Model") effective January 1, 2023. As a participating entity in the DC Model, referred to as the ACO REACH Model at January 1, 2023, with a global risk arrangement, the Company assumed the responsibility of guaranteeing the performance of its care network. The ACO REACH Model is intended to reduce administrative burden and support a focus on complex, chronically ill patients. On December 1, 2023, the Company notified CMS that it will no longer participate as a REACH ACO in connection with the 2024 performance year. The Company’s exit from the ACO REACH Program was made after the Company determined that it is in the Company's best interest to fully exit the ACO REACH Program, and follows its November 2022 announcement of a strategic reduction in the number of ACO REACH participating physicians in 2023.

Certain of the Company's arrangements with third-party providers require it to guarantee the performance of its care network to CMS, which, if not obtained, could potentially result in payment to CMS. The Non-Insurance performance year obligation and receivable are amortized on a straight-line basis for the amount that represents the completed performance. The Company is unable to estimate the maximum potential amount of future payments under the guarantee. This is attributable to the stop-loss arrangement and the corridors (tiered levels) in the arrangement. A certain percentage of these arrangements will still be the responsibility of the Company, in addition to a number of variables that are not reasonable for the Company to estimate, such as, but not limited to, risk ratings and benchmark trends that have an inestimable impact on the estimate of future payments.

For additional information, see Note 2 (Summary of Significant Accounting Policies) and Note 20 (Non-Insurance) in the 2023 Form 10-K.

The tables below include the financial statement impacts of the performance guarantee:


	March 31, 2024		December 31, 2023
	(in thousands)

Non-Insurance performance year obligation (1)	$	9,657	$	15,568
(1) This obligation represents the consideration due to providers, net of the shared savings or loss for the period and amortization of the liability.


	Three Months Ended March 31,
	2024		2023
	(in thousands)
Amortization of the Non-Insurance performance year receivable	$	—	$	(184,207)
Amortization of the Non-Insurance performance year obligation	—		184,207

Non-Insurance revenue	$	6,824	$	205,783

Restructuring Activities

Restructuring related expenses, which are recorded within Restructuring costs on the Condensed Consolidated Statements of Operations, include employee termination benefits, vendor costs associated with restructuring activities, and other costs associated with the business transformation initiatives. Restructuring costs are determined based on estimates, which are prepared at the time the restructuring actions are approved by management and are periodically reviewed and updated for changes in estimates. The Company applies the provisions of ASC 420, Exit or Disposal Cost Obligations ("ASC 420") as these costs meet the criteria of a one-time benefit. Under ASC 420-10, the Company establishes a liability for a cost associated with an exit or disposal activity, including employee termination benefits and other restructuring related costs, when the liability is incurred, rather than at the date that the Company commits to an exit plan. At each reporting date, there is an evaluation of the liability to ensure the amount is still appropriate.

On December 1, 2023, the Company notified CMS that it will no longer participate as a REACH ACO in connection with the 2024 performance year. The Company’s exit from the ACO REACH Program was made after the Company determined that it is in its best interest to fully exit the ACO REACH Program, and follows the Company's November 2022 announcement of a strategic reduction in the number of ACO REACH participating physicians in 2023. The Company incurred costs related to not continuing with the program, which consisted of employee termination benefits and are accounted for as exit and disposal costs and recorded pursuant to ASC 420, Exit or Disposal Cost Obligations. For those costs determined to be one-time termination benefits the Company established a liability for the restructuring related expenses when the plan was established, the remaining costs will be expensed as incurred.

The Restructuring costs are presented in the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss, which were as follows:

ACO REACH

As of March 31, 2024 and December 31, 2023, the liability for employee termination benefits was recorded in Accrued salaries and benefits and the liability for vendor related costs and other expenses were recorded in Accounts payable and accrued expenses in the discontinued operations balance sheets. The liability recorded reflects the Company's best estimate, which may be revised in subsequent periods as the restructuring progresses.


	Employee Termination Benefits		Vendor related costs		Total
	(in thousands)
Liability as of December 31, 2023	$	110	$	—	$	110
Charges	—		297		297
Cash payments	(110)		—		(110)
Liability as of March 31, 2024	$	—	$	297	$	297
Total cumulative costs incurred as of March 31, 2024	$	110	$	297	$	407