Discontinued Operations

12 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]


NOTE 20. Discontinued Operations

Discontinued operations is a component of an entity that has either been disposed of or is deemed held-for-sale and, (i) the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

On October 31, 2023, the Company completed the disposition of MDX Hawaii and its related operations. The Company’s decision to exit Hawaii and the Independent Practice Association line of business represents a strategic shift that will have a major effect on its operations and financial results. As such, the Company’s Hawaii operations are reflected in the consolidated financial statements as discontinued operations for all periods presented.

During 2020, the Company implemented a plan to divest its California operations, which included the entirety of its Medicaid line of business. In December 2021, the Company signed a definitive agreement to sell its remaining California operations. The sale closed in February 2021. The Company’s decision to exit California and the Medicaid line of business represents a strategic shift that will have a major effect on its operations and financial results. As such, the Company’s California operations are reflected in the consolidated financial statements as discontinued operations for all periods presented.

The following is a summary of the assets and liabilities related to discontinued operations (in thousands):


	December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	31,768
Receivables, net	5,210
Prepaid expenses and other current assets, net	2,547
Total current assets	39,525
Property and equipment, net	113
Intangible assets, net	49,232
Goodwill	39,027
Other assets, net	11,063
Total assets	$	138,960
LIABILITIES
Current liabilities:
Medical claims and related payables	$	45,929
Accounts payable and accrued expenses	5,936
Total current liabilities	51,865
Other liabilities	794
Total liabilities	52,659
Net assets	$	86,301

The results of discontinued operations are as follows (in thousands):


	Year Ended December 31,
	2023		2022		2021
Revenues:
Medical services revenue	$	266,279	$	320,018	$	317,821
Other operating revenue	414		498		688
Total revenues	266,693		320,516		318,509
Expenses:
Medical services expense	270,223		305,972		289,468
Other medical expenses	8,731		13,127		13,802
General and administrative	4,151		11,156		34,238
Depreciation and amortization	4,118		4,823		4,186
Income (loss) from operations	(20,530)		(14,562)		(23,185)
Other income (expense), net	646		75		(1,763)
Gain (loss) on sales of assets, net	(47,548)		—		473
Interest expense	(118)		(41)		(137)
Income (loss) before income taxes and noncontrolling interests	(67,550)		(14,528)		(24,612)
Income tax benefit (expense)	—		(26)		1,687
Net income (loss) from discontinued operations attributable to common shares	$	(67,550)	$	(14,554)	$	(22,925)

The following table provides significant non-cash operating items for discontinued operations that are included in the consolidated statements of cash flows (in thousands):


	Year Ended December 31,
	2023		2022		2021
Non-cash operating activities from discontinued operations:
Depreciation and amortization	$	4,118	$	4,823	$	4,186
Stock-based compensation expense	169		312		722
Deferred income taxes and uncertain tax positions	—		—		(1,697)
Release of indemnification assets	—		—		1,705
Other non-cash items	169		326		733
Cash flows from investing activities:
Purchase of property and equipment	—		(12)		(111)
Purchase of intangible assets	—		(7,000)		—

Indemnification Assets

Indemnification assets have been established to offset certain pre-closing liabilities for which the prior owners of some of the Company’s California subsidiaries are obligated to indemnify the Company. The Company deems the amounts receivable under the indemnification agreements to be fully collectible should indemnification claims arise and, as such, a valuation allowance is not deemed necessary. During the year ended December 31, 2021, the Company released $1.7 million of indemnification assets in discontinued operations in the consolidated statements of operations as the corresponding pre-closing liabilities were released as a result of closing certain tax years (see below). Indemnification assets were $4.6 million at December 31, 2023.

Unrecognized Tax Benefits

As of December 31, 2021, the Company has recorded a liability for unrecognized tax benefits of $2.1 million, respectively, inclusive of accrued interest and penalties on unrecognized tax benefits. The liability, if reversed, would result

in a tax benefit attributable to discontinued operations. During the year ended December 31, 2021, due to expiration of the 2016 U.S. federal statute of limitations, the Company reversed $5.6 million of tax liability, $1.1 million of accrued interest and $1.1 million of accrued penalties on unrecognized tax benefits and realized a tax benefit of $1.8 million attributable to discontinued operations.