Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

We derive a majority of our revenues from our annually renewable subscription-based service agreements with our customers, which include performance measurement and improvement services, healthcare analytics and governance education services. Such agreements are generally cancelable on short or

no

notice without penalty. See Note

2

for further information about our contracts with customers. We account for revenue using the following steps:

● Identify the contract, or contracts, with a customer;

● Identify the performance obligations in the contract;

● Determine the transaction price;

● Allocate the transaction price to the identified performance obligations; and

● Recognize revenue when, or as, we satisfy the performance obligations.

Our revenue arrangements with a client

may

include combinations of more than

one

service offering which

may

be executed at the same time, or within close proximity of

one

another. We combine contracts with the same customer into a single contract for accounting purposes when the contract is entered into at or near the same time and the contracts are negotiated together. For contracts that contain more than

one

separately identifiable performance obligation, the total transaction price is allocated to the identified performance obligations based upon the relative stand-alone selling prices of the performance obligations. The stand-alone selling prices are based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost-plus margin or residual approach. We estimate the amount of total contract consideration we expect to receive for variable arrangements based on the most likely amount we expect to earn from the arrangement based on the expected quantities of services we expect to provide and the contractual pricing based on those quantities. We only include some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur. We consider the sensitivity of the estimate, our relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement. Our revenue arrangements do

not

contain any significant financing element due to the contract terms and the timing between when consideration is received and when the service is provided.

Our arrangements with customers consist principally of

four

different types of arrangements:

1

) subscription-based service agreements;

2

)

one

-time specified services performed at a single point in time;

3

) fixed, non-subscription service agreements; and

4

) unit-priced service agreements.

Subscription-based services -

Services that are provided under subscription-based service agreements are usually for a

twelve

month period and represent a single promise to stand ready to provide reporting, tools and services throughout the subscription period as requested by the customer. These agreements are renewable at the option of the customer at the completion of the initial contract term for an agreed upon price increase each year. These agreements represent a series of distinct monthly services that are substantially the same, with the same pattern of transfer to the customer as the customer receives and consumes the benefits throughout the contract period. Accordingly, subscription services are recognized ratably over the subscription period. Subscription services are typically billed annually in advance but

may

also be billed on a quarterly and monthly basis.

One-time services –

These agreements typically require us to perform a specific

one

-time service in a particular month. We are entitled to a fixed payment upon completion of the service. Under these arrangements, we recognize revenue at the point in time we complete the service and it is accepted by the customer.

Fixed, non-subscription services –

These arrangements typically require us to perform an unspecified amount of services for a fixed price during a fixed period of time. Revenues are recognized over time based upon the costs incurred to date in relation to the total estimated contract costs. In determining cost estimates, management uses historical and forecasted cost information which is based on estimated volumes, external and internal costs and other factors necessary in estimating the total costs over the term of the contract. Changes in estimates are accounted for using a cumulative catch up adjustment which could impact the amount and timing of revenue for any period.

Unit-price services –

These arrangements typically require us to perform certain services on a periodic basis as requested by the customer for a per-unit amount which is typically billed in the month following the performance of the service. Revenue under these arrangements is recognized over the time the services are performed at the per-unit amount.

Revenue is presented net of any sales tax charged to our clients that we are required to remit to taxing authorities. We recognize contract assets or unbilled receivables related to revenue recognized for services completed but

not

invoiced to the clients. Unbilled receivables are classified as receivables when we have an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.  

Deferred Charges, Policy [Policy Text Block]

Deferred Contract Costs

Deferred contract costs, net is stated at gross deferred costs less accumulated amortization. We defer commissions and incentives, including payroll taxes, if they are incremental and recoverable costs of obtaining a renewable customer contract. Deferred contract costs are amortized over the estimated term of the contract, including renewals, which generally ranges from

three

to

five

years. The contract term was estimated by considering factors such as historical customer attrition rates and product life. The amortization period is adjusted for significant changes in the estimated remaining term of a contract.  An impairment of deferred contract costs is recognized when the unamortized balance of deferred contract costs exceeds the remaining amount of consideration we expect to receive net of the expected future costs directly related to providing those services.  We have elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of

one

year or less. We deferred incremental costs of obtaining a contract of

$1.6

million and

$868,000

in the

three

months ended

March 31, 2020

and

2019,

respectively. Deferred contract costs, net of accumulated amortization was

$4.9

million and

$4.2

million at

March 31, 2020

and

December 31, 2019,

respectively. Total amortization by expense classification for the

three

months ended

March 31, 2020

and

2019

was as follows:

	2020		2019
	(In thousands)
Direct expenses	$	148	$	6
Selling, general and administrative expenses	$	743	$	683
Total amortization	$	891	$	689

Additional expense included in selling, general and administrative expenses for impairment of costs capitalized due to lost clients was

$1,000

and

$21,000

for the

three

months ended

March 31, 2020

and

2019,

respectively.

Accounts Receivable [Policy Text Block]

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount. Effective

January 1, 2020,

we adopted Accounting Standards Update (“ASU”)

2016

-

13,

 

Measurement of Credit Losses on Financial Instruments.

This ASU requires the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The adoption of this standard did

not

impact on our condensed consolidated financial statements. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable, determined based on our historical write-off experience, current economic conditions and reasonable and supportable forecasts about the future. We review the allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The following table provides the activity in the allowance for doubtful accounts for the

three

months ended

March 31, 2020

and

2019

(In thousands):

	Balance at Beginning of Period		Bad Debt Expense (Benefit)			Write-offs		Recoveries		Balance at End of Period
Three months ended March 31, 2020	$	144	$	20		$	35	$	14	$	143
Three months ended March 31, 2019	$	175	$	(25	)	$	22	$	10	$	138

Lessee, Leases [Policy Text Block]

Leases

We determine whether a lease is included in an agreement at inception. Operating lease ROU assets are included in operating lease right-of-use assets in our consolidated balance sheet. Finance lease assets are included in property and equipment. Operating and finance lease liabilities are included in other current liabilities and other long term liabilities. Certain lease arrangements

may

include options to extend or terminate the lease. We include these provisions in the ROU and lease liabilities only when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and is included in direct expenses and selling, general and administrative expenses. Our lease agreements do

not

contain any residual value guarantees.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments during the lease term. ROU assets and lease liabilities are recorded at lease commencement based on the estimated present value of lease payments. Because the rate of interest implicit in each lease is

not

readily determinable, we use our estimated incremental collateralized borrowing rate at lease commencement, to calculate the present value of lease payments. When determining the appropriate incremental borrowing rate, we consider our available credit facilities, recently issued debt and public interest rate information.

We elected the practical expedient to account for lease and non-lease components as a single lease component for all asset classifications. We have also made a policy election to

not

record short-term leases with a duration of

12

months or less on the balance sheet.

Hosting Arrangement Implementation Costs [Policy Text Block]

 

Implementation Costs of Hosting Arrangements

When a software license is included in a cloud computing arrangement and we have the ability and feasibility to download the software, it is accounted for as software, included in property and equipment, and amortized. If a software license is

not

included or we do

not

have the ability or feasibility to download software included in a cloud computing arrangement, it is accounted for as a service contract, which is expensed to direct expenses or selling, general and administrative expenses during the service period. Effective

January 1, 2020,

we prospectively adopted ASU

2018

-

15,

Intangibles-Goodwill and Other-Internal Use Software (Subtopic

350

-

40

). This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The adoption did

not

significantly impact our results of operations and financial position.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

Our valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The inputs are then classified into the following hierarchy: (

1

) Level

1

Inputs—quoted prices in active markets for identical assets and liabilities; (

2

) Level

2

Inputs—observable market-based inputs other than Level

1

inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are

not

active, or other inputs that are observable or can be corroborated by observable market data; (

3

) Level

3

Inputs—unobservable inputs.

The following details our financial assets within the fair value hierarchy at

March 31, 2020

and

December 31, 2019:

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of March 31, 2020
Money Market Funds	$	2,739	$	--	$	--	$	2,739
Total Cash Equivalents	$	2,739	$	--	$	--	$	2,739
As of December 31, 2019
Money Market Funds	$	3,662	$	--	$	--	$	3,662
Total Cash Equivalents	$	3,662	$	--	$	--	$	3,662

There were

no

transfers between levels during the

three

-month period ended

March 31, 2020.

Our long-term debt described in Note

4

is recorded at historical cost. The fair value of long-term debt is classified in Level

2

of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	March 31, 2020		December 31, 2019
	(In thousands)
Total carrying amount of long-term debt	$	33,321	$	34,281
Estimated fair value of long-term debt	$	35,246	$	35,205

The carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate their fair value. All non-financial assets that are

not

recognized or disclosed at fair value in the financial statements on a recurring basis, which includes ROU assets, property and equipment, goodwill, intangibles and cost method investments, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of

March 31, 2020,

and

December 31, 2019,

there was

no

indication of impairment related to these assets.

Annually, we consider whether the recorded goodwill and indefinite lived intangibles have been impaired. However, goodwill and intangibles must be tested between annual tests if an event occurs or circumstances change to indicate that it is more likely than

not

that an impairment loss has been incurred (“triggering event”). We considered the current and expected future economic and market conditions, including the impact of the COVID-

19

pandemic on each of our reporting units. We also assessed our current market capitalization compared to book value, forecasts and margins in our last quantitative impairment testing. We concluded that a triggering event has

not

occurred which would require an interim impairment test to be performed as it is

not

more likely than

not

that an impairment loss has been incurred at

March 31, 2020.

Our Canadian reporting unit generates service revenue from a relatively small number of customers with approximately

56.5%

of its annual revenue concentrated in

one

customer contract which currently expires in

March 2021.

While historically we have been successful in renewing or retaining contracts with our customers, should we be unable to or choose

not

to renew a significant contract, it would likely result in an impairment of goodwill at this reporting unit. The carrying amount of goodwill related to our Canadian reporting unit at

March 31, 2020

was

$2.0

million

Commitments and Contingencies, Policy [Policy Text Block]

Commitments and Contingencies

From time to time, we are involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable. Legal fees, net of estimated insurance recoveries, are expensed as incurred. There were

no

outstanding claims at

March 31, 2020.

A sales tax accrual of

$775,000

was recorded in

2019

after we became aware that a state sales tax liability was both probable and estimable as of

December 31, 2019,

due to sales taxes that should have been collected from customers in

2019

and certain previous years. We are working through voluntary disclosure agreements with certain states and will have procedures in place to start collecting and remitting sales tax in

June

or

July

of

2020.

State and local jurisdictions have differing rules and regulations governing sales, use, and other taxes and these rules and regulations can be complex and subject to varying interpretations that

may

change over time. As a result, we could face the possibility of tax assessment and audits, and our liability for these taxes and associated interest and penalties could exceed our original estimates. In addition, we incurred additional sales tax expense in the

first

quarter of

2020

of

$50,000

and will incur additional expense in the

second

quarter of

2020,

since we will

not

start collecting sales tax from customers until

June

or

July

of

2020.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Not

Yet Adopted

In

December 2019,

the FASB issued ASU

2019

-

12,

Simplifying the Accounting for Income Taxes (Topic

740

). Among other clarifications and simplifications related to income tax accounting, this ASU simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences.  The guidance is effective for fiscal years beginning after

December 15, 2020

and interim periods within those fiscal years.  Early adoption is permitted in interim or annual periods with any adjustments reflected as of the beginning of the annual period that includes that interim period.  Additionally, entities that elect early adoption must adopt all the amendments in the same period.  Amendments are to be applied prospectively, except for certain amendments that are to be applied either retrospectively or with a modified retrospective approach through a cumulative effect adjustment recorded to retained earnings.  We are currently in the process of further evaluating the impact that this new guidance will have on our consolidated financial statements.

In

March 2020,

FASB issued ASU

No.

2020

-

04,

"Reference Rate Reform (Topic

848

): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of

March 12, 2020

through

December 31, 2022.

We expect to apply the optional expedient for contract modification to account for the change in the reference rate on impacted credit facilities prospectively by adjusting the effective interest rate.