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Investments in Unconsolidated Affiliates
12 Months Ended
Dec. 31, 2015
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Unconsolidated Affiliates
Investments in Unconsolidated Affiliates

Investments in unconsolidated affiliates in which the Company exerts significant influence but does not control or otherwise consolidate are accounted for using the equity method. Equity method investments are initially recorded at cost, unless such investments are a result of the Company entering into a transaction whereby the Company loses control of a previously controlled entity but retains a noncontrolling interest. Such transactions, which result in the deconsolidation of a previously consolidated entity, are measured at fair value. The fair value measurement utilizes Level 3 inputs, which include unobservable data, to measure the fair value of the retained noncontrolling interest. The fair value determination are generally based on a combination of multiple valuation methods which can include discounted cash flow, income approach, or market value approach which incorporates estimates of future earnings and market valuation multiples for certain guideline companies. These investments are included as investments in unconsolidated affiliates in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments is reported in equity in earnings of unconsolidated affiliates in the accompanying consolidated statements of earnings. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the companies and records reductions in carrying values when necessary.

As of December 31, 2015 and 2014, the Company has recorded in the accompanying consolidated balance sheets its investments in unconsolidated affiliates of $169.2 million and $75.5 million, respectively. The Company's net earnings from these investments during the years ended December 31, 2015, 2014 and 2013 were approximately $16.2 million, $7.0 million and $3.2 million, respectively.

During the year ended December 31, 2015, the Company's ambulatory services segment entered into five separate equity method investments. As a result of these investment transactions, the Company contributed its controlling interest in nine centers and received net cash of $8.5 million in exchange for noncontrolling interests in the new investments. Each of these investments is jointly owned by a health system and the Company. The newly formed investments (including the contributed centers) are controlled by the health systems. Also, as part of these transactions, the Company obtained a non-controlling interest in three additional centers and one surgical hospital which were contributed by the health systems.

During the year ended December 31, 2015, the Company's physician services segment contributed three contracts into an entity jointly owned by the Company and a health system.

During the year ended December 31, 2014, the Company's ambulatory services segment entered into four separate equity method investments. As a result of these investment transactions, the Company contributed its controlling interest in four of its centers and received net cash of $1.2 million in exchange for noncontrolling interests in the new investments. Each of these investments is jointly owned by a health system and the Company. The newly formed investments (including the contributed centers) are controlled by the health systems. Also, as part of these transactions, the Company obtained a non-controlling interest in one additional centers which was contributed by a health system.

During the year ended December 31, 2013, the Company's ambulatory services segment entered into one equity method investment. As a result of this investment transaction, the Company contributed cash of $0.3 million and its controlling interest in one center in exchange for a noncontrolling interests in the new investment. This investment is jointly owned by a health system and the Company. The newly formed investment (including the contributed center) are controlled by the health system. Also, as part of this transaction, the Company obtained a non-controlling interest in one additional center which was contributed by the health system.

As a result of these transactions, for the years ended December 31, 2015 and 2014, the Company recorded the fair value of the Company's investment in these entities of approximately $83.1 million and $56.4 million, respectively, in the accompanying consolidated balance sheets, as a component of investments in unconsolidated affiliates.

In each of these transactions, the gain or loss on deconsolidation, which is primarily non-cash in nature, is determined based on the difference between the fair value of the Company’s interest, which is based on estimates of the expected future earnings, in the new entity and the carrying value of both the tangible and intangible assets of the contributed centers or contracts immediately prior to each transaction. In certain cases, the Company evaluated likely scenarios which were weighted by a range of expected probabilities of
10% to 50% which were primarily based on third party valuations received by the Company. Accordingly, the Company recognized a net gain on deconsolidations in the accompanying consolidated statements of earnings of approximately $36.7 million, $3.4 million, and $2.2 million during the years ended December 31, 2015, 2014 and 2013.

Included in the Company’s investments in unconsolidated affiliates are certain investments which the Company has determined meet the definition of a variable interest entity. The Company has a variable interest in these investments through its equity interests; however, the Company is not the primary beneficiary of these entities as it only holds 50% of the voting rights and does not have the power to direct the activities that most significantly impact the entities' economic performance as a result of the Company’s shared control. As a result, the Company has accounted for these investments under the equity method of accounting. The Company's investment in these entities was $89.6 million and $53.2 million as of December 31, 2015 and 2014, respectively, and are reflected in the accompanying consolidated balance sheets as a component of investments in unconsolidated affiliates. During the year ended December 31, 2015, the Company contributed four centers which were previously controlled into an entity deemed by the Company to meet the definition of a variable interest entity which resulted in the Company’s recording the fair value of its retained noncontrolling interest of approximately $27.1 million as a component of investments in unconsolidated affiliates in the accompanying consolidated balance sheets. During the year ended December 31, 2014, as part of the acquisition of Sheridan, the Company acquired an interest in an entity deemed to be a variable interest entity and recorded the estimated fair value of the investment of $49.4 million on the acquisition date. The Company’s ownership interest in these investments ranges from 49% to 51% and under the terms of the operating agreements, the Company earns billing and management fees and receives its share of earnings distributions from each entity. The Company has no other material obligations or guarantees related to these entities.
The Company has recorded its share of the earnings of these investments of $11.0 million and $3.4 million as a component of equity in earnings of unconsolidated affiliates in the accompanying consolidated statement of earnings during 2015 and 2014, respectively. In addition, the Company recognized management and billing fees totaling $14.3 million and $4.7 million during 2015 and 2014, respectively, which are included in net revenue in the accompanying consolidated statement of earnings. Additionally, the Company has recorded receivables from these entities in the amount of $2.3 million and $3.5 million as of December 31, 2015 and 2014, respectively. These receivables are included in other current assets in the accompanying consolidated balance sheets.