Held for sale and discontinued operations

DaVita Medical Group

In December 2017, the Company entered into an agreement to sell its DMG division to Collaborative Care Holdings, LLC (Optum), a subsidiary of UnitedHealth Group Inc., subject to receipt of required regulatory approvals and other customary closing conditions. As a result, the DMG business has been classified as held for sale and its results of operations are reported as discontinued operations for all periods presented in these condensed consolidated financial statements.

During the third quarter of 2018, the Company recorded a $216,147 charge on its DMG business which included a $98,201 valuation adjustment and $117,946 in related tax expense on this held for sale business based on an updated assessment of fair value, which includes inputs such as the transaction itself, risks and timing, and performance of the business.

The following table presents the financial results of discontinued operations related to DMG:



	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
Revenues	$	1,252,909		$	1,178,443		$	3,733,270		$	3,461,493
Expenses	1,260,814			1,164,562			3,679,747			3,396,914
Goodwill impairment charges	—			601,040			—			651,659
Valuation adjustment	98,201			—			98,201			—
(Loss) income from discontinued operations before taxes	(106,106		)	(587,159		)	(44,678		)	(587,080		)
Income tax expense (benefit)	105,633			(216,287		)	103,151			(198,121		)
Net loss from discontinued operations, net of tax	(211,739		)	(370,872		)	(147,829		)	(388,959		)

The following table presents the financial position of discontinued operations related to DMG:



	September 30, 2018			December 31, 2017
Assets
Cash and cash equivalents	$	444,468		$	179,668
Other current assets	848,905			826,608
Property and equipment, net	438,332			379,945
Intangible assets, net	1,316,571			1,316,550
Other long-term assets	114,236			178,894
Goodwill	2,883,475			2,879,977
Valuation allowance on disposal group	(98,201		)	—
Total current assets held for sale, net	$	5,947,786		$	5,761,642
Liabilities
Other liabilities	$	652,502		$	505,734
Medical payables	457,748			457,040
Current portion of long-term debt	2,839			2,845
Long-term debt	33,595			35,003
Other long-term liabilities	272,937			184,448
Total current liabilities held for sale	$	1,419,621		$	1,185,070

The following table presents cash flows of discontinued operations related to DMG:



	September 30, 2018			September 30, 2017
Net cash provided by operating activities from discontinued operations	$	208,570		$	298,974
Net cash used in investing activities from discontinued operations	$	(32,860	)	$	(187,606	)

DMG acquisitions

During the first nine months of 2018, the Company's DMG business acquired three medical businesses for a total of $2,854 in cash and deferred purchase price of $275. Certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax contingencies. In addition, valuation of medical claims liabilities and certain other working capital items relating to acquisitions are pending final quantification. The assets and liabilities for all acquisitions were recorded at their estimated fair values at the dates of the acquisitions and are included in the Company’s current held for sale assets and liabilities.

Sale of Tandigm Health investment

Effective June 1, 2018, DMG sold its 19% ownership interest in the Tandigm Health joint venture and a related supporting business resulting in a gain, net of tax, of $18,636.

Goodwill impairment charges

As previously disclosed, prior to being reclassified as held for sale, the Company recorded goodwill impairment charges for the DMG business of $601,040 and $651,659 for the three and nine months ended September 30, 2017. These charges resulted from continuing developments in the Company’s DMG business, including the determination that commercial membership was expected to be lower than previously expected due to increased reimbursement pressure, Medicaid reimbursement rates were expected to trend lower within the state of California, and the gap between Medicare rate increases and medical cost increases were likely to persist. The charges recorded during the nine months ended September 30, 2017 resulted additionally from medical cost and utilization trends.