The following management's discussion and analysis should be read in conjunction
with the unaudited consolidated financial statements and the notes thereto
included in Part I, Item 1, "Financial Statements" of this Quarterly Report on
Form 10-Q. In addition, reference is made to our audited consolidated financial
statements and notes thereto and related Management's Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16,
2020.
Overview
We, together with our affiliated physician groups and consolidated entities, are
a physician-centric integrated population health management company providing
coordinated, outcomes-based medical care in a cost-effective manner and serving
patients in California, the majority of whom are covered by private or public
insurance provided through Medicare, Medicaid and HMOs, with a small portion of
our revenues coming from non-insured patients. We provide care coordination
services to each major constituent of the healthcare delivery system, including
patients, families, primary care physicians, specialists, acute care hospitals,
alternative sites of inpatient care, physician groups and health plans. Our
physician network consists of primary care physicians, specialist physicians and
hospitalists. We operate primarily through ApolloMed and the following
subsidiaries: NMM, AMM, APAACO and Apollo Care Connect, and their consolidated
entities.
Through our NGACO model and a network of IPAs with more than 7,000 contracted
physicians, which physician groups have agreements with various health plans,
hospitals and other HMOs, we are currently responsible for coordinating the care
for over 1.1 million patients in California as of March 31, 2020. These covered
patients are comprised of managed care members whose health coverage is provided
through their employers or who have acquired health coverage directly from a
health plan or as a result of their eligibility for Medicaid or Medicare
benefits. Our managed patients benefit from an integrated approach that places
physicians at the center of patient care and utilizes sophisticated risk
management techniques and clinical protocols to provide high-quality, cost
effective care. To implement a patient-centered, physician-centric experience,
we also have other integrated and synergistic operations, including (i) MSOs
that provide management and other services to our affiliated IPAs, (ii)
outpatient clinics and (iii) hospitalists that coordinate the care of patients
in hospitals.
Recent Developments

Auditor Change

On April 24, 2020, following a competitive selection process, the Company's Audit Committee approved the engagement of Ernst & Young LLP ("E&Y") as the Company's independent registered public accounting firm for the fiscal year ending December 31,


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2020 and dismissed BDO USA, LLP ("BDO") from service as the Company's independent registered public accounting firm, effective immediately. The Company engaged E&Y on April 27, 2020.

Disposition of Investment

On April 30, 2020, Universal Care Acquisition Partners, LLC ("UCAP"), a wholly-owned subsidiary of our consolidated variable interest entity, APC, completed the sale of its 48.9% equity ownership interest (its "Percentage Interest") in Universal Care, Inc. ("UCI"), a private full service health plan provider doing business as Brand New Day to Bright Health Company of California, Inc. ("Bright"). From the sale, APC received approximately $69.2 million in cash proceeds (including $16.5 million as repayment of indebtedness owed to APC), plus non-cash consideration consisting of shares of Bright Heath, Inc.'s preferred stock having a stipulated value of approximately $33.3 million. In addition, upon release from escrow, APC will be entitled to receive all or that portion of the following escrowed amounts that have not been offset or reserved for claims: (i) cash consideration of approximately $15.6 million, plus (ii) non-cash consideration consisting of shares of Bright Health, Inc.'s preferred stock having a stipulated value of approximately $5.9 million.



As disclosed in the Company's definitive proxy statement filed with the SEC on
July 31, 2019 (the "Proxy Statement"), the Percentage Interest is an "Excluded
Asset" that remains solely for the benefit of APC and its shareholders. As such,
any proceeds or gain on the sale of APC's indirect ownership interest in UCI
will have no impact on the Series A Dividend payable by APC to AP-AMH as
described in the Proxy Statement. Accordingly, the sale will not impact net
income attributable to the Company.
Key Financial Measures and Indicators
Operating Revenues
Our revenue primarily consists of capitation revenue, risk pool settlements and
incentives, NGACO AIPBP revenue, management fee income and FFS revenue. The form
of billing and related risk of collection for such services may vary by type of
revenue and the customer.
Operating Expenses
Our largest expense is the patient care cost paid to contracted physicians, and
the cost of providing management and administrative support services to our
affiliated physician groups. These services include payroll, benefits, human
resource services, physician practice billing, revenue cycle services, physician
practice management, administrative oversight, coding services, and other
consulting services.


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