Variable Interest Entities
|12 Months Ended|
Dec. 31, 2022
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Variable Interest Entities||
11. Variable Interest Entities
As discussed in Note 2, the PC entities were established to employ healthcare providers, contract with managed care payors and to deliver healthcare services to patients in the markets that the Company serves. Activities include but are not limited to operational support of the centers, marketing, information technology infrastructure and the sourcing and managing of health plan contracts.
The Company evaluated whether it has a variable interest in the PCs, whether the PCs are VIEs, and whether the Company has a controlling financial interest in the PCs. The Company concluded that it has variable interests in the PCs on the basis of its Management Services Agreement (“MSA”) which provides for reimbursement of costs and a management fee payable to the Company from the PCs in exchange for providing management and administrative services which creates risks and a potential return to the Company. The PCs’ equity at risk, as defined by U.S. GAAP, is insufficient to finance its activities without additional support, and, therefore, the PCs are considered VIEs.
In order to determine whether the Company has a controlling financial interest in the PCs, and, thus, is the Physician’s primary beneficiary, the Company considered whether it has i) the power to direct the activities of PCs that most significantly impact its economic performance and ii) the obligation to absorb losses of the PCs that could potentially be significant to it or the right to receive benefits from PCs that could potentially be significant to it. The Company concluded that the shareholders and employees of the PCs are structured in a way that neither shareholders, employees nor their designees have the individual power to direct the activities of the PCs that most significantly impact its economic performance. Under the MSA, the Company is responsible for providing management and administrative services related to the growth of the patient population of the PCs, the management of that population’s healthcare needs and the provision of required healthcare services to those patients. Babylon has concluded that the success or failure of the Company in conducting these activities will most significantly impact the economic performance of the PCs. In addition, the Company’s variable interests in the PCs provide the Company with the right to receive benefits that could potentially be significant to it. The single member of the PCs is a member and employee of the Company. As a result of this analysis, the Company concluded that it is the primary beneficiary of the PCs and therefore consolidates the balance sheets, results of operations and cash flows of the PCs. The Company performs a qualitative assessment of the PCs on an ongoing basis to determine if it continues to be the primary beneficiary.
The tables below illustrate the VIE assets and liabilities and performance of the PCs:
The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef