UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


þ	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2022


o	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 001-34746

R1 RCM INC.

(Exact name of registrant as specified in its charter)


Delaware	02-0698101
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

~~Delaware~~434 W. Ascension Way	~~02-0698101~~84123
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~		~~(I.R.S. Employer~~ ~~Identification Number)~~ 6th Floor
		Murray
~~401 North Michigan Avenue Suite 2700 Chicago, Illinois~~		~~60611~~Utah
(Address of principal executive offices)	(Zip code)

(312) 324-7820

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RCM	NASDAQ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

oý

Accelerated filer

ý☐

Non-accelerated filer

o☐

Smaller reporting company

o☐

Emerging growth company

~~(Do not check if a smaller reporting company)~~

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No R☑

As of ~~October 28, 2017,~~May 5, 2022, the registrant had ~~104,515,603~~279,704,879 shares of common stock, par value $0.01 per share, outstanding.

~~Table of Contents~~

Table of Contents

~~R1 RCM Inc.~~

~~Consolidated Balance Sheets~~

~~(In millions, except per share data)~~

PART I — FINANCIAL INFORMATION


~~ITEM 1.~~	~~CONSOLIDATED FINANCIAL STATEMENTS~~

ITEM 1.CONSOLIDATED FINANCIAL STATEMENTS

September 30, December 31,
2017 2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 142.8
$ 181.2
Accounts receivable, net 7.7
4.0
Accounts receivable, net - related party 18.0
1.8
Prepaid income taxes 0.9
3.8
Prepaid expenses and other current assets 16.1
13.8
Total current assets 185.5
204.6
Property, equipment and software, net 50.2
32.8
Non-current deferred tax assets 105.8
169.9
Restricted cash equivalents 1.5
1.5
Other assets 11.4
6.3
Total assets $ 354.4
$ 415.1
Liabilities
Current liabilities:
Accounts payable 6.9
7.9
Current portion of customer liabilities 0.9
69.7
Current portion of customer liabilities - related party 20.1
14.2
Accrued compensation and benefits 29.2
24.8
Other accrued expenses 16.1
18.5
Total current liabilities 73.2
135.1
Non-current portion of customer liabilities 0.3
1.0
Non-current portion of customer liabilities - related party 9.1
110.0
Other non-current liabilities 12.2
9.7
Total liabilities $ 94.8
$ 255.8

8.00% Series A convertible preferred stock: par value $0.01 per share, 370,000 authorized, 223,023 shares issued and outstanding as of September 30, 2017 (aggregate liquidation value of $227.5); 370,000 authorized, 210,160 shares issued and outstanding as of December 31, 2016 (aggregate liquidation value of $214.4) 184.7
171.6
Stockholders’ equity (deficit)
Common stock, $0.01 par value, 500,000,000 shares authorized, 116,639,819 shares issued and 104,505,034 shares outstanding at September 30, 2017; 116,425,524 shares issued and 106,659,542 shares outstanding at December 31, 2016 1.2
1.2
Additional paid-in capital 339.8
349.2
Accumulated deficit (204.3 ) (304.7 )
Accumulated other comprehensive loss (2.2 ) (2.8 )
Treasury stock, at cost, 12,134,785 shares as of September 30, 2017; 9,765,982 shares as of December 31, 2016 (59.6 ) (55.2 )
Total stockholders’ equity (deficit) 74.9
(12.3 )
Total liabilities and stockholders’ equity (deficit) $ 354.4
$ 415.1

R1 RCM Inc.

Consolidated Balance Sheets

(In millions, except share and per share data)


	(Unaudited)
	March 31,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	123.9	$	130.1

Accounts receivable, net of $2.3 million and $2.4 million allowance	115.3		131.3
Accounts receivable, net of $0.1 million and $0.1 million allowance - related party	20.0		26.1
Prepaid expenses and other current assets	81.2		77.2

Total current assets	340.4		364.7
Property, equipment and software, net	95.0		94.7
Operating lease right-of-use assets	49.8		48.9
Non-current portion of deferred contract costs	24.5		23.4
Intangible assets, net	258.3		265.4
Goodwill	554.7		554.7
Non-current deferred tax assets	44.2		51.8

Other assets	69.4		45.7
Total assets	$	1,436.3	$	1,449.3
Liabilities
Current liabilities:
Accounts payable	$	21.0	$	17.7
Current portion of customer liabilities	32.7		41.5
Current portion of customer liabilities - related party	6.9		7.9
Accrued compensation and benefits	66.7		97.0
Current portion of operating lease liabilities	13.4		13.5
Current portion of long-term debt	17.5		17.5
Other accrued expenses	63.3		59.1

Total current liabilities	221.5		254.2
Non-current portion of customer liabilities	3.5		3.3
Non-current portion of customer liabilities - related party	15.3		15.4
Non-current portion of operating lease liabilities	57.4		53.4
Long-term debt	750.7		754.9

Other non-current liabilities	21.4		21.4
Total liabilities	1,069.8		1,102.6


Stockholders’ equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 300,156,321 shares issued and 279,325,867 shares outstanding at March 31, 2022; 298,320,928 shares issued and 278,226,242 shares outstanding at December 31, 2021	3.0		3.0
Additional paid-in capital	639.1		628.5
Accumulated deficit	(34.9)		(64.3)
Accumulated other comprehensive loss	(6.6)		(5.3)
Treasury stock, at cost, 20,830,454 shares as of March 31, 2022; 20,094,686 shares as of December 31, 2021	(234.1)		(215.2)
Total stockholders’ equity	366.5		346.7
Total liabilities and stockholders’ equity	$	1,436.3	$	1,449.3

See accompanying notes to consolidated financial statements.

R1 RCM Inc.

Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~(Unaudited)

(In millions, except share and per share data)


	Three Months Ended March 31,
		2022		2021
Net services revenue ($216.7 million and $215.5 million for the three months ended March 31, 2022 and 2021, from related party, respectively)		$	385.7	$	342.6
Operating expenses:
Cost of services		296.5		267.2
Selling, general and administrative		28.9		25.6
Other expenses		17.1		13.0
Total operating expenses		342.5		305.8
Income from operations		43.2		36.8

Net interest expense		4.7		3.9
Income before income tax provision		38.5		32.9
Income tax provision		9.1		7.1
Net income		$	29.4	$	25.8
Net income (loss) per common share:
Basic		$	0.11	$	(2.37)
Diluted		$	0.09	$	(2.37)
Weighted average shares used in calculating net income (loss) per common share:
Basic		278,747,261		239,290,145
Diluted		321,043,371		239,290,145
Consolidated statements of comprehensive income
Net income		$	29.4	$	25.8
Other comprehensive income (loss):
Net change on derivatives designated as cash flow hedges, net of tax		0.1		0.5
Foreign currency translation adjustments		(1.4)		(0.4)
Total other comprehensive income (loss), net of tax		$	(1.3)	$	0.1
Comprehensive income		$	28.1	$	25.9

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Unaudited) (Unaudited)
Net services revenue ($112.2 million and $275.3 million for the three and nine months ended September 30, 2017, respectively, and $22.7 and $366.2 million for the three and nine months ended September 30, 2016 from related party, respectively) $ 123.2
$ 125.5
$ 309.5
$ 486.4
Operating expenses:
Cost of services 111.8
47.4
289.1
137.6
Selling, general and administrative 15.1
16.2
41.6
58.4
Other 1.4
0.5
2.6
20.0
Total operating expenses 128.3
64.1
333.3
216.0
Income (loss) from operations (5.1 ) 61.4
(23.8 ) 270.4
Net interest income —
0.1
0.1
0.2
Income (loss) before income tax provision (5.1 ) 61.5
(23.7 ) 270.6
Income tax provision (benefit) (1.5 ) 24.1
(5.1 ) 106.6
Net income (loss) $ (3.6 ) $ 37.4
$ (18.6 ) $ 164.0
Net income (loss) per common share:
Basic $ (0.08 ) $ 0.18
$ (0.31 ) $ 0.62
Diluted $ (0.08 ) $ 0.18
$ (0.31 ) $ 0.62
Weighted average shares used in calculating net income (loss) per common share:
Basic 102,225,422
100,934,561
102,022,129
99,870,685
Diluted 102,225,422
102,176,280
102,022,129
101,018,450
Consolidated statements of comprehensive income (loss)
Net income (loss) (3.6 ) 37.4
(18.6 ) 164.0
Other comprehensive loss:
Foreign currency translation adjustments (0.2 ) 0.2
0.6
—
Comprehensive income (loss) $ (3.8 ) $ 37.6
$ (18.0 ) $ 164.0


Reconciliation of net income (loss) to income (loss) available to common shareholders:
Basic:													Basic:
Net income (loss)	$	(3.6	)	$	37.4		$	(18.6	)	$	164.0
Net income													Net income	$	29.4	$	25.8
Less dividends on preferred shares	(4.4		)	(4.1		)	(13.1		)	(58.5		)	Less dividends on preferred shares	—		(592.3)
Less income allocated to preferred shareholders	—			(15.1		)	—			(43.4		)

Net income (loss) available/allocated to common shareholders - basic	$	(8.0	)	$	18.2		$	(31.7	)	$	62.1		Net income (loss) available/allocated to common shareholders - basic	$	29.4	$	(566.5)
Diluted:													Diluted:
Net income (loss)	$	(3.6	)	$	37.4		$	(18.6	)	$	164.0
Net income													Net income	$	29.4	$	25.8
Less dividends on preferred shares	(4.4		)	(4.1		)	(13.1		)	(58.5		)	Less dividends on preferred shares	—		(592.3)
Less income allocated to preferred shareholders	—			(15.0		)	—			(43.1		)

Net income (loss) available/allocated to common shareholders - diluted	$	(8.0	)	$	18.3		$	(31.7	)	$	62.4		Net income (loss) available/allocated to common shareholders - diluted	$	29.4	$	(566.5)

See accompanying notes to consolidated financial statements.

R1 RCM Inc.

Consolidated Statements of Stockholders’ Equity ~~(Deficit) (unaudited)~~(Unaudited)

(In millions, except share and per share data)

Common Stock Treasury Stock
Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
other
comprehensive
(loss)
Total
Shares Amount Shares Amount
Balance at December 31, 2016 116,425,524
$ 1.2
(9,765,982 ) $ (55.2 ) $ 349.2
$ (304.7 ) $ (2.8 ) $ (12.3 )
Impact of adoption of Topic 606 —
—
—
—
—
113.4
—
113.4
Impact of adoption of ASU 2016-09 —
—
—
—
1.5
(0.9 ) —
0.6
Adjusted Balance at January 1, 2017 116,425,524
1.2
(9,765,982 ) (55.2 ) 350.7
(192.2 ) (2.8 ) 101.7
Share-based compensation expense —
—
—
—
8.6
—
—
8.6
Issuance of common stock related to share-based compensation plans 155,535
—
—
—
—
—
—
—
Exercise of vested stock options 58,760
—
—
—
0.1
—
—
0.1
Dividends paid/accrued dividends —
—
—
—
(13.1 ) —
—
(13.1 )
Acquisition of treasury stock related to equity award plans —
—
(728,798 ) —
—
—
—
—
Treasury stock purchases and forfeitures —
—
(1,640,005 ) (4.4 ) —
—
—
(4.4 )
Reclassification of excess share-based compensation —
—
—
—
(6.5 ) 6.5
—
—
Foreign currency translation adjustments —
—
—
—
—
—
0.6
0.6
Net (loss) income —
—
—
—
—
(18.6 ) —
(18.6 )
Balance at September 30, 2017 116,639,819
$ 1.2
(12,134,785 ) $ (59.6 ) $ 339.8
$ (204.3 ) $ (2.2 ) $ 74.9


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	298,320,928	$	3.0	(20,094,686)	$	(215.2)	$	628.5	$	(64.3)	$	(5.3)	$	346.7
Share-based compensation expense	—	—		—	—		10.2		—		—		10.2
Issuance of common stock related to share-based compensation plans	1,757,955	—		—	—		—		—		—		—

Exercise of vested stock options	77,438	—		—	—		0.4		—		—		0.4

Acquisition of treasury stock related to share-based compensation plans	—	—		(727,768)	(18.7)		—		—		—		(18.7)

Repurchases of common stock	—	—		(8,000)	(0.2)		—		—		—		(0.2)
Net change on derivatives designated as cash flow hedges, net of tax of $0.0 million	—	—		—	—		—		—		0.1		0.1
Foreign currency translation adjustments	—	—		—	—		—		—		(1.4)		(1.4)



Net income	—	—		—	—		—		29.4		—		29.4
Balance at March 31, 2022	300,156,321	$	3.0	(20,830,454)	$	(234.1)	$	639.1	$	(34.9)	$	(6.6)	$	366.5

See accompanying notes to consolidated financial statements.


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	137,812,559	$	1.4	(16,668,521)	$	(139.2)	$	393.7	$	(161.5)	$	(6.5)	$	87.9


Share-based compensation expense	—	—		—	—		12.8		—		—		12.8
Issuance of common stock related to share-based compensation plans	6,497	—		—	—		—		—		—		—
Issuance of common stock	324,212	—		—	—		7.0		—		—		7.0
Exercise of vested stock options	539,795	—		—	—		3.5		—		—		3.5

Acquisition of treasury stock related to share-based compensation plans	—	—		(2,201)	—		—		—		—		—


Net change on derivatives designated as cash flow hedges, net of tax of $0.2 million	—	—		—	—		—		—		0.5		0.5
Foreign currency translation adjustments	—	—		—	—		—		—		(0.4)		(0.4)
Conversion of preferred shares	117,706,400	1.2		—	—		250.3		—		—		251.5
Inducement dividend	—	—		—	—		(592.3)		—		—		(592.3)
Issuance of common stock related to inducement	21,582,800	0.2		—	—		487.1		—		—		487.3
Net income	—	—		—	—		—		25.8		—		25.8
Balance at March 31, 2021	277,972,263	$	2.8	(16,670,722)	$	(139.2)	$	562.1	$	(135.7)	$	(6.4)	$	283.6

See accompanying notes to consolidated financial statements.

R1 RCM Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In millions)


								Three Months Ended March 31,
								2022		2021
Operating activities							Operating activities
Net income							Net income	$	29.4	$	25.8
Adjustments to reconcile net income to net cash provided by operations:							Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization							Depreciation and amortization	18.9		17.9
Amortization of debt issuance costs							Amortization of debt issuance costs	0.3		0.3
Share-based compensation							Share-based compensation	10.1		12.7

Loss on disposal and right-of-use asset write-downs							Loss on disposal and right-of-use asset write-downs	2.0		0.6
Provision for credit losses							Provision for credit losses	—		0.1
Deferred income taxes							Deferred income taxes	7.3		4.9
Non-cash lease expense							Non-cash lease expense	3.2		2.9
Other							Other	1.5		0.5
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable and related party accounts receivable							Accounts receivable and related party accounts receivable	22.1		(7.3)

Prepaid expenses and other assets							Prepaid expenses and other assets	(20.5)		(19.4)
Accounts payable							Accounts payable	3.2		5.2
Accrued compensation and benefits							Accrued compensation and benefits	(27.5)		9.4
Lease liabilities							Lease liabilities	(2.1)		(4.1)
Other liabilities							Other liabilities	1.7		(4.2)
Customer liabilities and customer liabilities - related party							Customer liabilities and customer liabilities - related party	(18.7)		0.7
Net cash provided by operating activities							Net cash provided by operating activities	30.9		46.0
Investing activities							Investing activities
Purchases of property, equipment, and software							Purchases of property, equipment, and software	(10.0)		(9.6)

	Nine Months Ended September 30,
	2017			2016
	(Unaudited)
Operating activities
Net income (loss)	$	(18.6	)	$	164.0
Adjustments to reconcile net income (loss) to net cash used in operations:
Depreciation and amortization	11.5			7.3
Share-based compensation	8.2			25.2
Loss on disposal	0.2			—
Provision (recovery) for doubtful receivables	0.1			0.1
Deferred income taxes	(5.6		)	106.5
Changes in operating assets and liabilities:
Accounts receivable and related party accounts receivable	(15.4		)	1.2
Prepaid income taxes	3.0			0.2
Prepaid expenses and other assets	(6.7		)	(7.9		)
Accounts payable	0.3			(1.4		)
Accrued compensation and benefits	4.3			8.3
Other liabilities	(0.3		)	3.0
Customer liabilities and customer liabilities - related party	14.7			(375.8		)
Net cash used in operating activities	(4.3		)	(69.3		)
Investing activities
Purchases of property, equipment, and software	(30.1		)	(10.4		)
Proceeds from maturation of short-term investments	—			1.0
Net cash used in investing activities	(30.1		)	(9.4		)	Net cash used in investing activities	(10.0)		(9.6)
Financing activities							Financing activities
Series A convertible preferred stock and warrant issuance, net of issuance costs	—			178.7

Repayment of senior secured debt							Repayment of senior secured debt	(4.4)		(6.5)

Inducement of preferred stock conversion							Inducement of preferred stock conversion	—		(105.0)
Exercise of vested stock options	—			0.1			Exercise of vested stock options	0.4		4.4
Purchase of treasury stock	(2.0		)	(2.0		)	Purchase of treasury stock	(0.6)		—
Shares withheld for taxes	(2.4		)	—			Shares withheld for taxes	(21.5)		—
Net cash (used in) provided by financing activities	(4.4		)	176.8
Effect of exchange rate changes in cash	0.4			0.3
Net increase (decrease) in cash and cash equivalents	(38.4		)	98.4
Cash and cash equivalents, at beginning of period	181.2			103.5
Cash and cash equivalents, at end of period	$	142.8		$	201.9

Other							Other	(0.1)		—
Net cash used in financing activities							Net cash used in financing activities	(26.2)		(107.1)
Effect of exchange rate changes in cash, cash equivalents and restricted cash							Effect of exchange rate changes in cash, cash equivalents and restricted cash	(0.9)		(0.1)
Net decrease in cash, cash equivalents and restricted cash							Net decrease in cash, cash equivalents and restricted cash	(6.2)		(70.8)
Cash, cash equivalents and restricted cash, at beginning of period							Cash, cash equivalents and restricted cash, at beginning of period	130.1		174.8
Cash, cash equivalents and restricted cash, at end of period							Cash, cash equivalents and restricted cash, at end of period	$	123.9	$	104.0
Supplemental disclosures of cash flow information							Supplemental disclosures of cash flow information
Accrued dividends payable to Preferred Stockholders	$	4.5		$	6.1
Accrued liabilities related to purchases of property, equipment and software	$	2.6		$	0.5
Accounts payable related to purchases of property, equipment and software	$	0.6		$	—
Income taxes paid	$	(1.1	)	$	(0.7	)
Income taxes refunded	$	3.4		$	0.6

Property, equipment and software purchases not paid							Property, equipment and software purchases not paid	$	23.3	$	10.3

See accompanying notes to consolidated financial statements.

R1 RCM Inc.

Notes to ~~Unaudited~~ Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share data)

1.Business Description and Basis of Presentation

Business Description

R1 RCM Inc. (the ~~"Company"~~“Company”) is a leading provider of ~~revenue cycle management ("RCM") services~~technology-driven solutions that transform the patient experience and ~~physician advisory services ("PAS") to~~financial performance of healthcare providers. The Company helps healthcare providers generate sustainable improvements in their operating margins and cash flows while also enhancing patient, physician, and staff satisfaction for its customers. The Company achieves these results for its customers by managing healthcare providers’ revenue cycle operations, which encompass processes including patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections from patients and payers. The Company does so by deploying a unique operating model that leverages its extensive healthcare site experience, innovative technology and process excellence.

The Company's primary service offering consists of end-to-end RCM, which encompasses patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections. The Company deploys its RCM services through a co-managed relationship or an operating partner relationship. Under a co-managed relationship, the Company leverages its customers’ existing RCM staff and processes, and supplements them with the Company's infused management, subject matter specialists, proprietary technology and other resources. Under an operating partner relationship, the Company provides comprehensive revenue cycle infrastructure to providers, including all revenue cycle personnel, technology, and process workflow. The Company also offers modular services, allowing customers to engage the Company for only specific components of its end-to-end RCM service offering. The Company's PAS offering complements the Company's RCM offering by strengthening customer’s compliance with certain third-party payer requirements and limiting denials of claims. For example, the Company's PAS offering helps customers determine whether to classify a hospital visit as an in-patient or an out-patient observation case for billing purposes.

On February 16, 2016, the Company entered into a long-term strategic partnership with Ascension Health Alliance, the parent of the Company's largest customer and the nation’s largest Catholic and non-profit health system, and TowerBrook Capital Partners ("TowerBrook"), an investment management firm (the "Transaction"). As part of the Transaction, the Company amended and restated its Master Professional Services Agreement ("A&R MPSA") with Ascension Health ("Ascension") effective February 16, 2016 with a term of ten years. Pursuant to the A&R MPSA and with certain limited exceptions, the Company will become the exclusive provider of RCM services and PAS with respect to acute care services provided by the hospitals affiliated with Ascension that execute supplement agreements with the Company.

Basis of Presentation

The accompanying unaudited consolidated financial statements reflect the Company's financial position as of ~~September 30, 2017,~~March 31, 2022, the results of operations of the Company for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, and the cash flows of the Company for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021. These financial statements include the accounts of R1 RCM Inc. and its ~~wholly owned~~wholly-owned subsidiaries. All material intercompany amounts have been eliminated in consolidation. These financial statements have been prepared in accordance with United States generally accepted accounting principles ~~("GAAP"~~(“GAAP”) for interim financial reporting and as required by the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the interim financial information, have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2017. Beginning with the quarter ended March 31, 2017, the Company changed the presentation in its financial statements to be stated in millions instead of thousands. Therefore, previously reported amounts for fiscal 2016 may differ due to rounding.

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

2022.

When preparing financial statements in conformity with GAAP, the Company ~~must make~~makes a number of significant estimates, assumptions, and ~~assumptions that affect~~judgments in the ~~reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date~~preparation of the financial statements. Actual results could differ from those estimates. For a more complete discussion of the Company’s significant accounting policies and other information, the unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements included in the ~~Company's Annual Report on~~Company’s 2021 Form 10-K for the year ended December 31, 2016 (the "2016 10-K"). As of January 1, 2017, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") and ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). See Note 6, Revenue Recognition, and Note 9, Share-Based Compensation, for discussion on the impact of the adoption of these standards on the Company's policies for revenue and stock compensation, respectively.

2.~~Recent Accounting Pronouncements~~

10-K.

Recently Issued Accounting Standards and Disclosures

~~In February 2016,~~No new accounting pronouncements issued or effective during the ~~FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which supersedes existing guidance~~fiscal year had, or are expected to have, a material impact on ~~accounting for leases in Topic 840, Leases. ASU 2016-02 generally requires all leases to be recognized in~~ the ~~consolidated balance sheet. The provisions of ASU 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02~~

~~are to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this prospective guidance on its~~Company’s consolidated financial statements.

2. Acquisitions

Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair value on the date of the acquisition. The difference between the purchase price amount and the net fair value of assets acquired and liabilities assumed is recognized as goodwill on the balance sheet if the purchase price exceeds the estimated net fair value or as a bargain purchase gain on the income statement if the purchase price is less than the estimated net fair value. The allocation of the purchase price may be modified up to one year after the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed.

During 2021, the Company acquired the following business:


Company Name	Description of the Business	Description of the Acquisition
iVinci Partners, LLC d/b/a VisitPay (“VisitPay”)	Provider of digital payment solutions	Purchased all outstanding equity interests

During the three months ended March 31, 2022, there were no significant purchase accounting adjustments to the fair value of assets acquired or the liabilities assumed in connection with the VisitPay acquisition as disclosed in Note 3 of the Company’s 2021 Form 10-K.

In ~~November 2016,~~2020, the ~~FASB issued ASU 2016-18, Statement~~Company purchased certain assets relating to the RevWorks services business from Cerner Corporation. In accordance with the purchase agreement, the Company paid the first deferred payment of ~~Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 is intended to reduce diversity in practice~~$12.5 million in the ~~classification~~third quarter of 2021. There is 1 remaining deferred payment of $12.5 million which is payable on the second anniversary of the closing date (August 2022), and ~~presentation of changes~~is included in ~~restricted cash~~other accrued expenses on the Consolidated ~~Statement~~Balance Sheets as of ~~Cash Flows. ASU 2016-18 requires that~~March 31, 2022.

The 2 deferred payments related to the ~~Consolidated Statement~~RevWorks acquisition are contractual obligations of ~~Cash Flows explain~~the Company; however, they are potentially effectively refundable to the Company if certain RevWorks customer revenue targets defined in the purchase agreement for the first two years following the acquisition are not achieved. At the time of the acquisition, the Company recorded an asset for the fair value of the contingently returnable consideration of $22.3 million. During 2021, the Company updated the contingently returnable consideration to $25.0 million, with the change being recorded as a component of other expenses and interest expense. The full amount is included in ~~total cash~~prepaid expenses and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. ASU 2016-18 also requires a reconciliation between the total of cash and cash equivalents and restricted cash presented in the Consolidated Statement of Cash Flows and the cash and cash equivalents balance presented inother current assets on the Consolidated Balance Sheet. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impactSheets as of ~~the adoption of this prospective guidance on its consolidated financial statements.~~March 31, 2022.

3.~~Fair Value of Financial Instruments~~Pro Forma Results

The Company records its financial assets and liabilities at fair value. The accounting standard for fair value (i) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, (ii) establishes a framework for measuring fair value, (iii) establishes a hierarchy of fair value measurements based upon the ability to observe inputs used to value assets and liabilities, (iv) requires consideration of nonperformance risk and (v) expands disclosures about the methods used to measure fair value. The accounting standard establishes a three-level hierarchy of measurements based upon the reliability of observable and unobservable inputs used to arrive at fair value. Observable inputs are independent market data, while unobservable inputs reflect the Company’s assumptions about valuation. The three levels of the hierarchy are defined as follows:

~~Level 1: Observable inputs such as quoted prices in active markets for identical assets and liabilities;~~

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

for identical or similar assets or liabilities in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

~~Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.~~

The carrying amounts of the Company’s financial instruments, which include financial assets such as cash and cash equivalents, restricted cash equivalents, accounts receivable, net, and certain other current assets, as well as financial liabilities such as accounts payable, accrued service costs, accrued compensation and benefits and certain other accrued expenses, approximate their fair values, due to the short-term nature of these instruments. The Company does not have any financial assets or liabilities that are required to be measured at fair value on a recurring basis.

4.~~Accounts Receivable and Allowance for Doubtful Accounts~~

Accounts receivable is comprised of unpaid balances pertaining to non-RCM services fees and net receivable balances for RCM customers after considering cost reimbursements owed to such customers, including related accrued balances.

The Company maintains an estimated allowance for doubtful accounts to reduce its accounts receivable to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay, the length of time a balance has been outstanding, input from key customer resources assigned to each customer, and the status of any ongoing operations with each applicable customer.

~~Movements in the allowance for doubtful accounts are as follows (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Beginning balance $ 151
$ 41
$ 66
$ 99
Provision (recoveries) (6 ) 114
85
87
Write-offs —
(7 ) (6 ) (38 )
Ending balance $ 145
$ 148
$ 145
$ 148

5.~~Property, Equipment and Software~~

~~Property, equipment and software consist of the following (in millions):~~

September 30, 2017 December 31, 2016
Computer and other equipment $ 29.2
$ 23.3
Leasehold improvements 21.4
16.0
Software 42.8
28.1
Office furniture 7.4
4.9
Property, equipment and software, gross 100.8
72.3
Less accumulated depreciation and amortization (50.6 ) (39.5 )
Property, equipment and software, net $ 50.2
$ 32.8

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

The following table summarizes, on a pro forma basis, the ~~allocation~~combined results of the Company as though the VisitPay acquisition had occurred as of January 1, 2020. These pro forma results are not necessarily indicative of the actual consolidated results had the VisitPay acquisition occurred as of January 1, 2020 or of the future consolidated operating results for any period. Pro forma results are:


	Three Months Ended March 31, 2021


Net services revenue		$	346.0
Net income		$	23.4

Adjustments were made to earnings to adjust depreciation and amortization ~~expense between cost~~to reflect the fair value of ~~services~~identified assets acquired, to record the effects of extinguishing the debt of VisitPay and ~~selling, general~~replacing it with the debt of the Company, to adjust timing of acquisition related costs incurred by the Company, and ~~administrative expenses (in millions):~~to record the income tax effect of these adjustments.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Cost of services $ 4.0
$ 2.6
$ 10.4
$ 6.9
Selling, general and administrative 0.5
0.1
1.1
0.4
Total depreciation and amortization $ 4.5
$ 2.7
$ 11.5
$ 7.3

6.3. Revenue Recognition

~~The Company follows the guidance under Topic 606,~~ ~~Revenue from Contracts with Customers, (“Topic 606”).~~ Revenue is measured based on consideration specified in a contract with a customer, and ~~excludes~~presented net of any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contact term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved.

~~Periods prior to January 1, 2017~~

Revenue is generally recognized when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured.

Net service fees, as reported in the consolidated statement of operations and comprehensive income (loss), consist of: (a) RCM services fees and (b) professional service fees earned on a fixed fee, transactional fee or time and materials basis. The Company’s primary source of revenue is RCM services fees. RCM services fees are primarily contingent, but along with fixed fees are generally viewed as one deliverable. To the extent that certain RCM services fees are fixed and not subject to refund, adjustment or concession, such fees are generally recognized as revenue on a straight-line basis over the term of the contract.

On a limited basis, the Company enters into contracts with multiple accounting elements which may include a combination of fixed fee or transactional fee elements. The selling price of each element is determined by using management's best estimate of selling price. Revenues are recognized in accordance with the accounting policies for the separate elements.

RCM services fees that are contingent in nature are recognized as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or other contractual agreement event. Revenue is recognized for RCM services fees upon the contract reaching the end of its stated term (such that the contractual relationship will not continue in its current form) to the extent that: (i) cash has been received for invoiced fees and (ii) there are no disputes at the conclusion of the term of the contract.

If fees or services are disputed by a customer at the end of a contract, a settlement agreement entered into with the customer triggers revenue recognition. An other "contractual agreement event" occurs when a renewal, amendment to an existing contract, or other settlement agreement is executed in which the parties reach agreement on prior fees. Revenue is recognized up to the amount covered by such agreements.

~~RCM services fees consist of the following contingent fees: (i) Net Operating Fees and (ii) Incentive Fees.~~

~~Net Operating Fees~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

The Company generates net operating fees to the extent the Company is able to assist customers in reducing the cost of revenue cycle operations. In limited cases, the Company earns a fixed fee instead of a fee based on the mechanics described below. The Company’s net operating fees consist of:

~~i) gross base fees invoiced to customers; less~~

ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; less

~~iii) any cost savings the Company shares with customers.~~

Net operating fees are recorded as deferred customer billings until the Company recognizes revenue for a customer contract at the end of a contract or reaches an "other contractual agreement event". The amount of unpaid costs of customers’ revenue cycle operations and shared cost savings are reported as accrued service costs within customer liabilities in the consolidated balance sheets.

~~Incentive Fees~~

The Company generates revenue in the form of performance-based fees when the Company improves the customers’ financial or operational metrics. These performance metrics vary by customer contract. However, certain contracts contain a contract-to-date performance metric that is not resolved until the end of the term of the contract.

~~Periods commencing January 1, 2017~~

~~Nature of Goods and Services~~

The Company's primary source of revenue is its end-to-end RCM services fees. The Company also generates revenue through its modular RCM services, where customers will engage the Company for only specific components of its end-to-end RCM service offering on a fixed-fee or transactional basis, as well as its PAS offering.

~~Revenue Cycle Management~~

RCM services fees are primarily variable and performance related, and are generally viewed as the consideration earned in satisfaction of a single performance obligation. RCM services fees consist of net operating fees, incentive fees, and other fees.

~~Net Operating Fees~~

~~The Company’s net operating fees consist of:~~

~~i) gross base fees invoiced to customers; less~~

The Company recognizes revenue related to net operating fees ratably as the performance obligation for the RCM services is satisfied. Base fees are typically billed in advance of the quarter and paid in three monthly payments as the entity performs and the customer simultaneously receives and consumes the benefits provided by the services provided. The costs of customers’ revenue cycle operations which the company pays pursuant to its RCM agreements are accrued based on the service period.

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Incentive Fees~~

The Company recognizes revenue related to incentive fees ratably as the performance obligation for RCM services is satisfied, to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Incentive fees are structured to reflect quarterly or annual, performance and are evaluated on a contract-by-contract basis. Incentive fees are typically billed and paid on a quarterly basis.

~~RCM Other~~

The Company recognizes revenue related to other RCM fees as RCM services are provided. These services typically consist of the Company's modular RCM services offering, which consists of an obligation to provide services for a specific component of its end-to-end RCM service offering. Fees are typically variable in nature with the entire amount being included in revenue in the month of service. The customer simultaneously receives and consumes the benefits provided by the services and the fees are typically billed on a monthly basis with payment terms of up to 30 days. To the extent that certain service fees are fixed and not subject to refund, adjustment or concession, these fees are generally recognized into revenue ratably as the performance obligation is satisfied.

~~Other Services~~

The Company recognizes revenue from PAS in the period in which the service is performed. The Company’s PAS arrangements typically consist of an obligation to provide specific services to customers on a when and if needed basis. These services are provided under a fixed price per unit arrangement. These contracts are evaluated on a contract-by-contract basis. Fees for the Company's PAS arrangements are typically billed on a monthly basis with 30 to 60 day payment terms.

~~Bundled Services~~

Modular RCM services may be sold separately or bundled in a contract and end-to-end RCM services are typically sold separately but may be bundled with PAS services. PAS services are commonly sold separately. The typical length of an end-to-end RCM contract is three to ten years (subject to the parties' respective termination rights) but varies from customer to customer. PAS and modular RCM agreements generally vary in length between one and three years.

For bundled arrangements, the Company accounts for individual services as a separate performance obligation if a service is separately identifiable from other items in the bundled arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The transaction price is allocated between separate services in a bundle based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells its RCM, PAS, or modular services. PAS services are provided at a customer’s election but do not represent material rights as the services are priced at standalone selling price throughout the life of the agreement. In certain situations, the Company allocates variable consideration to a distinct service, or services, within a contract. The Company allocates variable payments to one or more, but not all, of the distinct services in a contract when (i) the variable payment relates specifically to the Company’s efforts to transfer the distinct service and (ii) the variable payment is for an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to its customer.

Disaggregation of Revenue

In the following table, revenue is disaggregated by source of ~~revenue (in millions):~~revenue:

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~


	Three Months Ended March 31,
		2022		2021
Net operating fees		$	322.8	$	286.1
Incentive fees		30.2		29.0
Other (1)		32.7		27.5
Net services revenue		$	385.7	$	342.6

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
RCM services: net operating fees $ 104.6
$ 255.4
RCM services: incentive fees 7.5
20.2
RCM services: other 2.8
9.8
Other services fees 8.3
24.1
Total net service revenue $ 123.2
$ 309.5
(1) Other revenue primarily consists of physician advisory services (“PAS”), practice management services, subscription revenue, and revenue related to Entri and VisitPay modular services.

Contract Balances

The following table provides information about ~~receivables, contracts~~contract assets and contract liabilities from contracts with ~~customers (in millions):~~customers:


				March 31, 2022		December 31, 2021
	September 30, 2017	At adoption
Receivables, which are included in accounts receivable, net	25.7	30.5
Contract assets	—	—	Contract assets	$	1.9	$	—
Contract liabilities	12.5	20.9	Contract liabilities	26.9		29.0

The Company recognized revenue of $0.3 million for the three months ended September 30, 2017 related to changes in transaction price estimates during the quarter for certain revenue cycle management contracts.

~~The Company recognized a decrease in revenue of $0.4 million during the three months ended September 30, 2017, which amount was~~Contract assets and contract liabilities are included in other current assets and customer liabilities, respectively. The contract liabilities ~~at the beginning~~balance contains related party amounts, including $2.4 million and $2.5 million of ~~the period.~~current customer liabilities and $15.3 million and $15.4 million of non-current customer liabilities as of March 31, 2022 and December 31, 2021, respectively.

A receivable is recognized in the period the Company provides services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30-60 days.

~~Significant changes in the contract assets~~The Company recognized revenue of $89.0 million and ~~the contract liabilities balances~~$93.7 million during the three months ended ~~September 30, 2017 are as follows (in millions):~~March 31, 2022 and 2021, which amounts were included in contract liabilities on January 1 of the respective periods. These revenue amounts include $85.8 million and $88.1 million for the three months ended March 31, 2022 and 2021, respectively, related to advanced billings which become accounts receivable and contract liabilities on the first day of the respective service period.



	~~Three Months Ended September 30, 2017~~
	~~Contract assets~~	~~Contract liabilities~~
~~Revenue recognized that was included in the contract liability balance at the beginning of the period~~	—	~~40.9~~
~~Increases due to cash received, excluding amounts recognized as revenue during the period~~	—	~~1.9~~
~~Transferred to receivables from contract assets recognized at the beginning of the period~~	—	—
~~Increases as a result of cumulative catch-up adjustment arising from changes in the estimate of the stage of completion, excluding amounts transferred to receivables during the period~~	—	—

Transaction Price Allocated to the Remaining Performance Obligation

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting ~~period (in millions).~~period. The estimated revenue does not include amounts of variable consideration that are constrained.


	Net operating fees		Incentive fees
Remainder of 2022	$	86.6	$	39.5
2023	88.7		—
2024	79.5		—
2025	31.4		—
2026	30.9		—
2027	29.5		—
Thereafter	114.1		—
Total	$	460.7	$	39.5

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

RCM Other
Net operating fees Incentive fees Other Other Services fees
2017 $ 3.4
$ 6.1
$ 1.4
$ —
2018 13.5
9.7
2.9
—
2019 —
—
2.7
—
2020 —
—
2.2
—
Thereafter —
—
11.3
—
Total $ 16.9
$ 15.8
$ 20.5
$ —

The amounts presented in the table above ~~primarily consist~~include variable fee estimates for the non-cancellable term of the Company's physician groups revenue cycle management (“RCM”) services contracts, fixed fees, ~~which~~and forecasted incentive fees. Fixed fees are typically recognized ratably

as the performance obligation is satisfied orand forecasted incentive fees ~~which~~ are measured cumulatively over the contractually defined performance period.

Estimates of revenue expected to be recognized in future periods ~~also~~ exclude unexercised customer options to purchase services within the Company's PAS contracts that do not represent material rights to the customer. ~~Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services.~~

The Company has elected certain of the optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. Accordingly, the Company applies the practical expedient in paragraph 606-10-55-18 to its stand-alone PAS contracts and modular RCM services and does not disclose information about variable consideration from remaining performance obligations for which the Company recognizes revenue. PAS performance obligations are typically short in duration (often less than 1 day) with any uncertainty related to the associated variable consideration resolved as each increment of service (completion of a level of care review or an appeal) is completed which reflects the value the Customer receives from the Company’s fulfillment of the performance obligation. Modular RCM services performance obligations for variable consideration are of short duration with fees corresponding to the value the customer has realized, for example, patient accounts collected on behalf of the Customer or medical record lines transcribed.

~~The Company also applies the guidance in paragraph 606-10-50-14A(b) to variable consideration within its end-to-end RCM contracts and~~ does not disclose information about remaining ~~wholly unsatisfied~~ performance obligations ~~for~~with an original expected duration of one year or less and has elected an exemption to the disclosure requirements related to estimate variable ~~consideration that~~consideration.

4. Debt

The carrying amounts of debt consist of the following:


	March 31, 2022		December 31, 2021
Senior Revolver (1)	$	80.0	$	80.0
Senior Term Loan	691.3		695.6

Unamortized discount and issuance costs	(3.1)		(3.2)
Total debt	768.2		772.4
Less: Current maturities	(17.5)		(17.5)
Total long-term debt	$	750.7	$	754.9

(1) As of March 31, 2022, the Company ~~is able to allocate to one or more, but not-all,~~had $80.0 million in borrowings, $0.5 million letters of credit outstanding, and $369.5 million of availability under the Senior Revolver.

Amended and Restated Senior Secured Credit Facilities

On July 1, 2021, the Company and certain of its subsidiaries entered into an amended and restated senior credit agreement (the “A&R Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders named therein, governing the Company’s amended and restated senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $700.0 million senior secured term loan facility (the “Senior Term Loan”) and a $450.0 million senior secured revolving credit facility (the “Senior Revolver”).

The interest rate as of March 31, 2022 was 2.21%.

The A&R Credit Agreement contains a number of financial and non-financial covenants. The Company was in compliance with all of the performance obligations in its contracts in accordance with paragraph 606-10-32-40. The Company’s end-to-end RCM services performance obligations are satisfied over time and are substantially the same from period to period under either a co-managed or operating partner model. Fees are variable and consist of net operating fees and incentive fees with the uncertainty related to net operating fees and certain incentive fees being resolved quarterly with the uncertainty of other incentive fees being resolved annually. The information presentedcovenants in the ~~table above includes estimates for incentive fees where~~A&R Credit Agreement as of March 31, 2022. The obligations under the ~~uncertainty related to~~A&R Credit Agreement are secured by a pledge of 100% of the ~~final fee is resolved on longer than a quarterly basis and to the extent~~capital stock of certain domestic subsidiaries owned by the Company ~~does not believe~~and a security interest in substantially all of the ~~associated consideration is constrained.~~Company’s tangible and intangible assets and the tangible and intangible assets of certain domestic subsidiaries.

~~Changes in Accounting Policies~~

~~Except for the changes below,~~5. Derivative Financial Instruments

The Company utilizes cash flow hedges to manage its currency risk arising from its global delivery resources. As of March 31, 2022, the Company has ~~consistently applied the accounting policies~~recorded $1.2 million of unrealized gains in accumulated other comprehensive income related to ~~all periods presented in these consolidated financial statements.~~

foreign currency hedges. The Company ~~adopted Topic 606 with a date~~estimates that $1.2 million of ~~the initial application of January 1, 2017. As a result, the Company has changed its accounting policy for revenue recognition as detailed below.~~

The Company adopted Topic 606, effective January 1, 2017, using the modified retrospective method, applying Topic 606 to contracts that were not complete as of the date of initial application. Therefore, the comparative information

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~has not been adjusted and continues to be~~gains reported ~~under Topic 605. The details of the significant changes and quantitative impact of the changes are set out below.~~

~~RCM services fees~~

~~RCM services fees that are variable~~ in ~~nature were recognized under Topic 605 as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or~~accumulated other contractual agreement event. Revenue previously has been recognized for RCM service fees upon the contract reaching the end of its stated term (such that the contract relationship will not continue in its current form) to the extent that cash has been received for invoiced fees and there are no disputes at the conclusion of the term of the contract.

Under Topic 606, the Company recognizes service fees that are variable in nature over time as the service is provided to the customer to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty related to the estimated revenue is subsequently resolved. Net operating fees are typically recognized on a quarterly basis as the RCM services are rendered and measurement of the net operating fees earned during the distinct performance period is objectively determinable. Incentive fees are calculated quarterly based upon contractually defined agreed-upon performance metrics and are recognized as revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty related to the estimated revenue is subsequently resolved.

~~Fixed fees are generally recognized over the term of the contract on a ratable basis as the performance obligation is satisfied.~~

~~Other services fees~~

The PAS contract between the Company and customer typically stipulates the price per unit the Company is entitled to for each unit of service performed. Certain contracts include minimum fees and volume discounts but the Company does not know the quantity or mix of service types the customer will request until the request is made. The length of time it takes the Company to perform each service can vary depending on the nature of the service or complexity of the specific situation or case. Revenue previously had been recognized for PAS service fees when the service was completed.

~~Under Topic 606, the Company recognizes revenue on a monthly basis when services are completed during the month consistent with recognition under Topic 605.~~

~~Deferred contract costs~~

Eligible, one-time, nonrecurring fulfillment costs associated with the initial phases of the Ascension A&R MPSA and with the transition of additional Ascension hospitals under separate contracts are deferred and subsequently amortized. These costs are amortized on a straight-line basis over the expected period of benefit. Under Topic 606, the Company will continue to amortize associated assets over the remaining life of the contract as services are provided.

~~Impacts on Financial Statements~~

The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2017 (in millions, except per share data):

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~


i.	~~Consolidated balance sheets~~

Impact of changes in accounting policies
As reported September 30, 2017 Adjustments Balances without adoption of Topic 606
Assets
Current assets:
Cash and cash equivalents $ 142.8
$ —
$ 142.8
Accounts receivable, net 7.7
(0.3 ) 7.4
Accounts receivable, net - related party 18.0
(11.2 ) 6.8
Prepaid income taxes 0.9
—
0.9
Prepaid expenses and other current assets 16.1
(0.3 ) 15.8
Total current assets 185.5
(11.8 ) 173.7
Property, equipment and software, net 50.2
—
50.2
Non-current deferred tax assets 105.8
158.4
264.2
Restricted cash equivalents 1.5
—
1.5
Other assets 11.4
0.2
11.6
Total assets $ 354.4
$ 146.8
$ 501.2
Liabilities
Current liabilities:
Accounts payable 6.9
(1.1 ) 5.8
Current portion of customer liabilities 0.9
41.9
42.8
Current portion of customer liabilities - related party 20.1
(1.2 ) 18.9
Accrued compensation and benefits 29.2
—
29.2
Other accrued expenses 16.1
(1.3 ) 14.8
Total current liabilities 73.2
38.3
111.5
Non-current portion of customer liabilities 0.3
—
0.3
Non-current portion of customer liabilities - related party 9.1
360.2
369.3
Other non-current liabilities 12.2
—
12.2
Total liabilities $ 94.8
$ 398.5
$ 493.3
—

8.00% Series A convertible preferred stock 184.7
—
184.7
Stockholders’ equity (deficit)
Common stock 1.2
—
1.2
Additional paid-in capital 339.8
—
339.8
Accumulated deficit (204.3 ) (251.7 ) (456.0 )
Accumulated other comprehensive loss (2.2 ) —
(2.2 )
Treasury stock (59.6 ) —
(59.6 )
Total stockholders’ equity (deficit) 74.9
(251.7 ) (176.8 )
Total liabilities and stockholders’ equity (deficit) $ 354.4
$ 146.8
$ 501.2

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~


~~ii.~~	~~Consolidated statements of operations and~~ comprehensive income ~~(loss) -~~

Impact of changes in accounting policies
As reported three months ended September 30, 2017 Adjustments Balances without adoption of Topic 606 As reported nine months ended September 30, 2017 Adjustments Balances without adoption of Topic 606
Net services revenue $ 123.2
$ (82.4 ) $ 40.8
$ 309.5
$ (236.5 ) $ 73.0
Operating expenses:

Cost of services 111.8
(3.8 ) 108.0
289.1
(10.3 ) 278.8
Selling, general and administrative 15.1
—
15.1
41.6
—
41.6
Other 1.4
—
1.4
2.6
—
2.6
Total operating expenses 128.3
(3.8 ) 124.5
333.3
(10.3 ) 323.0
Income (loss) from operations (5.1 ) (78.6 ) (83.7 ) (23.8 ) (226.2 ) (250.0 )
Net interest income —
—
—
0.1
—
0.1
Income (loss) before income tax provision (5.1 ) (78.6 ) (83.7 ) (23.7 ) (226.2 ) (249.9 )
Income tax provision (benefit) (1.5 ) (30.1 ) (31.6 ) (5.1 ) (87.9 ) (93.0 )
Net income (loss) $ (3.6 ) $ (48.5 ) $ (52.1 ) $ (18.6 ) $ (138.3 ) $ (156.9 )
Consolidated statements of comprehensive income (loss)

Net income (loss) $ (3.6 ) $ (48.5 ) $ (52.1 ) $ (18.6 ) $ (138.3 ) $ (156.9 )
Other comprehensive loss:

Foreign currency translation adjustments (0.2 ) —
(0.2 ) 0.6
—
0.6
Comprehensive income (loss) $ (3.8 ) $ (48.5 ) $ (52.3 ) $ (18.0 ) $ (138.3 ) $ (156.3 )

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~


~~iii.~~	~~Consolidated statements of cash flows -~~

Impact of changes in accounting policies
As reported September 30, 2017 Adjustments Balances without adoption of Topic 606
Operating activities
Net income (loss) $ (18.6 ) $ (138.3 ) $ (156.9 )
Adjustments to reconcile net income (loss) to net cash used in operations:
Depreciation and amortization 11.5
—
11.5
Share-based compensation 8.2
—
8.2
Loss on disposal 0.2
—
0.2
Provision (recovery) for doubtful receivables 0.1
—
0.1
Deferred income taxes (5.6 ) (87.9 ) (93.5 )
Changes in operating assets and liabilities: —
Accounts receivable and related party accounts receivable (15.4 ) 6.9
(8.5 )
Prepaid income taxes 3.0
—
3.0
Prepaid expenses and other assets (6.7 ) —
(6.7 )
Accounts payable 0.3
(1.1 ) (0.8 )
Accrued compensation and benefits 4.3
—
4.3
Other liabilities (0.3 ) (1.4 ) (1.7 )
Customer liabilities and customer liabilities - related party 14.7
221.8
236.5
Net cash used in operating activities (4.3 ) —
(4.3 )
Investing activities
Purchases of property, equipment, and software (30.1 ) —
(30.1 )
Proceeds from maturation of short-term investments —
—
—
Net cash used in investing activities (30.1 ) —
(30.1 )
Financing activities
Series A convertible preferred stock and warrant issuance, net of issuance costs —
—
—
Exercise of vested stock options —
—
—
Purchase of treasury stock (2.0 ) —
(2.0 )
Shares withheld for taxes (2.4 ) —
(2.4 )
Net cash (used in) provided by financing activities (4.4 ) —
(4.4 )
Effect of exchange rate changes in cash 0.4
—
0.4
Net increase (decrease) in cash and cash equivalents (38.4 ) —
(38.4 )
Cash and cash equivalents, at beginning of period 181.2
—
181.2
Cash and cash equivalents, at end of period $ 142.8
$ —
$ 142.8

~~7. Customer Liabilities~~

~~Customer liabilities include (i) accrued service costs (amounts due and accrued for cost reimbursements),~~

(ii) deferred customer billings (net operating fees invoiced or accrued and incentive fees collected that have not met all revenue recognition criteria), (iii) refund liabilities (amounts potentially due as a refund to the Company's customers on incentive fees), (iv) customer deposits (consisting primarily of net operating fees under the Company’s RCM contracts that are paid prior to the service period and amounts due as a refund to the Company's customers on incentive fees) and (v) Deferred Revenue (contract liabilities) (fixed or variable fees amortized to revenue over the

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

service period). Deferred customer billings are classified as current based on the customer contract end dates or other termination events that fall within twelve months of the balance sheet dates. Accrued service cost, refund liabilities and contract liabilities are classified as current or non-current based on the anticipated period in which the liabilities are expected to be ~~settled or~~reclassified into earnings within the ~~revenue is~~next 12 months. Amounts reclassified into cost of services were a net gain of $0.2 million and $0.4 million during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the Company’s currency forward contracts have maturities extending no later than March 31, 2023, and had total notional amounts of $80.4 million.

The Company also utilizes cash flow hedges to reduce variability in interest cash flows from its outstanding debt. As of March 31, 2022, the Company has recorded $0.2 million of unrealized losses in accumulated other comprehensive income related to interest rate swaps. The Company estimates that $0.2 million of losses reported in accumulated other comprehensive income are expected to be ~~recognized.~~

~~Customer liabilities consist~~reclassified into earnings within the next 5 months. Amounts reclassified into interest expense were a net loss of ~~the following (in millions):~~

September 30, December 31,
2017 2016
Deferred customer billings, current $ —
$ 68.2
Accrued service costs, current (1)
17.6
14.8
Customer deposits, current —
0.9
Refund liabilities, current (1) 0.3
—
Deferred revenue (contract liabilities), current (1) 3.1
—
Current portion of customer liabilities $ 21.0
$ 83.9
Deferred customer billings, non-current (2) $ —
$ 110.0
Refund liabilities, non-current —
—
Customer deposits, non-current —
—
Deferred revenue (contract liabilities), non-current (2) 9.4
1.0
Non current portion of customer liabilities $ 9.4
$ 111.0
Total customer liabilities $ 30.4
$ 194.9

~~(1) Includes $17.6 million,~~ $0.3 million and ~~$2.2~~$0.5 million ~~in current accrued service costs, refund liabilities~~during the three months ended March 31, 2022 and ~~deferred revenue respectively, for a related party that are included in~~2021, respectively. As of March 31, 2022, the ~~current portion~~Company’s interest rate swaps extend no later than August 31, 2022, and had total notional amounts of customer liabilities - related party in the accompanying consolidated balance sheets at September 30, 2017. Includes $13.2 million and $1.0 million in current accrued service costs and customer deposits, respectively, for a related party that are included in the current portion of customer liabilities - related party in the accompanying consolidated balance sheet at December 31, 2016.$100.0 million.

(2) Includes $9.1 million in deferred revenue for a related party that are included in the non-current portion of customer liabilities - related party in the accompanying consolidated balance sheet at September 30, 2017. Includes $110.0 million in deferred customer billings for a related party that are included in the non-current portion of customer liabilities - related party in the accompanying consolidated balance sheet at December 31, 2016.

8.~~Stockholders’ Equity (Deficit)~~

~~Preferred Stock and Warrant~~

The Company ~~has 5,000,000 shares of authorized preferred stock, each with a par value of $0.01. The preferred stock may be issued~~classifies cash flows from time to time in one or more series. The board of directors of the Company ("Board") is authorized to determine the rights, preferences, privileges and restrictions of the Company’s authorized but unissued shares of preferred stock. On February 16, 2016, at the close of the Transaction, the Company issued to TCP-ASC ACHI Series LLLP, a limited liability limited partnership jointly owned by Ascension Health Alliance and investment funds affiliated with TowerBrook (the "Investor"): (i) 200,000 shares of its 8.00% Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock" or "Preferred Stock"), for an aggregate price of $200 million and (ii) an exercisable warrant to acquire up to 60 million shares of its common stock with an exercise price of $3.50 per common share and a term of ten years. The Series A Preferred Stock is immediately convertible into shares of common stock. As of September 30, 2017 and December 31, 2016, the Company had 223,023 and 210,160 shares of preferred stock outstanding, respectively. See Note 12, 8% Series A Convertible Preferred Stock, for additional information.

~~Common Stock~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Each outstanding share of the Company's common stock, par value $0.01 per share ("common stock"), is entitled to one vote per share on all matters submitted to a vote by shareholders. Subject to the rights of any preferred stock which mayderivative programs as cash flows from time to time be outstanding, the holders of outstanding shares of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive pro rata all assets legally available for distribution to stockholders. No dividends were declared or paid on the common stock during 2017 or 2016.

~~Treasury Stock~~

~~On November 13, 2013, the Board authorized a repurchase of up to $50.0 million of the Company’s common stock~~operating activities in the ~~open market or in privately negotiated transactions. The timing and amount~~consolidated statements of ~~any shares repurchased will be determined by the Company~~cash flows. Fair values for derivative financial instruments are based on ~~its evaluation of market conditions~~prices computed using third-party valuation models and ~~other factors. The repurchase program may be suspended or discontinued at any time at the sole discretion of the Board. Any repurchased shares will be available for use~~are classified as Level 2 in ~~connection~~accordance with the ~~Company’s stock plans and for other corporate purposes. The Company funds the repurchases from cash on hand. During the year ended December 31, 2016, the Company repurchased 158,557 shares~~three-level hierarchy of the Company stock for $0.4 million. During the three and nine months ended September 30, 2017, 342,130 and 855,474 shares were repurchased for $1.3 million and $2.5 million, respectively. No shares have been retired. As of September 30, 2017 and December 31, 2016, the Company held in treasury 5,341,481 and 4,465,919 shares of repurchased stock, respectively.fair value measurements.

Treasury stock also includes repurchases of Company stock related to employees’ tax withholding upon vesting of restricted shares. For the three and nine months ended September 30, 2017, the Company repurchased 19,988 and 784,531 shares related to employees’ tax withholding upon vesting of restricted shares. Additionally, treasury stock includes restricted stock awards that have been canceled or forfeited. See Note 9, Share-Based Compensation.

9.6.Share-Based Compensation

The share-based compensation expense relating to the Company’s stock options, restricted stock ~~awards ("RSAs"~~units (“RSUs”), ~~restricted stock units ("RSUs")~~ and performance-based restricted stock units ~~("PBRSUs"~~(“PBRSUs”) for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$2.4~~$10.1 million and ~~$4.8~~$12.7 million, respectively, with related tax benefits of approximately ~~$0.9~~$1.8 million and $1.9 million, respectively. The share-based compensation expense relating to the Company’s stock options, RSAs, RSUs and PBRSUs for the nine months ended September 30, 2017 and 2016 was $8.2 million and $25.3 million, respectively, with related tax benefits of approximately $3.2 million and $10.0$2.2 million, respectively.

~~As of January 1, 2017, the Company adopted ASU 2016-09.~~ The Company ~~elected to change its accounting policy to account~~accounts for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded to increase accumulated deficit by $1.0 million, increase additional paid-in capital by $1.5 million and increase non-current deferred tax assets by $0.5 million as of January 1, 2017.occur. Excess tax benefits and shortfalls for share-based payments are ~~now~~recognized in income tax expense (benefit) and included in operating ~~activities rather than in financing~~ activities. The ~~changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted.~~

Amendments related to accounting for excess tax benefits and shortfalls have been adopted prospectively, resulting in recognition of excess tax benefits and shortfalls in income tax expenses (benefit) rather than additional paid-in capital. For the three and nine months ended September 30, 2017, the Company recognized ~~$0.0~~$2.5 million and ~~$0.9~~$2.3 million of income tax ~~expense~~benefit from ~~shortfalls~~windfalls associated with vesting and exercises of equity ~~awards.~~awards for the three months ended March 31, 2022 and 2021, respectively.

Total share-based compensation costs that have been included in the Company’s consolidated statements of operations were as ~~follows (in millions):~~follows:

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Share-Based Compensation Expense Allocation Details:
Cost of services $ 1.2
$ 1.3
$ 3.3
$ 4.8
Selling, general and administrative 1.2
3.5
4.8
18.7
Other —
—
0.1
1.8
Total share-based compensation expense (1) $ 2.4
$ 4.8
$ 8.2
$ 25.3

(1) Includes $0 million and $0.1 million in share-based compensation expense paid in cash during the three and nine months ended September 30, 2016, respectively. In addition to the share-based compensation expense recorded above, $0.1 million and $0.4 million of share-based compensation expense was capitalized to deferred contract costs for the three and nine months ended September 30, 2017, respectively. See Note 16, Deferred Contract Costs, for further discussion.


	Three Months Ended March 31,
		2022		2021
Share-Based Compensation Expense Allocation Details:
Cost of services		$	4.3	$	7.3
Selling, general and administrative		5.8		5.4

Total share-based compensation expense		$	10.1	$	12.7

The Company uses the Black-Scholes option pricing model to estimate the fair value of its service-based options as of ~~its~~their grant ~~date.~~dates. The Company ~~uses Monte Carlo simulations~~assesses current performance on performance-based PBRSUs by reviewing historical performance to ~~estimate~~date, along with any adjustments which have been approved to the ~~fair value~~reported performance, and changes to the projections to determine the probable outcome of ~~its PBRSUs.~~the awards. The ~~PBRSUs vest upon satisfaction of both time-based requirements~~current estimates are then compared to the scoring metrics and any necessary adjustments are reflected in the current period to update share-based compensation expense to the current performance ~~targets based on share price. Expected life is based on the market condition to which the vesting is tied.~~expectations.

The following table sets forth the significant assumptions used in the Black-Scholes option pricing model and the ~~Monte Carlo simulations and the~~ calculation of share-based compensation expense for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016:~~2021:


	Nine Months Ended September 30,			Three Months Ended March 31,
	2017	2016		2022	2021
Expected dividend yield	—	—	Expected dividend yield	—%	—%
Risk-free interest rate	1.8% to 2.3%	1.2% to 1.9%	Risk-free interest rate	1.4%	0.4%
Expected volatility	40% to 45%	45% to 50%	Expected volatility	43%	43%
Expected term (in years)	2.34 to 6.29	6.25	Expected term (in years)	5.5	5.5
Forfeitures	—%	5.68% annually

The risk-free interest rate input is based on U.S. Treasury instruments, and the expected volatility of the share price is based ~~upon~~on review of the historical volatility levels of the Company’s common stock in conjunction with that of public companies that operate in similar industries or are similar in terms of stage of development or size and a projection of this information toward its future expected volatility. The Company used the simplified method to estimate the expected option ~~life for 2017 and 2016 option grants.~~life. The simplified method was used due to the lack of sufficient historical data available to provide a reasonable basis upon which to estimate the expected term of each stock option.

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Stock options

A summary of the options activity during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 is shown below:

Shares
Weighted-
Average
Exercise
Price
Outstanding at December 31, 2016 20,418,607
$ 6.26
Granted 3,581,904
3.32
Exercised (58,760 ) 2.37
Canceled/forfeited (5,897,038 ) 9.42
Outstanding at September 30, 2017 18,044,713
4.66
Outstanding, vested and exercisable at September 30, 2017 5,676,001
$ 8.99
Outstanding, vested and exercisable at December 31, 2016 7,993,168
$ 11.34

On May 12, 2017, the Company offered certain employees and directors an opportunity to elect to exchange certain stock options for new options covering a fewer number of shares of common stock. Under this offer, the Company accepted for exchange 4,279,463 options. All surrendered options were canceled and the Company issued 1,728,795 new stock options in exchange for such tendered options. The exchange ratios were established with the intent not to generate incremental share-based compensation expense and were established just prior to commencement of the offer. The incremental compensation associated with the fluctuations in the Company’s common stock price between the date the exchange ratios were established and the commencement of the offer was insignificant.


	Options	Weighted- Average Exercise Price
Outstanding at December 31, 2021	4,386,205	$	3.37
Granted	1,424	25.70
Exercised	(77,438)	5.39
Canceled/forfeited	(3,750)	6.31
Expired	—	—
Outstanding at March 31, 2022	4,306,441	$	3.34
Outstanding, vested and exercisable at March 31, 2022	4,293,696	$	3.30
Outstanding, vested and exercisable at December 31, 2021	4,365,759	$	3.33

Restricted stock ~~awards~~units and performance-based restricted stock units

A summary of the ~~restricted stock~~RSU and PBRSU activity during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 is shown below:

Shares
Weighted-
Average Grant
Date Fair Value
Outstanding and unvested at December 31, 2016 5,862,712
$ 3.01
Granted —
—
Vested (2,675,782 ) 3.50
Forfeited (728,798 ) 1.31
Outstanding and unvested at September 30, 2017 2,458,132
$ 2.98

RSA vesting is based on the passage of time. The amount of share-based compensation expense is based on the fair value of the Company's common stock on the respective grant dates and is recognized ratably over the vesting period.

The Company's RSA agreements allow employees to surrender to the Company shares of common stock upon vesting of their RSAs in lieu of their payment of the required personal employment-related taxes. During the nine months ended September 30, 2017 and 2016, employees delivered to the Company 733,769 and 981,505 shares of stock, respectively, which the Company recorded at a cost of approximately $1.8 million and $2.0 million, respectively. Shares surrendered for payment of personal employment-related taxes are held in treasury.

~~Restricted stock units~~

~~A summary of the restricted stock activity during the nine months ended September 30, 2017 is shown below:~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~


										Weighted- Average Grant Date Fair Value
	Shares		Weighted- Average Grant Date Fair Value			RSUs		PBRSUs		RSU		PBRSU
Outstanding and unvested at December 31, 2016	1,346,774		$	2.35
Outstanding and unvested at December 31, 2021					Outstanding and unvested at December 31, 2021	2,218,651		3,203,013		$	16.28	$	16.45
Granted	265,345		2.88		Granted	38,151		—		25.50		—
Performance factor adjustment					Performance factor adjustment	—		876,109		—		10.46
Vested	(155,535	)	2.35		Vested	(5,737)		(1,752,218)		14.28		10.46
Forfeited	(250,960	)	2.35		Forfeited	(39,862)		(2,832)		16.25		27.28
Outstanding and unvested at September 30, 2017	1,205,624		$	2.47
Outstanding and unvested at March 31, 2022					Outstanding and unvested at March 31, 2022	2,211,203		2,324,072		$	16.44	$	18.70

Shares surrendered for taxes for the three months ended March 31, 2022					Shares surrendered for taxes for the three months ended March 31, 2022	2,198		725,570
Cost of shares surrendered for taxes for the three months ended March 31, 2022 (in millions)					Cost of shares surrendered for taxes for the three months ended March 31, 2022 (in millions)	$	—	$	18.7
Shares surrendered for taxes for the three months ended March 31, 2021					Shares surrendered for taxes for the three months ended March 31, 2021	2,201		—
Cost of shares surrendered for taxes for the three months ended March 31, 2021 (in millions)					Cost of shares surrendered for taxes for the three months ended March 31, 2021 (in millions)	$	—	$	—

The Company's RSU and PBRSU agreements allow employees to surrender to the Company shares of common stock upon vesting of their RSUs and PBRSUs in lieu of their payment of the required personal employment-related taxes. During the nine months ended September 30, 2017 and 2016, employees delivered to the Company 50,762 and no shares of stock, respectively, which the Company recorded at a cost of approximately $0.2 million and $0.0 million, respectively. Shares surrendered for payment of personal employment-related taxes are held in treasury.

~~Performance-based restricted stock units~~

~~In the third quarter of 2017, the Company began to grant PBRSUs to its employees. The~~Outstanding PBRSUs vest upon satisfaction of both time-based ~~requirements~~ and performance-based conditions. Depending on the award, performance condition targets ~~based~~may include cumulative adjusted EBITDA, end-to-end RCM agreement growth, scored revenue growth, or other specific performance factors. Depending on ~~share price with certain awards vesting on December 31, 2019 and certain awards vesting on December 31, 2020. If certain price targets~~the percentage level at which the performance-based conditions are ~~reached,~~satisfied, the number of shares vesting could be ~~up to 150% or, in certain cases, up to~~between 0% and 200% of the number of PBRSUs originally granted. ~~A summary~~Based on the established targets, the maximum number of shares that could vest for all outstanding PBRSUs is 4,512,992.

7. Other Expenses

Other expenses are incurred in connection with acquisition and integration costs, various exit activities, transformation initiatives, and organizational changes to improve our business alignment and cost structure.The following table summarizes the ~~PBRSU activity during~~other expenses (income) recognized for the three months ended ~~September 30, 2017 is shown below:~~March 31, 2022 and 2021.


	Three Months Ended March 31,
		2022		2021
Severance and related employee benefits (1)		$	—	$	1.5
Strategic initiatives (2)		10.1		6.5
Customer employee transition and restructuring expenses (3)		(0.4)		—
Facility-exit charges (4)		4.8		1.5
Other (5)		2.6		3.5
Total other expenses		$	17.1	$	13.0

(1) Severance expense related to restructuring and business reorganization events.

Shares
Weighted-
Average Grant
Date Fair Value
Outstanding and unvested at June 30, 2017 —
$ —
Granted 3,117,297
3.21
Vested —
—
Forfeited (17,230 ) 3.21
Outstanding and unvested at September 30, 2017 3,100,067
$ 3.21

~~10. Other~~

~~Other costs are comprised~~(2) Costs related to evaluating, pursuing, and integrating acquisitions, performing portfolio and capital structure analyses and transactions, and other inorganic business projects as part of ~~reorganization-related~~the Company’s growth strategy. Costs include vendor spend, employee time and ~~certain other costs.~~expenses spent on activities, severance and retention amounts associated with integration activities, and changes to contingent consideration related to acquisitions. For the three months ended ~~September 30, 2017 and 2016,~~March 31, 2022, the ~~Company incurred $1.4~~balance also includes $3.1 million ~~and $0.5 million in other~~of costs ~~respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred $2.6 million and $20.0 million in other costs, respectively.~~

~~Other costs consist of the following (in millions):~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Severance and employee benefits $ —
$ (0.3 ) $ 0.3
$ 2.5
Facility charges —
—
—
0.7
Non-cash share based compensation —
—
0.1
1.8
Reorganization-related —
(0.3 ) 0.4
5.0
Transaction fees (1) —
—
—
13.3
Defined contribution plan contributions (2) —
—
—
0.9
Restatement costs —
0.8
—
0.8
Acquisition related diligence and costs (3) 1.4
—
1.4
—
Transitioned employees restructuring expense (4) —
—
0.8
—
Other 1.4
0.8
2.2
15.0
Total other $ 1.4
$ 0.5
$ 2.6
$ 20.0

~~(1)~~ ~~Costs~~ related to ~~retention payments and legal fees paid~~establishing a global business services center in ~~connection with~~ the ~~closing of the Transaction (see Note 12).~~

~~(2) Additional contributions to the Company's defined contribution plan for the year ended December 31, 2016.~~Philippines.

(3) ~~Costs related to evaluating and pursuing acquisition opportunities as part of the Company’s inorganic growth strategy.~~

~~(4)~~ As part of the transition of ~~Ascension~~customer personnel to the Company ~~in conjunction with the A&R MPSA,~~under certain operating partner model contracts, the Company has agreed to reimburse ~~Ascension~~the customer, or directly pay affected employees, for ~~certain~~ severance and retention costs related to certain ~~Ascension~~ employees who will not be transitioned to the Company, or whose jobs will be relocated after the employee transitions to the Company.

~~Reorganization-related~~

~~During the second and fourth quarters~~(4) As part of ~~2016,~~evaluating its footprint, the Company ~~initiated restructuring plans consisting~~has exited certain leased facilities. Costs include asset impairment charges, early termination fees, and other costs related to exited leased facilities.

(5) For the three months ended March 31, 2022 and 2021, other includes $0.5 million and $1.7 million, respectively, of ~~reductions in its workforce in order~~expenses related to ~~align~~ the ~~size and composition of its workforce to its current client base, better position itself for already committed future growth, and enable the Company to more efficiently serve contracted demand.~~COVID-19 pandemic.

~~The Company's reorganization activity was as follows (in millions):~~

Severance and Employee Benefits Facilities and Other Costs Total
Reorganization liability at December 31, 2016 $ 1.6
$ 0.5
$ 2.1
Restructuring charges 0.4
—
0.4
Cash payments (1.7 ) (0.5 ) (2.2 )
Non-cash charges (0.1 ) $ —
(0.1 )
Reorganization liability at September 30, 2017 $ 0.2
$ —
$ 0.2

~~11.~~8.Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant and infrequent or unusual items which are required to be discretely recognized within the current interim period. The ~~Company’s intention is to permanently reinvest its foreign earnings outside~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~the United States. As a result, the~~ effective tax rates in the periods presented are largely based upon the projected annual pre-tax earnings by jurisdiction and the allocation of certain expenses in various taxing jurisdictions where the Company conducts its business. These taxing jurisdictions apply a broad range of statutory income tax rates. The global intangible low-taxed income (“GILTI”) provisions impose taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company elected to account for GILTI tax in the period in which it is incurred.

The Company recognized income tax ~~benefit~~expense for the three ~~and nine~~ months ended ~~September 30, 2017 was lower than~~March 31, 2022 on the ~~amount derived by applying~~year-to-date pre-tax income. The deviation from the federal statutory tax rate of ~~35%~~21% is primarily ~~due~~attributable to recognizing the provisions for state taxes, GILTI, non-deductible compensation, and discrete ~~items~~items.

The Company recognized ~~in the period. The~~ income tax expense for the three ~~and nine~~ months ended ~~September 30, 2016 was higher than~~March 31, 2021 on the ~~amount derived by applying~~year-to-date pre-tax income. The deviation from the federal statutory tax rate of ~~35%~~21% is primarily ~~due~~attributable to recognizing the provisions for state taxes, GILTI, non-deductible compensation, and discrete ~~items as well as the impact of state taxes.~~items.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. U.S. federal income tax returns since ~~2013~~2018 are currently open for examination. State jurisdictions vary for open tax years. The statute of limitations for most states ranges from three to six years.

~~As of January 1, 2017,~~At December 31, 2021, the Company adopted ASU 2016-09. The Company elected to change its accounting policy to account for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded to increase non-current deferred tax assets by $0.5 million as of January 1, 2017. Excess tax benefits for share-based payments are now included in net cash used in operating activities rather than net cash used in financing activities. The changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted.

Amendments related to accounting for excess tax benefits and shortfalls have been adopted prospectively, resulting in recognition of excess tax benefits and shortfalls as part of income tax expense rather than additional paid-in capital. For the three and nine months ended September 30, 2017, the Company recognized $0.0 and $0.9 million of income tax expense from shortfalls associated with vesting and exercises of equity awards.

The Company wrote-off approximately $0.4 million and $1.5 million of deferred tax assets due to the expiration of shared-based awards and recognized as discrete expense during the three and nine months ended September 30, 2017. During 2016, deferred tax assets written-off due to the expiration of share-based awards were recognized as a reduction in additional paid-in capital.

During the nine months ended September 30, 2017, the Company corrected the deferred tax asset balance associated with share-based compensation. In 2015 and 2016, the Company incorrectly recorded excess share-based compensation of approximately $2.6 and $4.0 million. This excess share-based compensation expense resulted inhad gross deferred tax assets of approximately $2.5 million being erroneously recorded in the consolidated balance sheet at December 31, 2016. The Company has determined these amounts are immaterial to the quarterly and annual periods in 2015, 2016 and 2017. In addition to correcting the deferred tax balance, the Company reclassified approximately $6.5 million from additional paid-in-capital to accumulated deficit to correct for the excess share-based compensation expense recorded in 2015 and 2016.

~~At December 31, 2016, the Company had deferred tax assets of $169.9~~$123.7 million, of which ~~$71.0~~$54.7 million related to net operating loss (“NOL”) carryforwards. In conjunction with the adoption of ASU 2016-09 and Topic 606, a cumulative effect adjustment was recorded to increase deferred tax assets by $0.5 million for ASU 2016-09 and decrease deferred tax assets by $70.3 million for Topic 606 as of January 1, 2017. The majority of the Company's carryforwards were generated in 2013, 2014 and 2015 when the Company incurred substantial expenses related to the restatement. The Company expects ~~its business growth contracted for under the Ascension A&R MPSA will~~to be profitable, ~~and allow~~allowing the Company to utilize its NOL carryforwards and other deferred tax assets. Accordingly, the Company believes that it is more likely than not that the remaining deferred tax assets will be realized. Should the Company not operationally execute as expected, and the growth in the Ascension business not be as profitable as expected, such realizability assessment may change.

~~12. 8.00% Series A Convertible Preferred Stock~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

At the close of the Transaction on February 16, 2016 (as described in Note 1), the Company issued to the Investor: (i) 200,000 shares of Preferred Stock, for an aggregate price of $200 million, and (ii) a warrant with a term of ten years to acquire up to 60 million shares of common stock, par value $0.01 per share (“common stock”), at an exercise price of $3.50 per share, on the terms and subject to the conditions set forth in the Warrant Agreement (“Warrant”). The Preferred Stock is immediately convertible into shares of common stock.

During the twelve months ended December 31, 2016, the Company incurred direct and incremental expenses of $21.3 million (including $14.0 million in closing fees paid to the Investor) relating to financial advisory fees, closing costs, legal expenses and other offering-related expenses in connection with the Transaction. These direct and incremental expenses reduced the carrying amount of the Preferred Stock. In connection with the issuance of the Preferred Stock, a beneficial conversion feature of $48.3 million was recognized. Since the Preferred Stock is presently convertible into common stock, this amount was subsequently accreted to the carrying amount of the Preferred Stock, and treated as a deemed preferred stock dividend in the calculation of earnings per share.

~~Dividend Rights~~

The holders of the Preferred Stock are entitled to receive cumulative dividends January 1, April 1, July 1 and October 1 of each year (dividend payment dates), which commenced on April 1, 2016, at a rate equal to 8% per annum (preferred dividend) multiplied by the liquidation preference per share, initially $1,000 per share adjusted for any unpaid cumulative preferred dividends. For the first seven years after issuance, the dividends on the Preferred Stock will be paid-in-kind. As of September 30, 2017, the Company had accrued dividends of $4.5 million associated with the Preferred Stock, which was paid in additional shares of Preferred Stock in October 2017.

~~Conversion Features~~

Each share of the Preferred Stock may be converted to common stock on any date at the option of the holder into the per share amount (as defined in the Certificate of Designations of the 8.00% Series A Convertible Preferred Stock (the "Series A COD")). Fractional shares resulting from any conversion will be rounded to the nearest whole share.

~~Redemption Rights~~

Since the redemption of the Preferred Stock is contingently or optionally redeemable and therefore not certain to occur, the Preferred Stock is not required to be classified as a liability under ASC 480, ~~Distinguishing Liabilities from Equity~~. As the Preferred Stock is redeemable at the option of the holders upon a fundamental change (as defined in the Series A COD) and is redeemable in certain circumstances upon the occurrence of an event that is not solely within the Company's control, the Company has classified the Preferred Stock in mezzanine equity on the Consolidated Balance Sheets. In the event the Company believes that redemption of the Preferred Stock is probable, the Company would be required to accrete changes in the carrying value to the redemption value over the period until the expected redemption date.

~~Voting Rights~~

Each holder of the Preferred Stock is entitled to vote with the common stock on an as-converted basis, and has full voting rights and powers equal to the voting rights and powers of the holders of common stock.

~~The following summarizes the Preferred Stock activity for the nine months ended September 30, 2017:~~

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Preferred Stock
Shares Issued and Outstanding Carrying Value
Balance at December 31, 2016 210,160
$ 171.6
Dividends paid/accrued dividends 12,863
13.1
Balance at September 30, 2017 223,023
$ 184.7

~~13.~~9.Earnings (Loss) Per Share

Basic net income per share is computed by dividing net income, less any dividends, accretion or decretion, redemption or induced conversion on the ~~Preferred Stock,~~preferred stock, by the weighted average number of common shares outstanding during the period. As the Preferred Stock participates in dividends alongside the Company’s common stock (per their participating dividends), the Preferred Stock would constitute participating securities under ASC 260-10 and are applied to earnings per share using the two-class method. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends.

Diluted net income per share is calculated ~~using the more dilutive of the if-converted or the two-class method. For the three and nine months ended September 30, 2017 and 2016, the two-class method was more dilutive and was computed~~ by adjusting the denominator used in the basic net income per share computation by ~~the weighted average number of common shares outstanding and~~ potentially dilutive securities outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options and shares issuable upon vesting of ~~RSAs,~~ RSUs ~~PBRSUs~~ and ~~Preferred Stock.~~PBRSUs.

Basic and diluted net income (loss) per common share are calculated as ~~follows (in millions, except share and per share data):~~follows:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2017			2016			2017			2016					2022		2021
Basic EPS:													Basic EPS:
Net income (loss)	$	(3.6	)	$	37.4		$	(18.6	)	$	164.0
Less dividends on preferred shares	(4.4		)	(4.1		)	(13.1		)	(58.5		)
Less income allocated to preferred shareholders	—			(15.1		)	—			(43.4		)
Net income													Net income		$	29.4	$	25.8
Less dividends on preferred shares (1)													Less dividends on preferred shares (1)		—		(592.3)

Net income (loss) available/(allocated) to common shareholders - basic	$	(8.0	)	$	18.2		$	(31.7	)	$	62.1		Net income (loss) available/(allocated) to common shareholders - basic		$	29.4	$	(566.5)
Diluted EPS:													Diluted EPS:
Net income (loss)	(3.6		)	37.4			(18.6		)	164.0
Less dividends on preferred shares	(4.4		)	(4.1		)	(13.1		)	(58.5		)
Less income allocated to preferred shareholders	—			(15.0		)	—			(43.1		)
Net income													Net income		$	29.4	$	25.8
Less dividends on preferred shares (1)													Less dividends on preferred shares (1)		—		(592.3)

Net income (loss) available/(allocated) to common shareholders - diluted	$	(8.0	)	$	18.3		$	(31.7	)	$	62.4		Net income (loss) available/(allocated) to common shareholders - diluted		$	29.4	$	(566.5)
Basic weighted-average common shares	102,225,422			100,934,561			102,022,129			99,870,685			Basic weighted-average common shares		278,747,261		239,290,145
Add: Effect of dilutive securities	—			1,241,719			—			1,147,765
Add: Effect of dilutive equity awards													Add: Effect of dilutive equity awards		6,472,685		—
Add: Effect of dilutive warrants													Add: Effect of dilutive warrants		35,823,425		—
Diluted weighted average common shares	102,225,422			102,176,280			102,022,129			101,018,450			Diluted weighted average common shares		321,043,371		239,290,145
Net income (loss) per common share (basic)	$	(0.08	)	$	0.18		$	(0.31	)	$	0.62		Net income (loss) per common share (basic)		$	0.11	$	(2.37)
Net income (loss) per common share (diluted)	$	(0.08	)	$	0.18		$	(0.31	)	$	0.62		Net income (loss) per common share (diluted)		$	0.09	$	(2.37)

~~R1 RCM Inc.~~

~~Notes~~(1) The 2021 dividend on preferred shares includes amounts related to ~~Unaudited Consolidated Financial Statements~~

the conversion of the preferred shares. See Note 16 of the Company’s 2021 Form 10-K for more information.

Because of their anti-dilutive effect, ~~24,808,536~~43,206 common share equivalents comprised of stock options, ~~RSAs,~~ PBRSUs, and RSUs have been excluded from the diluted earnings per share calculation for the three ~~and nine~~ months ended ~~September 30, 2017. 16,706,526 and 12,967,519~~ March 31, 2022.

For the three months ended March 31, 2021, 13,688,519common share equivalents were excluded for the three and nine months ended September 30, 2016 due to their anti-dilutive effect. Additionally, the Investor's exercisable warrant to acquire up to 60 million shares of the Company's common stock hashave been excluded from the diluted earnings per share calculation because ~~it is~~of their anti-dilutive effect. Additionally, for ~~all periods presented.~~the three months ended March 31, 2021, TCP-ASC ACHI Series LLLP’s (“TCP-ASC” or the “Investor”) and IHC Health Services, Inc.’s (“Intermountain”) exercisable warrants to acquire up to 60.0 million and 1.5 million shares, respectively, of the Company's common stock have been excluded from the diluted earnings per share calculation because they were anti-dilutive.

~~14.~~

10.Commitments and Contingencies

Legal Proceedings

Other than as described below, the Company is not presently a party to any material litigation or regulatory proceeding and is not aware of any pending or threatened litigation or regulatory proceeding against the Company which, individually or in the aggregate, could have a material adverse effect on its business, operating results, financial condition or cash flows.

On ~~July 22, 2014,~~April 13, 2021 and April 19, 2021, respectively, certain purported stockholders of the Company ~~was named as a defendant in a putative class action lawsuit~~ filed 2 complaints in the ~~U.S. District~~Delaware Court ~~for~~of Chancery regarding the ~~Eastern District~~Company’s January 15, 2021 recapitalization transaction with TCP-ASC. Both complaints allege that TCP-ASC, Ascension Health (“Ascension”), and TowerBrook Capital Partners (“TowerBrook”) controlled the Company and breached their fiduciary duties by using that alleged control to force the Company to overpay in redeeming TCP-ASC’s preferred stock as part of ~~Michigan (Anger v. Accretive Health, Inc.), seeking statutory~~the recapitalization transaction. The plaintiffs seek an unspecified amount of damages ~~injunctive relief~~against TCP-ASC, Ascension, and ~~attorneys’ fees.~~TowerBrook. The ~~primary allegations are~~plaintiffs also allege that the Company ~~attempted~~and TCP-ASC entered into amendments to ~~collect debts without providing~~ the ~~notice required~~Investor Rights Agreement that the plaintiffs contend contains provisions that are void under the Company’s charter, bylaws, and the Delaware General Corporation Law. The cases have since been consolidated into a single action. All defendants have answered the complaint and discovery has commenced.

On February 18, 2022, plaintiffs filed a supplement to their complaint, naming certain additional defendants and asserting additional claims related to the Company’s agreement to acquire Cloudmed, which was announced on January 10, 2022. The additional claims assert that: (i) TCP-ASC, Ascension, and TowerBrook, along with the Company’s directors (“Individual Defendants”), breached their fiduciary duties by causing the ~~Fair Debt Collection Practices Act ("FDCPA"~~Company to enter into and approving the Cloudmed acquisition, respectively, which plaintiffs claim will perpetuate TCP-ASC’s, Ascension’s, and TowerBrook’s control over the Company and entrench the Individual Defendants by virtue of certain agreements entered into as part of the transaction, including a Second Amended Investor Rights Agreement with TCP-ASC (the “Seconded Amended Investor Rights Agreement”) and ~~Michigan Fair Debt Collection Practices Act~~an Investor Rights Agreement with Cloudmed (the “Cloudmed Investor Rights Agreement”); and ~~failed to abide by~~(ii) Cloudmed’s stockholders aided and abetted such breaches. Plaintiffs also allege that certain provisions in the ~~terms of an agreed payment plan in violation of those same statutes. On August 27, 2015,~~Cloudmed Investor Rights Agreement and the ~~Court granted in part and denied in part~~Second Amended Investor Rights Agreement are void under the Company’s motion to dismiss. An amended complaint was filed on November 30, 2015. Discovery was underway, but on July 15, 2016, the court postponed all deadlines in the case as the parties attempted to finalize a confidential agreement in principle to settle the case. On February 23, 2017, the parties reached a settlement in principle and filed the proposed class action settlement with the Court, which conducted a Class Action Fairness Act (CAFA) hearing on whether to approve of the settlement. Members of the putative class were notified of the settlement and were given an opportunity to object or opt-out of the settlement. No objections to the settlement were entered before or at the CAFA hearing on October 4, 2017,charter, bylaws, and the ~~Court approved the settlement by Order dated October 11, 2017. Accordingly, the Company will pay the $1.3 million settlement~~Delaware General Corporation law. The plaintiffs seek a declaratory judgment and an unspecified amount ~~less amounts already paid, to a settlement fund to assist members~~ of ~~the class Ascension Michigan ministry patients pay off healthcare debt, to pay for class notice~~damages, as well as attorneys’ fees and ~~administration, to pay $15,000 to each of the named class representatives and to reimburse plaintiff’s attorneys’ fees.~~

In April 2015, the Company was named among other defendants in an employment action brought by a former employee before the Maine Human Rights Commission ("MHRC"), alleging improper termination in retaliation for uncovering alleged Medicare fraud.costs. The Company filed its response with the MHRC on May 19, 2015 seeking that the Company be dismissed entirely from the action. On June 23, 2015, the MHRC issued its Notice of Right to Sue and decision to terminate its process with respectbelieves it has meritorious defenses to all ~~charges asserted by the former employee. The plaintiff filed a parallel~~ ~~qui tam~~ ~~action in the District of Maine (Worthy v. Eastern Maine Healthcare Systems) making the same allegations,~~claims against it and ~~seeking money damages, False Claims Act penalties and plaintiff’s attorneys’ fees. The U.S. Department of Justice declined~~intends to intervene in the federal court action, and the case was unsealed in April 2015. The Company and other defendants filed motions to dismiss the Third Amended Complaint on March 21, 2016. Those motions were granted with respect to the retaliation claims, but denied with respect to the False Claims Act claims by the federal district court in January 2017. The parties mediated the case before the Magistrate Judge on July 24, 2017 and reached an agreement in principle, and subsequently resolved an additional contingency in order to settle the case. The settlement, which is now finalized, did not have a material impact to the consolidated financial statements.vigorously defend against these claims.

In May 2016, the Company was served with a False Claims Act case brought by a former emergency department service associate who worked at a hospital of one of the Company’s customers, MedStar Inc.’s Washington Hospital Center (“WHC”), along with WHC and three other hospitals that were PAS ~~clients~~customers and a place holder, John Doe hospital, representing all PAS ~~clients~~customers (~~USA~~U.S. ex rel. Graziosi vs. Accretive Health, Inc. et. al.), and seeking money damages, False Claims Act penalties, and plaintiff’s attorneys’ fees. The ~~Second~~Third Amended Complaint alleges that the Company’s PAS business violates the federal False Claims Act. The case was originally

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

filed under seal in 2013 in the federal district court in Chicago ~~was~~and presented to the U.S. Attorney in Chicago, ~~twice,~~ and the U.S. ~~Attorneys~~Attorney declined to intervene. The Company filed a motion to dismiss the Second Amended Complaint on July 29, 2016. On March 22, 2017, the district court dismissed all claims against all hospital defendants other than Medstar Inc.’s WHC, and dismissed all claims related to TriCare-related episodes of care. The parties are currently engaged in an initial discovery phase in which the plaintiff has sought broad discovery and brought a motion to compel discovery relating to the defendants that have been dismissed. The motion was denied and the Company believes that it has meritorious defenses to all claims in the case and intends to vigorously defend itself against these claims. ~~The outcome is not presently determinable.~~Both the Company’s and plaintiff’s motions for summary judgment were denied in December 2020, and the parties have completed damage and expert discovery. Additional dispositive motions are expected to extend through 2022, with trial, if necessary, in June 2023.

~~15.~~11. Related Party Transactions

~~As a result of~~This note encompasses transactions between Ascension and its affiliates, including AMITA Health, and the ~~closing of the Transaction on February 16, 2016 andAscension's ownership interest in the Investor, Ascension became a related party~~Company pursuant to the ~~Company. See Note 12, 8% Series A Convertible Preferred Stock, for additional information.~~

The Company provides RCM and PAS services to Ascension. The execution of the A&R MPSA, as discussed in Note 1, Business Description and Basis of Presentation, was a contractual settlement agreement of the prior Master Professional Services Agreement, ~~between the Company~~including all supplements, amendments, and ~~Ascension. The Company recorded revenue of $22.7 million and $366.2 million~~other documents entered into in connection therewith. For further details on the Company's agreements with ~~these~~Ascension, see Note 1 and Note 19 of the Company's 2021 Form 10-K.

Net services ~~for the three and nine months ended September 30, 2016. For the three and nine months ended September 30, 2017, the Company recorded~~ revenue ~~of $112.2 million and $275.3 million~~ from services provided to Ascension, ~~respectively.~~

~~At September 30, 2017, the Company had $20.1 million in current portion of~~as well as corresponding accounts receivable and customer liabilities ~~for a related party, consisting~~are presented in the Consolidated Statements of ~~$17.6 million, $0.3 million~~Operations and ~~$2.2 million in current accrued service costs, refund liabilities~~Comprehensive Income and deferred revenue. The Company had $9.1 million in non-current portion of customer liabilities for a related party related to non-current deferred revenue as of September 30, 2017. At December 31, 2016, the Company had $14.2 million in current portion of customer liabilities for a related party, consisting of $13.2 million in current accrued service costs and $1.0 million in current customer deposits. The Company had $110.0 million in non-current portion of customer liabilities for a related party related to deferred customer billings as of December 31, 2016. At September 30, 2017 and December 31, 2016, the Company had $18.0 million and $1.8 million in accounts receivable with Ascension, respectively.

As part of the transition of Ascension personnel to the Company in conjunction with the A&R MPSA, the Company has agreed to reimburse Ascension for certain severance and retention costs related to certain Ascension employees who will not be transitioned to the Company. As of September 30, 2017 and December 31, 2016, the Company had $0.7 million and $1.7 million in accrued compensation and benefits related to these costs, respectively.

AsConsolidated Balance Sheets. Since Ascension is the ~~Company's~~Company’s largest customer, a significant percentage of the ~~Company's~~Company’s cost of services is associated with providing services to Ascension. However, due to the nature of the ~~Company's shared~~Company’s global business services and information technology operations, it is impractical to assign the dollar amount associated with services provided to Ascension.

~~16. Deferred Contract Costs~~

~~One-time, non-recurring costs associated with~~On May 27, 2021 and May 28, 2021, the ~~initial phases~~Company issued 16,750,000 shares of common stock to TCP-ASC upon the cashless exercise of a warrant to purchase 19,535,145 shares of common stock at an exercise price of $3.50 per share based upon a market value of $24.54 to $24.64 per share as determined under the terms of the Ascension A&R MPSA and with the transition of additional Ascension hospitals are deferred. These fulfillment costs relate directly to the Company’s responsibilities under the A&R MPSA, generate or enhance resources of the Company that will be used in satisfying its performance obligations under the A&R MPSA in the future, and are expected to be recovered through the margins realized under the A&R MPSA. At September 30, 2017, the Company had $10.6 million in total deferred contract costs and $4.8 million at December 31, 2016.warrant.

~~R1 RCM Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Of the $10.6 million in deferred eligible costs, $1.3 million is included in prepaid expenses and other current assets and $9.3 million is included in other assets in the accompanying consolidated balance sheets. As of December 31, 2016, deferred eligible costs were included in the other current assets in the accompanying consolidated balance sheets.

The associated assets are amortized as services are transferred to the customer over the remaining life of the contract. For the three and nine months ended September 30, 2017, total amortization was $0.2 million and $0.6 million, respectively, and there were no associated impairment losses. For the~~three and nine monthsended September 30, 2016, $1.9 million and $2.8 million amounts had been capitalized, respectively, and no amounts had been amortized.~~

~~17.~~12.Segments and Customer Concentrations

The Company has determined that it has a single operating segment in accordance with ~~how its business activities are managed~~the way that management operates and ~~evaluated.~~views the business. All of the Company’s significant operations are organized around the single business of providing end-to-end management services of revenue cycle operations for U.S.-based ~~hospitals and other medical~~healthcare providers. Accordingly, for purposes of segment disclosures, the Company has only ~~one reporting~~1 operating and reportable segment. ~~All~~

Customers comprising greater than 10% of ~~the Company’s~~ net services revenue ~~and trade accounts receivable~~ are ~~derived from healthcare providers domiciled in the United States.~~as follows:

Hospital systems affiliated with Ascension have accounted for a significant portion of the Company’s net services revenue each year since the Company’s formation. For the three months ended September 30, 2017 and 2016, net services revenue from hospitals affiliated with Ascension accounted for 91% and 18% of the Company's total net services revenue, respectively. For the nine months ended September 30, 2017 and 2016, net services revenue from hospitals affiliated with Ascension accounted for 89% and 75% of the Company's total net services revenue, respectively.


	Three Months Ended March 31,
Customer Name	2022		2021
Ascension and its affiliates	56	%	63	%
Intermountain Healthcare	14	%	14	%

The loss of customers within the Ascension health system ~~would~~or Intermountain network could have a material adverse impact on the Company’s operations.

As of ~~September 30, 2017~~March 31, 2022 and ~~2016,~~December 31, 2021, the Company had a concentration of credit risk with ~~hospitals affiliated with~~ Ascension accounting for ~~70%~~15% and ~~31%~~17% of accounts receivable, respectively.

13.Supplemental Financial Information

The following table summarizes the allocation of depreciation and amortization expense related to property, equipment and software and intangible assets between cost of services and selling, general and administrative expenses:


	Three Months Ended March 31,
		2022		2021
Cost of services		$	18.6	$	17.1
Selling, general and administrative		0.3		0.8
Total depreciation and amortization		$	18.9	$	17.9

Supplemental cash flow information related to leases are as follows:


	Three Months Ended March 31,
	2022		2021


Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3.4	$	9.4
Right-of-use assets obtained in exchange for operating lease obligations:	6.0		5.6



Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to “R1,” “the Company,” “we,” “our,” and “us” mean R1 RCM Inc., and its subsidiaries.

The following discussion and analysis is an integral part of understanding our financial results and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes. ~~Also refer to Note 1 of our consolidated financial statements.~~

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the ~~federal securities laws, that involve substantial risks and uncertainties. These~~Private Securities Litigation Reform Act of 1995, as amended. You should not place undue reliance on these statements. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q are ~~often identified by the use of~~forward-looking statements. The words ~~such as~~ “anticipate,” “believe,” “designed,” “estimate,” “expect,” “forecast,” “intend,” ~~"designed",~~ “may,” “plan,” “predict,” “project,” “target,” “will” or “would” and similar expressions or ~~variations.~~variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements include, among other things, statements about our potential acquisition of Cloudmed, our strategic initiatives, our capital plans, our costs, our ability to successfully implement new technologies, our future financial performance, and our liquidity. Such forward-looking statements are ~~subject to~~based on management’s current expectations about future events as of the date hereof and involve many risks ~~uncertainties~~ and ~~other factors~~uncertainties that could cause our actual results ~~and the timing of certain events~~ to differ materially from ~~future results~~those expressed or implied in our forward-looking statements. Subsequent events and developments, including actual results or changes in our assumptions, may cause our views to change. We do not undertake to update our forward-looking statements except to the extent required by applicable law. Readers are cautioned not to place undue reliance on such forward-looking statements. ~~Factors that~~All forward-looking statements included herein are expressly qualified in their entirety by these cautionary statements. Our actual results and outcomes could ~~cause or contribute to such differences include,~~differ materially from those included in these forward-looking statements as a result of various factors, including, but are not limited to, ~~those discussed~~our ability to retain existing customers or acquire new customers; the development of markets for our revenue cycle management offering; variability in the ~~section titled “Risk Factors,”~~lead time of prospective customers; failure to consummate the potential Cloudmed acquisition within the expected timeframe or at all; our ability to integrate Cloudmed’s business into our operations in ~~Part II, Item 1A~~a timely and efficient manner; failure to realize the anticipated benefits of the potential Cloudmed acquisition; volatility in our price in connection with the announcement of the potential Cloudmed acquisition; competition within the market; breaches or failures of our information security measures or unauthorized access to customer’s data; delayed or unsuccessful implementation of our technologies or services, or unexpected implementation costs; disruptions in or damages to our global business services centers and third-party operated data centers; the impact of the COVID-19 pandemic on our business, operating results, and financial condition; the effects of macroeconomic events, including the war in Ukraine; and the factors discussed elsewhere in this Quarterly Report on Form 10-Q, and ~~elsewhere in this Report, as well as~~ those set forth in Part I, Item 1A of ~~the 2016~~our 2021 Form 10-K ~~as well as~~and our other filings with the SEC. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Subsequent events and developments may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Overview

Our Business

We are a leading provider of ~~RCM~~technology-driven solutions that transform the patient experience and ~~PAS services to~~financial performance of healthcare providers. WeOur services help healthcare providers generate sustainable improvements in their operating margins and cash flows while also enhancing patient, physician, and staff satisfaction for our customers.

~~While we cannot control the changes in the regulatory environment imposed on~~

We achieve these results for our customers ~~we believe that our role becomes increasingly more important to our customers as macroeconomic, regulatory and~~by managing healthcare ~~industry conditions continue to impose financial pressure on healthcare providers to manage their~~providers’ revenue cycle operations, ~~effectively and efficiently.~~

~~Our primary service offering consists of end-to-end RCM,~~ which ~~encompasses~~encompass processes including patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation, and ~~collections.~~collections from patients and payers. We ~~deploy~~do so by deploying a unique operating model that leverages our extensive healthcare domain experience, innovative technology and intelligent automation, and process excellence. We assist our revenue cycle management (“RCM”) customers in managing their revenue cycle operating costs while simultaneously increasing the portion of the maximum potential services revenue they receive. Together, these benefits can generate significant and sustainable improvements in operating margins and cash flows for our customers.

Our primary service offering consists of end-to-end RCM services for health systems, hospitals, and physician groups, which we deploy through ~~a co-managed relationship or~~ an operating partner relationship or a co-managed relationship. Under an operating partner relationship, we provide comprehensive revenue cycle infrastructure to providers, including all revenue cycle personnel, technology solutions, and process workflow. Under a co-managed relationship, we leverage our customers’ existing RCM staff and processes, and supplement them with our infused management, subject matter specialists, proprietary technology solutions, and other resources. Under anthe operating partner ~~relationship,~~model, we ~~provide comprehensive~~record higher revenue ~~cycle infrastructure~~and expenses due to ~~providers, including~~the fact that almost all of the revenue cycle personnel ~~technology,~~are our employees and ~~process workflow.~~ more third-party vendor contracts are controlled by us. Under the co-managed model, the majority of the revenue cycle personnel and third-party vendor contracts remain with the customer and those costs are netted against our co-managed revenue. For the three months ended March 31, 2022 and 2021, substantially all of our net operating and incentive fees from end-to-end RCM services were generated under the operating partner model.

We also offer modular services, allowing ~~clients~~customers to engage us for ~~only~~ specific components of our end-to-end RCM service ~~offering.~~offering, such as patient experience, physician advisory services (“PAS”), clinical documentation integrity (“CDI”), coding management, revenue integrity solutions (“RIS”), business office services, and practice management (“PM”). Our patient experience offering, R1 EntriTM, unifies scheduling, clearance, intake and payments into one welcoming experience. Our PAS offering ~~complements our RCM offering by strengthening our customer’s compliance~~assists healthcare organizations in complying with ~~certain third-party~~ payer requirements ~~and limiting denials of claims. For example, our PAS offering helps customers determine~~regarding whether to classify a hospital visit as an in-patient or an out-patient observation case for billing purposes. Our CDI solution helps customers improve Hospital Compare Star Ratings, which in turn can increase volume and reimbursement. Our coding management offering drives performance, quality, and consistent results via business intelligence and analysis, human capital management, an accountability framework, and a quality management program. Our RIS offering includes charge capture, charge description master (“CDM”) maintenance, and pricing services that help providers ensure they are capturing the maximum net compliant revenue for services delivered. Our business office services can help providers with the entire billing function or to specifically recoup revenue that may otherwise be lost by focusing skilled resources in lower priority areas with significant revenue potential. Our PM services offer administrative and operational support to allow healthcare providers to focus on delivering high quality patient care and outsource non-core functions to us.

Once implemented, our technology solutions, processes, and services are deeply embedded in our customers’ day-to-day revenue cycle operations. We believe our service offerings are adaptable to meet an evolving healthcare regulatory environment, technology standards, and market trends.

We operate our business as a single segment configured with our significant operations and offerings organized around the business of providing ~~end-to-end RCM services to U.S.-based hospitals and other~~revenue cycle operations for healthcare providers.

~~Business Update~~Coronavirus Pandemic

Patient volumes have continued to recover and are largely in line with pre-2019 Novel Coronavirus (“COVID-19”) levels. The impact of the COVID-19 pandemic is fluid and continues to evolve. We cannot predict the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted, including as a result of macro-economic impacts to the global supply chain, labor shortages, and inflationary pressures. However, we continue to assess its impact on our business and continue to actively manage our response. For further details on the potential impact of COVID-19 on our business, refer to “Risk Factors,” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Cloudmed Acquisition

On ~~February 16, 2016,~~January 9, 2022, we entered into a definitive agreement to acquire Cloudmed, a leader in Revenue Intelligence™ solutions for healthcare providers, in exchange for shares of common stock equal to approximately 30% of our fully diluted shares as of the ~~A&R MPSA with Ascension for~~date of the agreement on a ~~10-year term, becoming~~pro forma basis, after giving effect to the acquisition. The total consideration is expected to be approximately $4.1 billion, inclusive of approximately $857 million in net debt, based on our closing stock price on January 7, 2022.

~~exclusive provider~~

We believe this transaction will enable us to further our ability to deliver transformative value to healthcare providers through a more fulsome platform of differentiated capabilities by creating a scaled leader across both end-to-end RCM and ~~PAS services to Ascension hospitals that execute supplement agreements with us. We started onboarding the first phase of new hospitals in mid-2016,~~technology-driven revenue intelligence.

The transaction, which ~~was followed~~has been unanimously approved by the Boards of Directors of both companies, is expected to close in the second ~~phase~~quarter of ~~new hospitals in mid-2017. We expect the final phase of hospitals~~2022, subject to be onboarded in mid-2018. The A&R MPSA is structured as an operating partner model, whereby a significant number of Ascension’s revenue cycle employees become our employees. As a result, our employee count has increased by over 5,000 employees since mid-2016. The operating partner model also requires the transitionapproval of the ~~non-payroll expenses supporting a hospital’s revenue cycle operations to become direct expenses of~~stock issuance by our shareholders, the ~~Company. New hospitals onboarded, along with direct control of payroll and non-payroll expenses, have been the primary drivers of the growth in our revenue and cost of services in 2017.~~

In May 2017, we announced the expansion of our relationship with Ascension. The expanded relationship adds a health system which was acquired by Ascension after the signing of the A&R MPSA and increases the scope of our contract by adding physician RCM services for all Ascension ministries in Wisconsin. We expect to begin onboarding this expanded scope of business in the fourth quarter of 2017.

By the end of 2017, we expect to have onboarded or started the onboarding process for more than 85% of the new Ascension hospitals under the A&R MPSA. Consequently, we believe we are in a position to meaningfully increase our sales and marketing efforts to win new business. In July 2017, we launched a portfolio of five modular solutions to complement our end-to-end RCM offerings. The sophistication of our capabilities and additional flexibility for health systems to contract with us for specific components of the revenue cycle should position us favorably to win new business. Additionally, we also announced the appointmentcontinued effectiveness of a ~~new chief commercial officer in August 2017. In addition to organic growth, we also expect to continue to actively pursue acquisitions to complement our existing capabilities~~registration statement on Form S-4, receipt of regulatory approvals, and ~~further enhance our market presence.~~the satisfaction of other customary closing conditions.

CONSOLIDATED RESULTS OF OPERATIONS

The following table provides consolidated operating results and other operating data for the periods indicated:


	Three Months Ended March 31,		2022 vs. 2021 Change
			2022		2021		Amount		%
		(In millions except percentages)
Consolidated Statement of Operations Data:
Net operating fees			$	322.8	$	286.1	$	36.7	13	%
Incentive fees			30.2		29.0		1.2		4	%
Other			32.7		27.5		5.2		19	%
Total net services revenue			385.7		342.6		43.1		13	%
Operating expenses:
Cost of services			296.5		267.2		29.3		11	%
Selling, general and administrative			28.9		25.6		3.3		13	%
Other expenses			17.1		13.0		4.1		32	%
Total operating expenses			342.5		305.8		36.7		12	%
Income from operations			43.2		36.8		6.4		17	%

Net interest expense			4.7		3.9		0.8		21	%
Net income before income tax provision			38.5		32.9		5.6		17	%
Income tax provision			9.1		7.1		2.0		28	%
Net income			$	29.4	$	25.8	$	3.6	14	%

Adjusted EBITDA (1)			$	89.3	$	80.4	$	8.9	11	%

(1) Refer to the Non-GAAP Financial Measures section below for a reconciliation of our financial results reported in accordance with GAAP to non-GAAP financial results.

Three Months Ended September 30, 2017 vs. 2016
Change Nine Months Ended September 30, 2017 2017 vs. 2016
Change
2017 2016 Amount % 2017 2016 Amount %
(In millions except percentages)
Consolidated Statement of Operations Data:
RCM services: net operating fees $ 104.6
$ 49.0
$ 55.6
113.5 % 255.4
300.3
$ (44.9 ) (15.0 )%
RCM services: incentive fees 7.5
68.5
(61.0 ) (89.1 )% 20.2
166.5
(146.3 ) (87.9 )%
RCM services: other 2.8
3.8
(1.0 ) (26.3 )% 9.8
8.3
1.5
18.1 %
Other service fees 8.3
4.2
4.1
97.6 % 24.1
11.3
12.8
113.3 %
Total net services revenue 123.2
125.5
(2.3 ) (1.8 )% 309.5
486.4
(176.9 ) (36.4 )%
Operating expenses:
Cost of services 111.8
47.4
64.4
135.9 % 289.1
137.6
151.5
110.1 %
Selling, general and administrative 15.1
16.2
(1.1 ) (6.8 )% 41.6
58.4
(16.8 ) (28.8 )%
Other 1.4
0.5
0.9
180.0 % 2.6
20.0
(17.4 ) (87.0 )%
Total operating expenses 128.3
64.1
64.2
100.2 % 333.3
216.0
117.3
54.3 %
Income (loss) from operations (5.1 ) 61.4
(66.5 ) (108.3 )% (23.8 ) 270.4
(294.2 ) (108.8 )%
Net interest income —
0.1
(0.1 ) (100.0 )% 0.1
0.2
(0.1 ) (50.0 )%
Net income (loss) before income tax provision (5.1 ) 61.5
(66.6 ) (108.3 )% (23.7 ) 270.6
(294.3 ) (108.8 )%
Income tax provision (benefit) (1.5 ) 24.1
(25.6 ) (106.2 )% (5.1 ) 106.6
(111.7 ) (104.8 )%
Net income (loss) $ (3.6 ) $ 37.4
$ (41.0 ) (109.6 )% (18.6 ) 164.0
$ (182.6 ) (111.3 )%

Use of Non-GAAP Financial Information

AsIn order to provide a more comprehensive understanding of ~~January 1, 2017,~~ the ~~Company adopted Topic 606,~~ ~~Revenue from Contracts with Customers~~ ~~(“Topic 606”)~~information used by our management team in financial and thus for the three and nine months ended September 30, 2017, the Company followed the guidance under Topic 606. Under the newly adopted guidance, revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contract term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved.

~~For periods prior to 2017,~~operational decision-making, we typically invoiced customers for base fees and incentive fees on a quarterly or monthly basis, and typically received cash from customers on a similar basis. For GAAP reporting purposes, we only recognized those net operating fees and incentive fees as net services revenue to the extent that all the criteria for revenue recognition were met, which was generally upon contract renewal, termination or other contractual agreement event. As such, net operating and incentive fees were typically recognized for GAAP purposes in periods subsequent to the periods in which the services are provided. Therefore,supplement our ~~net services revenue and other items in our GAAP~~ consolidated financial statements ~~typically included the effects of billings and collections from periods prior to the period~~that have been prepared in ~~which revenue was recognized.~~

~~We supplement our~~accordance with GAAP ~~consolidated financial statements~~ with the ~~following~~ non-GAAP financial ~~measures: gross cash generated from customer contracting activities (2016), net cash generated from customer contracting activities (2016) and~~measure of adjusted EBITDA. Adjusted EBITDA is utilized by our Board and management team as (i) one of the primary methods for planning and forecasting overall expectations and for evaluating actual results against such expectations; and (ii) as a performance evaluation metric in determining achievement of certain executive incentive compensation programs, as well as for incentive compensation plans for employees. The non-GAAP measures of gross and net cash generated from customer contracting activities, that were utilized by the Company in 2016, are the metrics most comparable to net services revenue and net income, respectively. The Company will provide these metrics for comparability in light of the differences in our revenue recognition year over year.

~~Selected Non-GAAP Measures~~

~~Gross and Net Cash Generated from Customer Contracting Activities~~

Gross and net cash generated from customer contracting activities reflects the change in the deferred customer billings, relative to GAAP net services revenue. Deferred customer billings include the portion of both (i) invoiced or accrued net operating fees and (ii) cash collections of incentive fees, in each case, that have not met our revenue recognition criteria. Deferred customer billings are included in the detail of our customer liabilities balance in the consolidated balance sheet. Deferred customer billings are reduced by the amounts of revenue recognized when a revenue recognition event occurs. Gross cash generated from customer contracting activities is defined as GAAP net services revenue, plus the change in deferred customer billings. Accordingly, gross cash generated from customer contracting activities is the sum of (i) invoiced or accrued net operating fees, (ii) cash collections on incentive fees and (iii) other services fees. Net cash generated from customer contracting activities is defined as adjusted EBITDA, plus the change in deferred customer billings.We anticipate the use of these non-GAAP measures to be limited to the year and quarters ended in 2017. Beginning in 2018, there will be two comparable periods of GAAP metrics under Topic 606 and we expect disclosure of these metrics to not be necessary on a go forward basis.

Gross and net cash generated from customer contracting activities include invoices issued to customers that may remain uncollected or may be subject to credits, and cash collected may be returned to our customers in the form of concessions or other adjustments. Customer concessions and other adjustments have occurred in the past and we cannot determine the likelihood that they will again occur in the future.

~~These non-GAAP measures are used throughout this Quarterly Report on Form 10-Q including in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

Adjusted EBITDA

We define adjusted EBITDA as net income before net interest ~~income,~~income/expense, income tax ~~provision,~~provision/benefit, depreciation and amortization expense, share-based compensation expense, ~~reorganization-related expense~~strategic initiatives costs, and ~~certain~~ other ~~items. Prior~~items which are detailed in Note 7, Other Expenses, to ~~2017,~~ the use of adjusted EBITDA to measure operating and financial performance was limited by our revenue recognition criteria, pursuant to which GAAP net services revenue was recognized at the end of a contract or "other contractual agreement event". As such, adjusted EBITDA did not adequately match corresponding cash flows resulting from customer contracting activities.Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

We understand that, although non-GAAP measures are frequently used by investors, securities analysts, and others in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under GAAP. Some of these limitations are:

Gross and net cash generated from customer contracting activities include invoiced or accrued net operating fees, and collected incentive fees which may be subject to adjustment or concession prior to the end of a contract or "other contractual agreement event";

Gross and net cash generated from customer contracting activities include progress billings on incentive fees that have been collected for a number of our RCM contracts. These progress billings have, from time-to-time been subject to adjustments, and the fees included in these non-GAAP measures may be subject to adjustments in the future;

•Adjusted EBITDA ~~and net cash generated from customer contracting activities do~~does not ~~reflect changes~~reflect:

•Changes in, or cash requirements for, our working capital needs;

~~Adjusted EBITDA and net cash generated from customer contracting activities do not reflect share-based~~•Share-based compensation expense;

~~Adjusted EBITDA and net cash generated from customer contracting activities do not reflect income~~•Income tax expenses or cash requirements to pay taxes;

~~Adjusted EBITDA and net~~•Interest expenses or cash ~~generated from customer contracting activities do not reflect certain Other~~required to pay interest;

•Certain other expenses which may require cash payments;

•Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and ~~neither~~ adjusted EBITDA ~~nor net cash generated from customer contracting activities~~does not reflect cash requirements for such replacements or other purchase commitments, including lease commitments; and

•Other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Reconciliation of GAAP and Non-GAAP Measures

The following table represents a reconciliation of ~~gross cash generated from customer contracting activities~~adjusted EBITDA to net ~~services revenue,~~income, the most closely comparable GAAP measure, for each of the periods indicated:

Three Months Ended September 30, 2017 vs. 2016
Change Nine Months Ended September 30, 2017 2017 vs. 2016
Change
2017 2016 Amount % 2017 2016 Amount %
(In millions except percentages)
RCM services: net operating fees $ 104.6
$ 49.0
$ 55.6
113.5 % 255.4
300.3
$ (44.9 ) (15.0 )%
RCM services: incentive fees 7.5
68.5
(61.0 ) (89.1 )% 20.2
166.5
(146.3 ) (87.9 )%
RCM services: other 2.8
3.8
(1.0 ) (26.3 )% 9.8
8.3
1.5
18.1 %
Other services fees 8.3
4.2
4.1
97.6 % 24.1
11.3
12.8
113.3 %
Net services revenue 123.2
125.5
(2.3 ) (1.8 )% 309.5
486.4
(176.9 ) (36.4 )%
Change in deferred customer billings (non-GAAP) (1) n.a.
(65.8 ) n.m.
n.m.
n.a. (347.5) n.m.
n.m.
Gross cash generated from customer contracting activities (non-GAAP) n.a.
$ 59.7
n.m.
n.m.
n.a
138.9
n.m.
n.m.


	Three Months Ended March 31,		2022 vs. 2021 Change
			2022		2021		Amount		%
		(In millions except percentages)
Net income			$	29.4	$	25.8	$	3.6	14	%
Net interest expense			4.7		3.9		0.8		21	%
Income tax provision			9.1		7.1		2.0		28	%
Depreciation and amortization expense			18.9		17.9		1.0		6	%
Share-based compensation expense (1)			10.1		12.7		(2.6)		(20)	%

Other expenses (2)			17.1		13.0		4.1		32	%
Adjusted EBITDA (non-GAAP)			$	89.3	$	80.4	$	8.9	11	%

~~n.m. - not meaningful~~

~~n.a. - Due~~(1) Share-based compensation expense represents the expense associated with stock options, restricted stock units, and performance-based restricted stock units granted, as reflected in our Consolidated Statements of Operations and Comprehensive Income. See Note 6, Share-Based Compensation, to the ~~adoption of Topic 606 as of January 1, 2017, the non-GAAP measure of gross cash generated from customer contracting activities, that was utilized by the Company~~consolidated financial statements included in ~~2016, is not applicable for 2017. Gross cash generated from customer contracting activities has been provided~~this Quarterly Report on Form 10-Q for the ~~three and nine months ended September 30, 2016 as it is the most comparable metric to net services revenue for the three and nine months ended September 30, 2017.~~

~~(1)~~

Deferred customer billings include the portion of both (i) invoiced or accrued net operating fees and (ii) cash collections on incentive fees, in each case, that have not met our revenue recognition criteria. Deferred customer billings are included in the detail of our customer liabilities account in the consolidated balance sheet. Deferred customer billings are reduced by revenue recognized when revenue recognition occurs. Change in deferred customer billings represents the net change in the cumulative net operating fees and incentive fees that have not met revenue recognition criteria under Topic 605.

~~The following table represents a reconciliation of adjusted EBITDA and net cash generated from customer contracting activities to net income (loss), the most comparable GAAP measure, for each~~ of the ~~periods indicated:~~amounts of share-based compensation expense.

Three Months Ended September 30, 2017 vs. 2016 Change Nine Months Ended September 30, 2017 2017 vs. 2016
Change
2017 2016 Amount % 2017 2016 Amount %
(In millions except percentages)
Net income (loss) (3.6 ) 37.4
$ (41.0 ) (109.6 )% (18.6 ) 164.0
$ (182.6 ) (111.3 )%
Net interest income —
(0.1 ) 0.1
(100.0 )% $ (0.1 ) —
(0.2 ) 0.1
(50.0 )%
Income tax provision (benefit) (1.5 ) 24.1
(25.6 ) (106.2 )% (5.1 ) 106.6
(111.7 ) (104.8 )%
Depreciation and amortization expense 4.5
2.7
1.8
66.7 % 11.5
7.3
4.2
57.5 %
Share-based compensation expense (1) 2.4
4.8
(2.4 ) (50.0 )% 8.2
23.5
(15.3 ) (65.1 )%
Other (2) 1.4
0.5
0.9
180.0 % 2.6
20.0
(17.4 ) (87.0 )%
Adjusted EBITDA (non-GAAP) 3.1
69.4
(66.3 ) (95.5 )% (1.6 ) 321.2
(322.8 ) (100.5 )%
Change in deferred customer billings (non-GAAP) (3) n.a.
(65.8 ) n.m.
n.m.
n.a.
(347.5 ) n.m.
n.m.
Net cash generated from customer contracting activities (non-GAAP) n.a.
$ 3.6
n.m.
n.m.
n.a.
$ (26.4 ) n.m.
n.m.

~~n.m. - not meaningful~~

n.a. - Due to the adoption of Topic 606 as of January 1, 2017, the non-GAAP measure of gross cash generated from customer contracting activities, that was utilized by the Company in 2016, is not applicable for 2017. Net cash generated from customer contracting activities has been provided for the three and nine months ended September 30, 2016 as it is the most comparable metric to adjusted EBITDA for the three and nine months ended September 30, 2017.

~~Due to rounding, numbers presented in this table may not add up precisely to the totals provided.~~

~~(1)~~

Share-based compensation expense represents the expense associated with stock options, restricted stock units and restricted stock awards granted, as reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 9, Share-Based Compensation, to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the detail of the amounts of share-based compensation expense.


~~(2)~~	~~Other costs consist of the following (in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Severance and employee benefits $ —
$ (0.3 ) $ 0.3
$ 2.5
Facility charges —
—
—
0.7
Non-cash share based compensation —
—
0.1
1.8
Reorganization-related —
(0.3 ) 0.4
5.0
Transaction fees (i) —
—
—
13.3
Defined contribution plan contributions (ii) —
—
—
0.9
Restatement costs —
0.8
—
0.8
Acquisition related diligence and costs (iii) 1.4
—
1.4
—
Transitioned employees restructuring expense (iv) —
—
0.8
—
Other 1.4
0.8
2.2
15.0
Total other $ 1.4
$ 0.5
$ 2.6
$ 20.0

~~(i) Costs related to retention payments and legal fees paid~~(2) Other expenses are incurred in connection with acquisition and integration costs, various exit activities, transformation initiatives, and organizational changes to improve our business alignment and cost structure. See Note 7, Other Expenses, to the ~~closing~~consolidated financial statements included in this Quarterly Report on Form 10-Q for the detail of the ~~Transaction (see Note 12).~~amounts included in other expenses.

~~(ii) Additional contributions to the Company's defined contribution plan for the year ended December 31, 2016.~~

~~(iii) Costs related to evaluating and pursuing acquisition opportunities as part of the Company’s inorganic growth strategy.~~

(iv) As part of the transition of Ascension personnel to the Company in conjunction with the A&R MPSA, the Company has agreed to reimburse Ascension for certain severance and retention costs related to certain Ascension employees who will not be transitioned to the Company.

~~(3)~~

Three Months Ended ~~September 30, 2017~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2021

Net Services Revenue

~~Revenue decreased~~Net services revenue increased by ~~$2.3~~$43.1 million, or 13%, from ~~$125.5~~$342.6 million for the three months ended ~~September 30, 2016~~March 31, 2021, to $123.2 million for three months ended September 30, 2017. As noted above, the Company adopted new guidance on revenue recognition as of January 1, 2017. Under the new revenue recognition standard adopted as of January 1, 2017, we recognize revenue when a performance obligation is satisfied by transferring control over a service to a customer, which is typically over the contact term. For the three months ended September 30, 2017, we recognized $123.2 million in revenue. Prior to the adoption of the new standard, revenue was recognized when all the criteria for revenue recognition was met, which was generally upon contract renewal, termination or other contractual agreement event. For the three months ended September 30, 2016, we recognized $116.8 million in revenue due to contractual agreement events. See Note 6, Revenue Recognition, for further explanation of the Company’s revenue recognition policy related to periods starting on or after January 1, 2017.

~~Net Services Revenue (2017) (GAAP) compared to Gross Cash Generated from Customer Contracting Activities (2016) (non-GAAP)~~

Due to the adoption of Topic 606 as of January 1, 2017, the non-GAAP measure of gross cash generated from customer contracting activities, that was utilized by the Company in 2016, is not applicable for 2017. However, we have provided a year-over-year comparison of net services revenue to gross cash generated from customer contracting activities as gross cash generated from customer contracting activities for the three months ended September 30, 2016 is the most comparable metric to net services revenue for the three months ended September 30, 2017.

~~Net services revenue as compared to gross cash generated from customer contracting activities increased by $63.5 million, or 106.4%, from $59.7~~$385.7 million for the three months ended ~~September 30, 2016,~~March 31, 2022. The increase was driven primarily by increased net operating fees from end-to-end RCM services provided to ~~$123.2~~hospitals and physician groups due to new customers onboarded during 2021 and a recovery in patient volumes. The increase can also be attributed to other services revenue, which largely includes modular revenue inclusive of iVinci Partners, LLC d/b/a VisitPay (“VisitPay”).

Cost of Services

Costs of services primarily consists of wages and benefits of personnel that perform services for our customers and any related supplies, equipment, or facility costs utilized by these employees. It also includes cost of services provided to our customers by vendors directly contracted by R1 or assigned to R1 at contract inception. Cost of servicesincreased by $29.3 million, or 11%, from $267.2 million for the three months ended ~~September 30, 2017. The increase was primarily driven by the onboarding of new Ascension hospitals under the A&R MPSA.The transition~~March 31, 2021, to ~~the A&R MPSA for Ascension hospitals served~~

prior to 2016 also contributed to the increase, due to a change in classification of costs from an offset to net operating fees to cost of services due to on-boarding of employees. These two factors resulted in an increase in revenue of $59.3 million. In addition, other services fees increased by $4.1 million, driven by our PAS business.

Gross cash generated from customer contracting activities is a non-GAAP measure. Please see "Selected Consolidated Financial Data - Selected Non-GAAP Measures" for an explanation of how we calculate and use gross cash generated from customer contracting activities and for its reconciliation to revenue, the most comparable GAAP measure.

~~Cost of Services~~

~~Cost of services increased by $64.4 million, or 135.9%, from $47.4~~$296.5 million for the three months ended ~~September 30, 2016, to $111.8 million for the three months ended September 30, 2017.~~March 31, 2022. The increase in cost of services was primarily driven by compensation and vendor costs ~~associated with providing services to new Ascension hospitals. In addition, costs also increased due~~related to the ~~transition to~~onboarding of new customers and the ~~A&R MPSA,~~addition of VisitPay operating costs, which ~~led to change in classification~~are reflective of ~~costs from an offset to net operating fees to cost~~current revenue growth. Cost of services ~~due~~also includes amortization expense related to ~~on-boarding~~acquired intangible assets and software that support our service offerings to customers. Amortization expense increased as a result of ~~employees (discussed above)~~the VisitPay acquisition and an increase in shared services costs driven by increased volume. These two factors resulted in an increase in costs of $61.5 million. In addition, the increase in PAS volume resulted in a $2.2 million increase in cost of services.internally developed software.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~decreased~~increased by ~~$1.1~~$3.3 million, or ~~6.8%~~13%, from ~~$16.2~~$25.6 million for the three months ended ~~September 30, 2016~~March 31, 2021, to ~~$15.1~~$28.9 million for the three months ended ~~September 30, 2017. This decrease~~March 31, 2022. The increase was ~~primarily~~ driven by ~~a $2.2 million decline in stock compensation expense, offset by an increase in general~~VisitPay-related costs, sales and ~~administrative costs related~~marketing spend to ~~scaling of the business.~~support business growth, and increased travel expenses as COVID-19-related restrictions are lifted.

Other ~~Costs~~Expenses

Other ~~costs~~expenses increased by ~~$0.9 million, from $0.5~~$4.1 million, or ~~180.0%~~32%, ~~for the three months ended September 30, 2016, to $1.4~~from $13.0 million for the three months ended ~~September 30, 2017. The increase in costs was primarily related~~March 31, 2021, to ~~acquisition-related diligence expenditures.~~

~~Income Taxes~~

~~Income tax provision decreased by $25.6~~$17.1 million ~~from $24.1 million income tax provision~~ for the three months ended ~~September 30, 2016~~March 31, 2022. See Note 7, Other Expenses, to ~~a $1.5~~the consolidated financial statements included in this Quarterly Report on Form 10-Q for the details of the costs included in this total for the comparative periods.

Income Tax Provision

Income tax expense increased by $2.0 million ~~benefit~~from $7.1 million for the three months ended ~~September 30, 2017, primarily due~~March 31, 2021, to ~~a decrease in pretax income. Our effective tax rate was approximately 29% and 39%~~$9.1 million for the three months ended ~~September 30, 2017~~March 31, 2022, primarily due to higher pre-tax income and ~~2016,~~higher non-deductible expenses. Our effective tax rate (including discrete items) was approximately 24% and 22% for the three months ended March 31, 2022 and 2021, respectively.Our tax rate is also affected by discrete items that may occur in any given year but are not necessarily consistent from year to year. ~~Our rate for the three months ended September 30, 2017 was impacted by the write-off of deferred tax assets related to stock-based compensation due to the adoption of ASU 2016-09.~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Revenue~~

Revenue decreased by $176.9 million, or 36.4%, from $486.4 million for the nine months ended September 30, 2016 to $309.5 million for nine months ended September 30, 2017. As noted above, the Company adopted new guidance on revenue recognition as of January 1, 2017. For the nine months ended September 30, 2016, revenue was recognized when all the criteria for revenue recognition was met, which was generally upon contract renewal, termination or other contractual agreement. For the nine months ended September 30, 2016, $450.2 million in revenue was recognized due to contractual agreement events related to Ascension and other RCM clients. A significant portion of this revenue related to services prior to the period of revenue recognition. For the nine months ended September 30, 2017, we recognize revenue when a performance obligation is satisfied by transferring control

over a service to a customer, which is typically over the contact term. The amount recognized in 2016 associated with the contractual termination event was partially offset by services provided to new Ascension hospitals under the A&R MPSA that we were not previously servicing.

~~See Note 6, Revenue Recognition, for further explanation of the Company’s revenue recognition policy related to periods starting on or after January 1, 2017.~~

~~Net Services Revenue (2017) (GAAP) compared to Gross Cash Generated from Customer Contracting Activities (2016) (non-GAAP)~~

Due to the adoption of Topic 606 as of January 1, 2017, the non-GAAP measure of gross cash generated from customer contracting activities, that was utilized by the Company in 2016, is not applicable for 2017. However, we have provided a year-over-year comparison of net services revenue to gross cash generated from customer contracting activities as gross cash generated from customer contracting activities for the nine months ended September 30, 2016 is the most comparable metric to net services revenue for the nine months ended September 30, 2017.

Net services revenue as compared to gross cash generated from customer contracting activities increased by $170.6 million or 122.8%, from $138.9 million for the nine months ended September 30, 2016, to $309.5 million for the nine months ended September 30, 2017. The increase was primarily driven by the onboarding of new Ascension hospitals under the A&R MPSA. In addition, the increase was also driven by the transition to the A&R MPSA, which resulted in a change in classification of costs from an offset to net operating fees to cost of services due to on-boarding of employees. These two factors primarily resulted in an increase of $157.7 million in revenue. In addition, other service fees increased by $12.8 million primarily due to revenue being recognized in conjunction with the execution of PAS supplements for Ascension affiliates which were executed during 2017, as well as volume increases for Non-Ascension PAS customers.

~~Cost of Services~~

Cost of services increased by $151.5 million, or 110.1%, from $137.6 million for the nine months ended September 30, 2016, to $289.1 million for the nine months ended September 30, 2017. The increase was driven by costs associated with providing services to new Ascension hospitals. In addition, costs also increased due to the transition to the A&R MPSA, which led to change in classification of costs from an offset to net operating fees to cost of services due to on-boarding of employees (discussed above) and an increase in shared service costs driven by increased volume. These two factors resulted in an increase in costs of $142.1 million. In addition, the increase in PAS volume resulted in a $6.8 million increase in cost of services.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses decreased by $16.8 million, or 28.8%, from $58.4 million for the nine months ended September 30, 2016 to $41.6 million for the nine months ended September 30, 2017. This decrease was primarily due to a $13.7 million decline in stock compensation expense and $3.0 million of severance costs related to the departure of an executive officer in 2016.

~~Other Costs~~

Other costs decreased by $17.4 million, or 87.0% from $20.0 million for the nine months ended September 30, 2016, to $2.6 million for the nine months ended September 30, 2017. The decrease was primarily attributable to $13.3 million in costs related to the closing of the Transaction with Ascension Health Alliance and TowerBrook on

February 16, 2016 and $5.0 million in reorganization related costs during the nine months ended September 30, 2016, offset by $1.4 million of costs incurred during the nine months ended September 30, 2017 for acquisition-related diligence expenditures.

~~Income Taxes~~

Income tax provision decreased by $111.7 million from $106.6 million income tax provision for the nine months ended September 30, 2016 to a $5.1 million income tax benefit for the nine months ended September 30, 2017, primarily due to a decrease in pretax income. Our effective tax rate was approximately 22% and 39% for the nine months ended September 30, 2017 and 2016. Our tax rate is affected by discrete items that may occur in any given year, but not consistent from year to year. Our rate for the nine months ended September 30, 2017 was impacted by the write-off of deferred tax assets related to stock based compensation due to the adoption of ASU 2016-09.

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

Management considers an accounting ~~policy~~estimate to be critical if the accounting ~~policy~~estimate requires management to make particularly difficult, subjective, or complex judgments about matters that are inherently uncertain. A summary of our critical accounting ~~policies~~estimates is included in Part II, Item 7 ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Application of Critical Accounting ~~Policies and Use of Estimates"~~Estimates” of our ~~2016~~2021 Form 10-K. There have been no material changes to the critical accounting ~~policies~~estimates disclosed in our ~~2016~~2021 Form 10-K other than the impact of adopting new accounting standards. See Note 6, Revenue Recognition, and Note 9, Share-Based Compensation, in the notes to the consolidated financial statements for discussion of the impact of the adoption of these standards on the Company's policies for revenue and stock compensation, respectively.10-K.

NEW ACCOUNTING PRONOUNCEMENTS

~~For additional information regarding~~No new accounting ~~guidance, see~~pronouncements issued or effective during the fiscal year had, or are expected to have, a material impact on our consolidated financial statements as described in Note ~~2, Recent Accounting Pronouncements,~~1, Business Description and Basis of Presentation, to our consolidated financial statements included in this Quarterly Report on Form ~~10-Q, which provides a summary~~10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity include our ~~recently adopted accounting standards and disclosures.~~

~~Liquidity and Capital Resources~~

~~Cash~~cash flows from ~~operating, investing~~operations and ~~financing activities,~~borrowings under our amended and restated senior credit agreement (the “A&R Credit Agreement”). As of March 31, 2022 and December 31, 2021, we had total available liquidity of $493.4 million and $499.6 million, respectively, reflecting our cash and cash equivalents as ~~reflected~~well as remaining availability under our senior secured revolving credit facility (the “Senior Revolver”).

Our liquidity is influenced by many factors, including timing of revenue and corresponding cash collections, the amount and timing of investments in strategic initiatives, our ~~Consolidated Statements of Cash Flows, are summarized~~investments in ~~the following table:~~

Nine Months Ended September 30,
2017 2016
(In millions)
Net cash used in provided by operating activities $ (4.3 ) $ (69.3 )
Net cash used in investing activities (30.1 ) (9.4 )
Net cash (used in) provided by financing activities (4.4 ) 176.8

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Operating Activities~~

Cash used in operating activities improved by $65.0 million, from cash used of $69.3 million for the nine months ended September 30, 2016, to cash used of $4.3 million for the nine months ended September 30, 2017. The decrease resulted from stronger operating performance as evidenced by the improvement in adjusted EBITDA for

~~the nine months ended September 30, 2017 as compared to net cash generated for the nine months ended September 30, 2016.~~

~~Investing Activities~~

Cash used in investing activities increased by $20.7 million from $9.4 million for the nine months ended September 30, 2016, to $30.1 million for the nine months ended September 30, 2017. Cash used in investing activities increased primarily due to an increase in purchases of computer hardwareproperty, equipment and software, and ~~spending on expanding our India operations.~~

~~Financing Activities~~

~~Cash provided by financing activities decreased by $181.2 million from~~the use of cash ~~provided by financing activities~~to pay tax withholding obligations upon surrender of ~~$176.8 million for the nine months ended September 30, 2016~~shares upon vesting of equity awards. We continue to ~~cash used~~invest capital in ~~financing activities of $4.4 million for the nine months ended September 30, 2017. This change is primarily due~~order to ~~the investment of $200 million by the Investor in connection with the Transaction offset by transaction costs of $21.3 million during the nine months ended September 30, 2016.~~

~~Future Capital Needs~~

~~In connection with~~achieve our strategic ~~initiatives,~~initiatives. In addition, we plan ~~to continue~~ to enhance customer service by continuing our investment in technology to enable our systems to more effectively integrate with our customers’ existing ~~technologies.~~ technologies in connection with our strategic initiatives.

We plan to continue to deploy resources to strengthen our information technology infrastructure, including automation, in order to drive additional value for our customers. We also expect to continue to invest in our ~~shared~~global business services infrastructure and capabilities, and selectively pursue acquisitions and/or strategic relationships that will enable us to broaden or further enhance our offerings.

~~Additionally, new~~ New business development remains a priority as we plan to continue to boost our sales and marketing efforts. Additionally, we expect to incur costs associated with implementation and transition costs to onboard new customers.

We ~~plan to continue to add experienced personnel to our sales organization, develop more disciplined sales processes,~~expect cash and ~~create an integrated marketing capability.~~

~~We believe that our available~~ cash balances and the cash flows expected to be generated from operations will be sufficient to satisfy our current and planned working capital and investment needs for the next twelve months. We also believe that our longer-term working capital and other general corporate funding requirements will be satisfied throughequivalents, cash flows from operations, and our availability under the Senior Revolver to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, including debt maturities and material capital expenditures, for at least the ~~extent necessary, from new borrowing~~next 12 months and beyond. Similar to previous material acquisitions, future potential acquisitions may be funded through the incurrence of additional debt if our current credit facilities ~~and future financial market activities.~~

~~OFF-BALANCE SHEET OBLIGATIONS~~

~~Operating Leases~~

The Company rents office space and equipment under operating leases, primarily for its Chicago corporate office, U.S. shared services centers and India operations. Office space lease terms range from one to 10 years, whereas equipment lease terms range from one to three years. The Company’s leases contain various rent holidays and rent escalation clauses and entitlements for tenant improvement allowances. Lease payments are amortized to expense on a straight-line basis over the lease term.

~~The aggregate future minimum rental commitments under all noncancelable operating leases having remaining terms in excess of one year as of September 30, 2017 are as follows (in thousands):~~

2017 1,919
2018 7,645
2019 6,940
2020 7,144
2021 6,907
2022 3,964
Thereafter 19,037
Total $ 53,556

We do not have the required capacity. Refer to Note 23, Subsequent Event, to our consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for a discussion of the pending Cloudmed acquisition and related debt to be obtained in conjunction with the acquisition.

Our material cash requirements include the following contractual and other obligations:

Debt

As of March 31, 2022, we had outstanding debt of $771.3 million with contractual payments extending through 2026, with $17.5 million payable within 12 months. Future interest payments associated with our debt total $69.1 million, with $17.5 million payable within the next 12 months.

Leases

Our significant leasing activity encompasses leases for real estate, including corporate offices, operational facilities, and global business services centers. As of March 31, 2022, we had fixed lease payments of $91.5 million, with $18.1 million payable within 12 months.

Software purchase and services obligations

Our primary purchase obligations relate to contracts entered into with vendors that supply various software services and products. As of March 31, 2022, we had purchase obligations related to software and service contracts of $143.7 million, with $46.3 million payable within 12 months.

As of March 31, 2022 and December 31, 2021, we had cash and cash equivalents of $123.9 million and $130.1 million, respectively. Cash flows from operating, investing, and financing activities, as reflected in our consolidated statements of cash flows, are summarized in the following table:


	Three Months Ended March 31,
	2022		2021
	(In millions)
Net cash provided by operating activities	$	30.9	$	46.0
Net cash used in investing activities	$	(10.0)	$	(9.6)
Net cash used in financing activities	$	(26.2)	$	(107.1)

Cash Flows from Operating Activities

Cash provided by operating activities decreased by $15.1 million from $46.0 million for the three months ended March 31, 2021, to $30.9 million for the three months ended March 31, 2022. Cash provided by operating activities decreased due to a larger cash bonus payout related to the 2021 bonus plan compared to the 2020 bonus plan, offset by increased net income of $3.6 million.

Cash Used in Investing Activities

Cash used in investing activities primarily includes our investments in property, equipment and software and our inorganic growth initiatives. Outflows for significant acquisitions are typically offset by cash inflows from financing activities related to obtaining new debt.

Cash used in investing activities increased by $0.4 million from $9.6 million for the three months ended March 31, 2021, to $10.0 million for the three months ended March 31, 2022. The increase in cash usage is due to timing of payments for property, equipment and software.

Cash Flows from Financing Activities

Cash flows from financing activities primarily relate to borrowings and repayments of debt. In conjunction with acquisitions, we typically borrow additional debt to fund the consideration, either by increasing our existing facilities or refinancing with new facilities. We utilize our revolver to ensure we have sufficient cash on hand to support the needs of the business at any given point in time. Cash flows from financing activities also include cash received from exercises of stock options and the use of cash to pay tax withholding obligations upon surrender of shares upon vesting of equity awards, as well as other ~~off-balance sheet arrangements that have or are reasonably likely~~financing activities.

Cash used in financing activities decreased by $80.9 million from $107.1 million for the three months ended March 31, 2021 to ~~have~~$26.2 million for the three months ended March 31, 2022. This change is primarily due to additional cash usage in 2021, including $105.0 million used to pay for the inducement of the conversion of our preferred stock, partially offset by higher amounts of cash required to pay tax withholding obligations upon surrender of shares upon vesting of equity awards in 2022.

Debt and Financing Arrangements

On July 1, 2021, we entered into the A&R Credit Agreement with Bank of America, N.A., as administrative agent, and the lenders named therein, governing the Company’s amended and restated senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a ~~material current or future impact~~$700.0 million senior secured term loan facility (the “Senior Term Loan”) and a $450.0 million Senior Revolver. The Senior Term Loan requires quarterly payments, and bears interest at a floating rate, which was 2.21% as of March 31, 2022.

As of March 31, 2022, we had drawn $80.0 million and had $369.5 million remaining on our Senior Revolver.

In connection with the entry into the A&R Credit Agreement, the Company used all of the proceeds, in addition to cash on hand, to refinance, in full, all existing debt under the Company’s 2019 credit agreement and to fund the VisitPay acquisition.

The A&R Credit Agreement contains a number of financial ~~results.~~and non-financial covenants. We are required to maintain minimum consolidated total net leverage and consolidated interest coverage ratios. The Company was in compliance with all of the covenants in the A&R Credit Agreement as of March 31, 2022.

See Note 4, Debt, to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.



Item 3.			Qualitative and Quantitative Disclosures about Market Risk

Interest Rate Sensitivity. Our results of operations and cash flows are subject to fluctuations due to changes in interest rates due to our debt and banking arrangements, which can result in fluctuations in our interest income and expense. As of March 31, 2022, we have hedged $100.0 million of our $771.3 million outstanding floating rate debt to a fixed rate of 1.4% plus the applicable spread defined in the A&R Credit Agreement. The remaining $671.3 million outstanding is subject to an average variable rate of 2.21% as of March 31, 2022. Assuming the current level of borrowings, a one percentage point increase or decrease in interest rates would increase or decrease our annual interest expense by approximately $6.7 million.

Our interest income is primarily generated from variable rate interest earned on operating cash accounts. We do not enter into interest rate swaps, caps or collars or other hedging instruments. As a result, we believe that the risk of a significant impact on our operating income from interest rate fluctuations is not material.

Foreign Currency Exchange Risk. Our results of operations and cash flows are subject to fluctuations due to changes in the Indian rupee because a portion of our operating expenses are incurred by our subsidiary in India and are denominated in Indian rupees. ~~However, we~~We do not generate ~~any~~significant revenues outside of the United States. For ~~both~~ the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, 8%~~2021, 10% and 9% of our expenses were denominated in ~~Indian rupees.~~foreign currencies, respectively. As of ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, we had net assets of ~~$21.1~~$72.3 million and ~~$15.5~~$61.0 million in ~~India,~~foreign entities, respectively. ~~The~~Before the impact of our foreign currency hedging activities discussed below, the reduction in earnings from a 10% change in ~~U.S. dollar/Indian Rupee~~ foreign currency spot rates would be $3.7 million and $3.0 million at March 31, 2022 and ~~$1.3~~2021, respectively.

For designated cash flow hedges, gains and losses currently recorded in accumulated other comprehensive loss will be reclassified into earnings at the time when certain anticipated intercompany charges are accrued as cost of services. As of March 31, 2022, it was anticipated that approximately $0.9 million ~~at September 30, 2017~~of gains, net of tax, currently recorded in accumulated other comprehensive loss will be reclassified into cost of services within the next 12 months.

We use sensitivity analysis to determine the effects that market foreign currency exchange rate fluctuations may have on the fair value of our hedge portfolio. The sensitivity of the hedge portfolio is computed based on the market value of future cash flows as affected by changes in exchange rates. This sensitivity analysis represents the hypothetical changes in value of the hedge position and ~~2016, respectively.~~does not reflect the offsetting gain or loss on the underlying exposure. A 10% change in the levels of foreign currency exchange rates against the U.S. dollar (or other base currency of the hedge if not a U.S. dollar hedge) with all other variables held constant would have resulted in a change in the fair value of our hedge instruments of approximately $7.4 million as of March 31, 2022.



Item 4.			Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management including its principal executive officer and principal financial officer to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2022. Our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2017,~~March 31, 2022, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the ~~third~~first quarter of ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II



Item 1.			Legal Proceedings

Other than asthe litigation described ~~below,~~in Note 10, Commitments and Contingencies, to our consolidated financial statements included in this Quarterly Report on Form 10-Q, we are presently not a party to any material litigation or regulatory proceeding and are not aware of any pending or threatened litigation or regulatory proceeding against us which, individually or in the aggregate, could have a material adverse effect on our business, operating results, financial condition, or cash flows.

On July 22, 2014, we were named as a defendant in a putative class action lawsuit filed in the U.S. District Court for the Eastern District of Michigan (Anger v. Accretive Health, Inc.), seeking statutory damages, injunctive relief and attorneys’ fees. The primary allegations are that we attempted to collect debts without providing the notice required by the FDCPA and Michigan Fair Debt Collection Practices Act and failed to abide by the terms of an agreed payment plan in violation of those same statutes. On August 27, 2015, the Court granted in part and denied in part our motion to dismiss. An amended complaint was filed on November 30, 2015. Discovery was underway, but on July 15, 2016, the court postponed all deadlines in the case as the parties attempted to finalize a confidential agreement in principle to settle the case. On February 23, 2017, the parties reached a settlement in principle and filed the proposed class action settlement with the Court, which conducted a Class Action Fairness Act (CAFA) hearing on whether to approve of the settlement. Members of the putative class were notified of the settlement and were given an opportunity to object or opt-out of the settlement before the CAFA hearing on October 4, 2017. No objections to the class settlement were filed. The Court approved the settlement by Order dated October 11, 2017. Accordingly, the Company will pay the $1.3 million settlement, less amounts already paid, to a settlement fund to assist members of the class Ascension Michigan ministry patients pay off healthcare debt, to pay for class notice and administration, to pay $15,000 to each of the named class representatives and depending upon Court approval, to reimburse plaintiff’s attorneys’ fees.

In April 2015, we were named among other defendants in an employment action brought by a former employee before the MHRC alleging improper termination in retaliation for uncovering alleged Medicare fraud. We filed our response with the MHRC on May 19, 2015 seeking that we be dismissed entirely from the action. On June 23, 2015, the MHRC issued its Notice of Right to Sue and decision to terminate its process with respect to all charges asserted by the former employee. The plaintiff filed a parallel qui tam action in the District of Maine (Worthy v. Eastern Maine Healthcare Systems) making the same allegations, and seeking money damages, False Claims Act penalties and plaintiff’s attorneys’ fees. The U.S. Department of Justice declined to intervene in the federal court action, and the case was unsealed in April 2015. The Company and other defendants filed motions to dismiss the Third Amended Complaint on March 21, 2016. Those motions were granted with respect to the retaliation claims, but denied with respect to the other claims by the federal district court on January 18, 2017. The parties mediated the case before the Magistrate Judge on July 24, 2017 and reached an agreement in principle, and subsequently resolved an additional contingency in order to settle the case. The settlement, which is now finalized, did not have a material impact to our consolidated financial statements.

In May 2016, we were served with a False Claims Act case brought by a former emergency department service associate who worked at a hospital of one of our customers, WHC, along with WHC and three other hospitals that were PAS clients and a place holder, John Doe hospital, representing all PAS clients (USA ex rel. Graziosi vs. Accretive Health, Inc. et. al.). The Second Amended Complaint, which seeks monetary damages, alleges that our PAS business violates the federal False Claims Act. The case was originally filed under seal in 2013 in the federal district court in Chicago, was presented to the U.S. Attorney in Chicago twice, and the U.S. Attorneys declined to intervene. We filed a motion to dismiss the Second Amended Complaint on July 29, 2016. On March 22, 2017, the district court dismissed all claims against all hospital defendants other than Medstar Inc.’s WHC, and dismissed all claims related to TriCare-related episodes of care. The parties are currently engaged in an initial discovery phase in which the plaintiff has sought broad discovery and brought a motion to compel discovery relating to the defendants that have been dismissed. That motion was denied and we believe that we have meritorious defenses to all claims in the case, and intend to vigorously defend ourselves against these claims. The outcome is not presently determinable.



Item 1A.			Risk Factors

~~There~~In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A of our 2021 Annual Report on Form 10-K. Except as set forth below, there have been no material changes in our risk factors from those disclosed in our ~~2016~~2021 Form 10-K.

Risks Related to the Acquisition of Cloudmed

We may not be able to obtain the regulatory approvals required to consummate the acquisition of Cloudmed.

Completion of the Cloudmed acquisition is subject to customary closing conditions. These closing conditions include, among others, the expiration or termination of the waiting period under the HSR Act and approval under EU Merger Regulation, Council Regulation (EC) No 139/2004. We intend to pursue all of these consents and authorizations as required by and in accordance with the terms of the merger agreement relating to the Cloudmed acquisition (the “Transaction Agreement”). Complying with requests from such governmental agencies, including requests for additional information and documents, could delay consummation of the Cloudmed acquisition.

If we do not integrate the businesses successfully, we may lose customers and fail to achieve our financial objectives.

Achieving the benefits of the Cloudmed acquisition will depend in part on the successful integration of Cloudmed’s business into our operations in a timely and efficient manner. In order for us to provide our customers with the same level of service after the Cloudmed acquisition, we will need to integrate our product lines and development organizations with those of Cloudmed. This may be difficult, unpredictable, and subject to delay because the businesses have been developed independently and were designed without regard to such integration. In addition, Cloudmed is still in the process of integrating certain of its recent acquisitions. If we cannot successfully integrate the businesses and products and continue to provide customers with products and new product features in the future on a timely basis, we may lose customers and our business and operating results may be harmed.

The ~~risk factors disclosed~~combined company may not realize the anticipated benefits from the Cloudmed acquisition.

The Cloudmed acquisition involves the integration of two companies that have previously operated independently. We expect the combined company to result in ~~Part I, Item 1A~~financial and operational benefits, including increased cost savings and other financial and operating benefits from the Cloudmed acquisition. There can be no assurance, however, regarding when or the extent to which the combined companies will be able to realize these increased cost savings or benefits. The companies must integrate or, in some cases, replace numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll, and regulatory compliance, many of which are dissimilar. Difficulties associated with integrating the post-acquisition entity (“New R1”) could have a material adverse effect on the combined companies and the market price of New R1’s common stock.

We will incur significant transaction and merger-related costs in connection with the Cloudmed acquisition and will remain liable for significant transaction costs whether or not we successfully close the Cloudmed acquisition, including legal, accounting, and other costs.

We have incurred and expect to continue to incur a number of non-recurring costs associated with combining the operations of the two companies which cannot be estimated accurately at this time. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and transaction-related costs over time, this net benefit may not be achieved in the near term, or at all. Also, speculation regarding the likelihood of the closing of the Cloudmed acquisition could increase the volatility of our ~~2016 10-K,~~share price in the interim.

While the Cloudmed acquisition is pending, we are restricted from taking certain actions in the conduct of our business, which could adversely affect our ability to take actions beneficial to us or our stockholders.

Under the Transaction Agreement, we have agreed to operate our business in the usual, regular, and ordinary course. In addition, we have agreed not to take certain actions, including, without limitation, to the extent provided in the Transaction Agreement, declaring dividends, issuing securities, encumbering capital stock or other equity interests, making material acquisitions or disposing of material assets. Our agreement not to take these actions could adversely affect our ability to take actions beneficial to us or our stockholders.

The Cloudmed acquisition could cause us and New R1 to lose key personnel, which could materially affect the respective companies’ businesses and require the companies to incur substantial costs to recruit replacements for lost personnel.

As a result of the Cloudmed acquisition, current and prospective R1 and New R1 employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect our ability to attract and retain key management and operational personnel. Any failure to attract and retain key personnel could have a material adverse effect on the business of us now and New R1 after completion of the Cloudmed acquisition.

The trading price of our common stock has been volatile and the trading price of New R1’s common stock may continue to be volatile.

Since March 1, 2020, our common stock has traded at a price per share as high as $31.28 and as low as $7.12. Market prices for securities of companies that have undergone significant acquisitions may be volatile. The trading price of New R1’s common stock may be highly volatile in the future and could be subject to wide fluctuations in response to various factors. In addition to the ~~other information set forth~~risks described in this ~~Quarterly Report on Form 10-Q,~~section, factors that may cause the market price of New R1’s common stock to fluctuate include: fluctuations in New R1’s quarterly financial results or the quarterly financial results of companies perceived to be similar to New R1; changes in estimates of New R1’s financial results or recommendations by securities analysts, if any, who cover New R1’s common stock, or failure to meet expectations of such securities analysts; the loss of service agreements with customers; lawsuits filed against New R1 by governmental authorities or stockholders; unfavorable publicity concerning New R1’s operations or business practices; investors’ general perception of New R1; changes in local, regional or national economic conditions; changes in demographic trends; increased labor costs, including healthcare, unemployment insurance, and minimum wage requirements; the entry into, or termination of, material agreements; changes in general economic, industry, regulatory, and market conditions not related to the combined company or its business; the availability of experienced management and hourly-paid employees; issues in operating the combined companies; future sales of New R1 securities, including sales by New R1’s significant stockholders; and other potentially negative financial announcements, including delisting of New R1 common stock from The Nasdaq Global Select Market, changes in accounting treatment or restatement of previously reported financial results, delays in the combined companies’ filings with the SEC or the combined companies’ failure to maintain effective internal control over financial reporting.

In addition, if the stock market in general experiences a loss of investor confidence, the trading price of New R1’s common stock could ~~materially affect our~~decline for reasons unrelated to its business, financial condition, or ~~results. Additional risks and uncertainties not currently known to us or that we deem to be immaterial could also materially adversely affect our business, financial condition, or~~operating results.



Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sale of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table provides information about our repurchases of common stock during the periods ~~indicated (in millions, except share and per share data):~~indicated:

Period Number of Shares Purchased (1) Average Price Paid per Share (3)
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs (2)

Maximum Dollar
Value of Shares
that May Yet be
Purchased Under
Publicly
Announced Plans
or Programs (in millions) (2)
July 1, 2017 through July 31, 2017 342,130
   $ 3.67
—
   $ 49.0
August 1, 2017 through August 31, 2017 19,988
$ 3.30
—
$ 49.0
September 1, 2017 through September 30, 2017 —
$ —
—
$ 49.0


Period	Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Plans or Programs (in millions) (2)
January 1, 2022 through January 31, 2022	10,198	$	25.18	8,000	$	491.9
February 1, 2022 through February 28, 2022	725,570	$	25.79	—	$	491.9
March 1, 2022 through March 31, 2022	—	$	—	—	$	491.9



(1)		Amounts include ~~strategic repurchases~~stock repurchased under our repurchase program (see discussion in footnote 2 below) and ~~repurchases~~the surrender of shares of our common stock related to employees’ tax withholding upon vesting of ~~19,988 RSAs~~restricted stock of 2,198, 725,570, and 0 shares for the ~~month~~months ended ~~August~~January 31, ~~2017.~~2022, February 28, 2022, and March 31, 2022, respectively. See Note 9,6, Share-Based Compensation, to our consolidated financial statements included in this ~~Annual~~Quarterly Report on Form 10-Q.
(2)		On ~~November 13, 2013,~~October 22, 2021, the Board authorized ~~subject to the completion of the Restatement,~~ the repurchase of up to ~~$50.0~~$200.0 million of our common stock from time to time in the open market or in privately negotiated transactions (the ~~"2013~~“2021 Repurchase ~~Program"~~Program”). On January 9, 2022, the Board increased the authorization under the 2021 Repurchase Program to an aggregate amount of up to $500.0 million. The average price paid per share of common stock repurchased under the 2021 Repurchase Program is the execution price, including commissions paid to brokers. The timing and amount of any shares repurchased under the ~~2013~~2021 Repurchase Program will be determined by our management based on its evaluation of market conditions and other factors. The ~~2013~~2021 Repurchase Program may be suspended or discontinued at any time. ~~See Note 8, Stockholders' Equity, to our consolidated financial statements included in this Annual Report on Form 10-Q.~~
~~(3)~~	~~Average price paid per share of common stock repurchased under the 2013 Repurchase Program is the execution price, including commissions paid to brokers.~~



~~Item 3.~~	~~Defaults upon Senior Securities~~

~~None~~



~~Item 4.~~	~~Mine Safety Disclosure~~

~~Not applicable.~~



~~Item 5.~~	~~Other Information~~

~~None~~



Item 6.			Exhibits

The following are filed or incorporated by reference as a part of this Quarterly Report on Form 10-Q:

(a)



Exhibit Number		Exhibit Description
10.12.1		~~Employment Offer Letter~~Transaction Agreement by and ~~between~~Plan of Merger, dated as of January 9, 2022 among the Company, Project Roadrunner Parent Inc., Project Roadrunner Merger Sub Inc., Coyco 1, L.P., and ~~Thomas A. Lesica, dated February 16, 2017~~Coyco 2, L.P. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K/A (File No. 001-34746) filed on January 11, 2022)
10.2*4.1		Form of ~~Grant of Performance Based Restricted Stock Unit Awards pursuant to the~~ Second Amended and Restated ~~2010 Stock Incentive Plan (to be used for awards~~Registration Rights Agreement between the Company, Project Roadrunner Parent Inc., TCP-ASC ACHI Series LLLP, IHC Health Services, Inc., LifePoint Health, Inc., Coyco 1, L.P., and Coyco 2, L.P. (incorporated by reference to ~~a senior vice president or executive vice president)~~Exhibit 4.1 to the Current Report on Form 8-K/A (File No. 001-34746) filed on January 11, 2022)
10.34.2		Form of ~~Grant of Performance Based Restricted Stock Unit Awards pursuant to the Second~~ Amended and Restated ~~2010 Stock Incentive Plan (to be used for awards~~Investor Rights Agreement between the Company, Project Roadrunner Parent Inc., and TCP-ASC ACHI Series LLLP (incorporated by reference to ~~a vice president or director-level employee)~~Exhibit 4.2 to the Current Report on Form 8-K/A (File No. 001-34746) filed on January 11, 2022)
10.44.3		Form of ~~Letter~~Investor Rights Agreement ~~(to be used for executive vice presidents)~~between Project Roadrunner Parent Inc., Coyco 1, L.P., and Coyco 2, L.P. (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K/A (File No. 001-34746) filed on January 11, 2022)
~~31.1~~10.1		Voting Agreement, dated as of January 9, 2022, between the Company, Revint Holdings, LLC, and TCP-ASC ACHI Series LLLP (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K/A (File No. 001-34746) filed on January 11, 2022)
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~32.1~~32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~32.2~~32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		~~XBRL Schema Document~~
~~101.CAL~~	~~XBRL Calculation Linkbase Document~~
~~101.LAB~~	~~XBRL Labels Linkbase Document~~
~~101.DEF~~	XBRL Taxonomy Extension Schema Document
~~101.PRE~~101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Management contract or compensatory plan or arrangement.


*			Certain exhibits and schedules to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request.
**			Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



			R1 RCM INC.

By:			/s/ Joseph Flanagan
			Joseph Flanagan
			President and Chief Executive Officer

By:			/s/ ~~Christopher Ricaurte~~Rachel Wilson
			~~Christopher Ricaurte~~Rachel Wilson
			Chief Financial Officer and Treasurer

Date: ~~October 31, 2017~~May 9, 2022


Part I.			Financial Information
Item 1.			Consolidated Financial Statements	3
			Consolidated Balance Sheets	34
			Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~	45
			Consolidated Statements of Stockholders' Equity ~~(Deficit)~~	56
			Consolidated Statements of Cash Flows	67
			Notes to Unaudited Consolidated Financial Statements	78
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	3119
Item 3.			Qualitative and Quantitative Disclosures About Market Risk	4126
Item 4.			Controls and Procedures	4127

Part II.			Other Information
Item 1.			Legal Proceedings	4328
Item 1A.			Risk Factors	4428
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	4430
Item 3.6.			~~Defaults upon Senior Securities~~Exhibits	4531
~~Item 4.~~			~~Mine Safety Disclosures~~	45
~~Item 5.~~SIGNATURES				~~Other Information~~32	45
~~Item 6.~~	~~Exhibits~~	46

~~SIGNATURES~~		47



	September 30,			December 31,
	2017			2016
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	142.8		$	181.2
Accounts receivable, net	7.7			4.0
Accounts receivable, net - related party	18.0			1.8
Prepaid income taxes	0.9			3.8
Prepaid expenses and other current assets	16.1			13.8
Total current assets	185.5			204.6
Property, equipment and software, net	50.2			32.8
Non-current deferred tax assets	105.8			169.9
Restricted cash equivalents	1.5			1.5
Other assets	11.4			6.3
Total assets	$	354.4		$	415.1
Liabilities
Current liabilities:
Accounts payable	6.9			7.9
Current portion of customer liabilities	0.9			69.7
Current portion of customer liabilities - related party	20.1			14.2
Accrued compensation and benefits	29.2			24.8
Other accrued expenses	16.1			18.5
Total current liabilities	73.2			135.1
Non-current portion of customer liabilities	0.3			1.0
Non-current portion of customer liabilities - related party	9.1			110.0
Other non-current liabilities	12.2			9.7
Total liabilities	$	94.8		$	255.8

8.00% Series A convertible preferred stock: par value $0.01 per share, 370,000 authorized, 223,023 shares issued and outstanding as of September 30, 2017 (aggregate liquidation value of $227.5); 370,000 authorized, 210,160 shares issued and outstanding as of December 31, 2016 (aggregate liquidation value of $214.4)	184.7			171.6
Stockholders’ equity (deficit)
Common stock, $0.01 par value, 500,000,000 shares authorized, 116,639,819 shares issued and 104,505,034 shares outstanding at September 30, 2017; 116,425,524 shares issued and 106,659,542 shares outstanding at December 31, 2016	1.2			1.2
Additional paid-in capital	339.8			349.2
Accumulated deficit	(204.3		)	(304.7		)
Accumulated other comprehensive loss	(2.2		)	(2.8		)
Treasury stock, at cost, 12,134,785 shares as of September 30, 2017; 9,765,982 shares as of December 31, 2016	(59.6		)	(55.2		)
Total stockholders’ equity (deficit)	74.9			(12.3		)
Total liabilities and stockholders’ equity (deficit)	$	354.4		$	415.1



	September 30, 2017			December 31, 2016
Computer and other equipment	$	29.2		$	23.3
Leasehold improvements	21.4			16.0
Software	42.8			28.1
Office furniture	7.4			4.9
Property, equipment and software, gross	100.8			72.3
Less accumulated depreciation and amortization	(50.6		)	(39.5		)
Property, equipment and software, net	$	50.2		$	32.8



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
RCM services: net operating fees	$	104.6	$	255.4
RCM services: incentive fees	7.5		20.2
RCM services: other	2.8		9.8
Other services fees	8.3		24.1
Total net service revenue	$	123.2	$	309.5



	Impact of changes in accounting policies
	As reported September 30, 2017			Adjustments			Balances without adoption of Topic 606
Assets
Current assets:
Cash and cash equivalents	$	142.8		$	—		$	142.8
Accounts receivable, net	7.7			(0.3		)	7.4
Accounts receivable, net - related party	18.0			(11.2		)	6.8
Prepaid income taxes	0.9			—			0.9
Prepaid expenses and other current assets	16.1			(0.3		)	15.8
Total current assets	185.5			(11.8		)	173.7
Property, equipment and software, net	50.2			—			50.2
Non-current deferred tax assets	105.8			158.4			264.2
Restricted cash equivalents	1.5			—			1.5
Other assets	11.4			0.2			11.6
Total assets	$	354.4		$	146.8		$	501.2
Liabilities
Current liabilities:
Accounts payable	6.9			(1.1		)	5.8
Current portion of customer liabilities	0.9			41.9			42.8
Current portion of customer liabilities - related party	20.1			(1.2		)	18.9
Accrued compensation and benefits	29.2			—			29.2
Other accrued expenses	16.1			(1.3		)	14.8
Total current liabilities	73.2			38.3			111.5
Non-current portion of customer liabilities	0.3			—			0.3
Non-current portion of customer liabilities - related party	9.1			360.2			369.3
Other non-current liabilities	12.2			—			12.2
Total liabilities	$	94.8		$	398.5		$	493.3
	—
8.00% Series A convertible preferred stock	184.7			—			184.7
Stockholders’ equity (deficit)
Common stock	1.2			—			1.2
Additional paid-in capital	339.8			—			339.8
Accumulated deficit	(204.3		)	(251.7		)	(456.0		)
Accumulated other comprehensive loss	(2.2		)	—			(2.2		)
Treasury stock	(59.6		)	—			(59.6		)
Total stockholders’ equity (deficit)	74.9			(251.7		)	(176.8		)
Total liabilities and stockholders’ equity (deficit)	$	354.4		$	146.8		$	501.2



	Impact of changes in accounting policies
	As reported three months ended September 30, 2017			Adjustments			Balances without adoption of Topic 606			As reported nine months ended September 30, 2017			Adjustments			Balances without adoption of Topic 606
Net services revenue	$	123.2		$	(82.4	)	$	40.8		$	309.5		$	(236.5	)	$	73.0
Operating expenses:
Cost of services	111.8			(3.8		)	108.0			289.1			(10.3		)	278.8
Selling, general and administrative	15.1			—			15.1			41.6			—			41.6
Other	1.4			—			1.4			2.6			—			2.6
Total operating expenses	128.3			(3.8		)	124.5			333.3			(10.3		)	323.0
Income (loss) from operations	(5.1		)	(78.6		)	(83.7		)	(23.8		)	(226.2		)	(250.0		)
Net interest income	—			—			—			0.1			—			0.1
Income (loss) before income tax provision	(5.1		)	(78.6		)	(83.7		)	(23.7		)	(226.2		)	(249.9		)
Income tax provision (benefit)	(1.5		)	(30.1		)	(31.6		)	(5.1		)	(87.9		)	(93.0		)
Net income (loss)	$	(3.6	)	$	(48.5	)	$	(52.1	)	$	(18.6	)	$	(138.3	)	$	(156.9	)
Consolidated statements of comprehensive income (loss)
Net income (loss)	$	(3.6	)	$	(48.5	)	$	(52.1	)	$	(18.6	)	$	(138.3	)	$	(156.9	)
Other comprehensive loss:
Foreign currency translation adjustments	(0.2		)	—			(0.2		)	0.6			—			0.6
Comprehensive income (loss)	$	(3.8	)	$	(48.5	)	$	(52.3	)	$	(18.0	)	$	(138.3	)	$	(156.3	)



	Shares		Weighted- Average Exercise Price
Outstanding at December 31, 2016	20,418,607		$	6.26
Granted	3,581,904		3.32
Exercised	(58,760	)	2.37
Canceled/forfeited	(5,897,038	)	9.42
Outstanding at September 30, 2017	18,044,713		4.66
Outstanding, vested and exercisable at September 30, 2017	5,676,001		$	8.99
Outstanding, vested and exercisable at December 31, 2016	7,993,168		$	11.34



	Shares		Weighted- Average Grant Date Fair Value
Outstanding and unvested at June 30, 2017	—		$	—
Granted	3,117,297		3.21
Vested	—		—
Forfeited	(17,230	)	3.21
Outstanding and unvested at September 30, 2017	3,100,067		$	3.21



	Severance and Employee Benefits			Facilities and Other Costs			Total
Reorganization liability at December 31, 2016	$	1.6		$	0.5		$	2.1
Restructuring charges	0.4			—			0.4
Cash payments	(1.7		)	(0.5		)	(2.2		)
Non-cash charges	(0.1		)	$	—		(0.1		)
Reorganization liability at September 30, 2017	$	0.2		$	—		$	0.2



	Preferred Stock
	Shares Issued and Outstanding	Carrying Value
Balance at December 31, 2016	210,160	$	171.6
Dividends paid/accrued dividends	12,863	13.1
Balance at September 30, 2017	223,023	$	184.7



	Three Months Ended September 30,					2017 vs. 2016 Change					Nine Months Ended September 30, 2017			2017 vs. 2016 Change
	2017			2016		Amount			%		2017		2016	Amount			%
	(In millions except percentages)
Consolidated Statement of Operations Data:
RCM services: net operating fees	$	104.6		$	49.0	$	55.6		113.5	%	255.4		300.3	$	(44.9	)	(15.0	)%
RCM services: incentive fees	7.5			68.5		(61.0		)	(89.1	)%	20.2		166.5	(146.3		)	(87.9	)%
RCM services: other	2.8			3.8		(1.0		)	(26.3	)%	9.8		8.3	1.5			18.1	%
Other service fees	8.3			4.2		4.1			97.6	%	24.1		11.3	12.8			113.3	%
Total net services revenue	123.2			125.5		(2.3		)	(1.8	)%	309.5		486.4	(176.9		)	(36.4	)%
Operating expenses:
Cost of services	111.8			47.4		64.4			135.9	%	289.1		137.6	151.5			110.1	%
Selling, general and administrative	15.1			16.2		(1.1		)	(6.8	)%	41.6		58.4	(16.8		)	(28.8	)%
Other	1.4			0.5		0.9			180.0	%	2.6		20.0	(17.4		)	(87.0	)%
Total operating expenses	128.3			64.1		64.2			100.2	%	333.3		216.0	117.3			54.3	%
Income (loss) from operations	(5.1		)	61.4		(66.5		)	(108.3	)%	(23.8	)	270.4	(294.2		)	(108.8	)%
Net interest income	—			0.1		(0.1		)	(100.0	)%	0.1		0.2	(0.1		)	(50.0	)%
Net income (loss) before income tax provision	(5.1		)	61.5		(66.6		)	(108.3	)%	(23.7	)	270.6	(294.3		)	(108.8	)%
Income tax provision (benefit)	(1.5		)	24.1		(25.6		)	(106.2	)%	(5.1	)	106.6	(111.7		)	(104.8	)%
Net income (loss)	$	(3.6	)	$	37.4	$	(41.0	)	(109.6	)%	(18.6	)	164.0	$	(182.6	)	(111.3	)%



	Three Months Ended September 30,					2017 vs. 2016 Change					Nine Months Ended September 30, 2017							2017 vs. 2016 Change
	2017		2016			Amount			%		2017				2016			Amount			%
	(In millions except percentages)
Net income (loss)	(3.6	)	37.4			$	(41.0	)	(109.6	)%	(18.6		)		164.0			$	(182.6	)	(111.3	)%
Net interest income	—		(0.1		)	0.1			(100.0	)%	$	(0.1	)	—	(0.2		)	0.1			(50.0	)%
Income tax provision (benefit)	(1.5	)	24.1			(25.6		)	(106.2	)%	(5.1		)		106.6			(111.7		)	(104.8	)%
Depreciation and amortization expense	4.5		2.7			1.8			66.7	%	11.5				7.3			4.2			57.5	%
Share-based compensation expense (1)	2.4		4.8			(2.4		)	(50.0	)%	8.2				23.5			(15.3		)	(65.1	)%
Other (2)	1.4		0.5			0.9			180.0	%	2.6				20.0			(17.4		)	(87.0	)%
Adjusted EBITDA (non-GAAP)	3.1		69.4			(66.3		)	(95.5	)%	(1.6		)		321.2			(322.8		)	(100.5	)%
Change in deferred customer billings (non-GAAP) (3)	n.a.		(65.8		)	n.m.			n.m.		n.a.				(347.5		)	n.m.			n.m.
Net cash generated from customer contracting activities (non-GAAP)	n.a.		$	3.6		n.m.			n.m.		n.a.				$	(26.4	)	n.m.			n.m.



2017	1,919
2018	7,645
2019	6,940
2020	7,144
2021	6,907
2022	3,964
Thereafter	19,037
Total	$	53,556



Period	Number of Shares Purchased (1)		Average Price Paid per Share (3)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Plans or Programs (in millions) (2)
July 1, 2017 through July 31, 2017		342,130	$	3.67		—	$	49.0
August 1, 2017 through August 31, 2017		19,988	$	3.30		—	$	49.0
September 1, 2017 through September 30, 2017		—	$	—		—	$	49.0