Note 4—Exit and Realignment (Income) Charges, Net

We incur exit and realignment and other charges associated with optimizing our operations which include IT strategic initiatives and other strategic actions. These charges include professional fees, severance and other costs to streamline functions and enhance processes and separation costs. Separation costs primarily consist of professional fees including costs reimbursable to the Purchaser as described below and other wind-down costs incurred after the divestiture of the P&HS business. These costs are not normal, cash operating expenses necessary for the Company to operate its business on an ongoing basis.

Exit and realignment (income) charges, net were $(24) million and $14 million for the three months ended March 31, 2026 and 2025. These charges were primarily related to strategic operational improvements to increase net revenue and lower costs. During the three months ended March 31, 2026 exit and realignment income, net also included a $52 million gain on sales of patient service equipment in connection with the contract termination with a commercial Payor and P&HS Sale separation costs. During the three months ended March 31, 2025 exit and realignment charges, net also include a provision to accounts receivable related to our Fusion5 business which was in the process of being wound down.

As a result of the sale of our P&HS business, we have incurred $18 million in reimbursable separation costs during the three months ended March 31, 2026. We expect to incur up to $65 million in exit and realignment costs associated with reimbursement to the Purchaser for certain future separation costs incurred by the Purchaser, as described in Note 2. 

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The following table summarizes the activity related to exit and realignment cost accruals, which are generally classified as other current liabilities or accounts payable in our condensed consolidated balance sheets, through March 31, 2026 and 2025:

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In addition to the exit and realignment accruals in the preceding table and the $52 million gain on patient service equipment, we also incurred $4.1 million of costs that were expensed as incurred during the three months ended March 31, 2026, which primarily related to P&HS Sale separation costs and $7.1 million of costs that were expensed as incurred for the three months ended March 31, 2025, which primarily related to wind-down costs of Fusion5.