The Company’s condensed consolidated financial statements include its subsidiaries and consolidated VIEs. A VIE is defined as a legal entity whose equity owners lack sufficient equity at risk or, as a group, lack decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is the variable interest holder with both (i) the power to direct the activities most significantly affecting the VIE’s economic performance and (ii) the obligation to absorb expected losses or the right to receive benefits potentially significant to the VIE.

Certain states prohibit non-physician owned entities from practicing medicine, employing physicians to practice medicine, or exercising control over medical decisions (“corporate practice of medicine” laws). To comply with these laws, the Company maintains long-term MSAs with its affiliated IPAs and medical groups that are owned and operated solely by physicians. AHM, a wholly owned subsidiary, has entered into MSAs with several affiliated IPAs, including APC. APC has been determined to be a VIE of AHM, as AHM is its primary beneficiary with the ability, through majority representation on the APC Joint Planning Board, to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance. Accordingly, APC and its wholly owned subsidiaries and VIEs are consolidated in the accompanying condensed consolidated financial statements.

Certain state laws also prohibit a multi-shareholder professional corporation from holding shares in another professional corporation; however, a single-shareholder professional corporation may do so. In reliance on this exception, the Company designated certain key personnel as the nominee shareholder of professional corporations that hold controlling and non-controlling ownership interests in several medical corporations. Via a Physician Shareholder Agreement with the nominee shareholder, the Company retains the right to designate alternative equity holders. These entities are also managed by the Company’s wholly owned MSOs via MSAs and are consolidated in the accompanying condensed consolidated financial statements.