R1 RCM will restate previously issued financial statements for 2021, 2022 and the first two quarters of 2023.
The company said in a Nov. 13 news release that immediately prior to the scheduled filing of its Form 10-Q for the third quarter 2023, it identified "errors related to the accounting for certain acquiree compensation costs (e.g., transaction bonuses and accelerated equity award vesting) incurred as a result of historical acquisitions."
These expenses should have been recorded as "other expenses" within the consolidated statements of operations and comprehensive income, but instead were included in the purchase price allocations and ultimately recorded as goodwill in the consolidated balance sheets, according to the release.
R1 determined that the drivers of the corrections are acquiree compensation expenses equal to approximately $7.8 million for 2022 and $8.4 million for 2021.
"As part of the restatement process, other less significant previously identified immaterial adjustments that were not recorded in the proper period will also be adjusted," the release said. "Based on information currently available, R1 does not expect a material impact to 2022 and 2021 revenue or Adjusted EBITDA."
R1 CEO Lee Rivas said in the release the technical accounting issue was "proactively identified by R1's internal team, at which time we immediately took action to identify any potential impact on past financial statements in conjunction with our auditors, Ernst & Young."
"At this time there is no expected material impact on our 2023 results of operations or outlook," Mr. Rivas said. "As we look ahead, we remain confident in our ability to deliver on our 2023 outlook and drive long-term value through our excellent provider relationships, commitment to innovation and continued customer growth."