Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. COMPUTER PROGRAMS & SYSTEMS INC (1169445) 10-Q published on May 08, 2018 at 4:02 pm
Reporting Period: Mar 30, 2018
Effective January 1, 2018, our interface services team, which provides the design, development, implementation, and support services for all interfaces for data exchange from the CPSI applications, was previously considered a part of our product development division and has been integrated with our acute care client service team. This transition will work to create a consistent, personal, and convenient service experience for our clients characterized by transparent communication with prompt resolution. With this change, the payroll and related costs of this group of employees that were formerly included within the caption "Product development" on our condensed consolidated statements of income are now included within the caption "System sales and support - Cost of sales."
Revenue is recognized upon transfer of control of promised products or services to clients in an amount that reflects the consideration we expect to receive in exchange for those products and services. We enter into contracts that can include various combinations of products and services, which are generally distinct and accounted for as separate performance obligations. The Company employs the 5-step revenue recognition model under ASC 606 to: (1) identify the contract with the client, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
Additionally, the Company provides financing for purchases of its information and patient care systems to certain healthcare providers under long-term financing arrangements expiring in various years through 2025. Under long-term financing arrangements, the transaction price is adjusted by a discount rate that reflects market conditions that would be used for a separate financing transaction between the Company and licensee at contract conception, and takes into account the credit characteristics of the licensee and market interest rates as of the date of the agreement. As such, the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated financing component. As payments are received from the licensee, the Company recognizes a portion of the financing component as interest income, reported as other income in the condensed consolidated statements of income. These receivables typically have terms from two to seven years.
Non-recurring system sales and support revenues increased $3.0 million, or 30%, primarily as Acute Care EHR non-recurring revenue increased $3.5 million, or 40%. Acute Care EHR benefited from $4.4 million in MU3 implementations during the first quarter of 2018, compared to none in the same period of 2017. This increase was partially offset by a decrease in other add-on software implementations as a result of the Company's and clients' emphasis on MU3 certification prior to the January 1, 2019 deadline. We installed acute care EHR solutions at six new hospital clients during the first quarter of 2018 (one under a SaaS arrangement, resulting in revenue being recognized ratably over the contractual term) compared to four new hospital clients during the first quarter of 2017 (one under a SaaS arrangement). Non-recurring Post-acute Care EHR revenues decreased by $0.5 million, or 39%, as a result of slowing new installation bookings due to aggressive competition during our effort to make technological improvements to the AHT product line.
We continue to execute on our TruBridge strategy by moving up-market into larger healthcare facilities while expanding the scope of our relationships with new and existing customers by increasing revenue-generating touchpoints within those facilities. Our initial success in that endeavor has resulted in bookings volatility as our periodic bookings are heavily influenced by low-volume, high-value deals. Such large, enterprise client wins resulted in TruBridge bookings for the first quarter of 2017 that were the second-highest in TruBridge history at that time, with bookings for the remainder of 2017 being heavily influenced by large, enterprise client wins. Absent any such large, enterprise client wins during the first quarter of 2018, TruBridge bookings experienced a normalization that resulted in a decrease from the first quarter of 2017. We continue to see demand for TruBridge's products and services that alleviate administrative burden on our clients and allow them to take advantage of our specialized capabilities. Particularly strong demand exists for TruBridge's accounts receivable management and medical coding services.