Leasehold Improvements - Admitted Asset

[FranH-EH]

The following is support of our position to record Leasehold Improvements as admitted assets on the Reporting entity’s (“HIP”) books. We have interpreted in applying SSAP 73 Health Care Delivery Assets and Leasehold Improvements in Health Care Facilities that HIP is providing direct care as HIP is ultimately servicing its members.We would appreciate if you would please read through the following background information and provide your thoughts regarding admissibility.

Under a nominee shareholder agreement, an officer (the “Officer”) of EmblemHealth is the sole shareholder of AdvantageCare Physicians P.C., a professional corporation formed in 2012 (“ACPNY”). ACPNY provides health care services to certain subscribers of EmblemHealth’s benefit plans operated out of approximately 36 medical facilities owned or leased by HIP.HIP, the Officer and ACPNY have entered into a stock transfer restriction agreement limiting the sale, transfer, and assignment of the shares of ACPNY and provides HIP with the right to appoint the shareholder(s) of ACPNY. As a result, HIP records its investment in other invested assets under the equity method in accordance SSAP 97, Investments in Subsidiary, Controlled and Affiliated Entities.As a result of the stock transfer restriction agreement, there is a direct relationship between HIP and ACPNY. For the year ended December 31, 2018, ACPNY received approximately 63% of its capitation and fee for service revenue from HIP (approximately 80% of its capitation and fee for service revenue from EmblemHealth inclusive of HIP).HIP records the operating results and equity of ACPNY as part of its financial results, all of which impacts the capital and surplus of HIP.

This direct relationship is then applied to SSAP 73 to record buildings and leasehold improvements for the medical facilities owned or leased by HIP as admitted assets in its financial statements.

EmblemHealth was approximately 74% of total revenues.

[Glenn]

Hello Fran,
I concur with your position given the facts and circumstances. You are in compliance with SSAP 73 and the admissibility guidance for Leasehold Improvements as long as the entity ( HIP) is providing "direct healthcare services" and the assets are deemed as healthcare delivery assets ( in your case the leasehold improvements too).
Refer to SSAP 73 paragraphs 2 through 10 in the summary conclusion, in particular paragraphs 2 and 4.

Regards,
Glenn S Sackett