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FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis:
|  |  | Basis of Fair Value Measurements
|  |  | Quoted Prices in Active Markets for Identical Assets/Liabilities |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs
September 30, 2023 | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |
Deferred compensation trading securities | $ | 71 |  |  | $ | 71 |  |  | $ | — |  |  | $ | — |
Cash surrender value of life insurance policies | 50 |  |  | — |  |  | 50 |  |  | — |
Available-for-sale debt securities | 2 |  |  | — |  |  | — |  |  | 2 |
Total | $ | 123 |  |  | $ | 71 |  |  | $ | 50 |  |  | $ | 2 |
Liabilities: |  |  |  |  |  |  |
Deferred compensation liabilities | $ | 127 |  |  | $ | — |  |  | $ | 127 |  |  | $ | — |
Contingent consideration | 98 |  |  | — |  |  | — |  |  | 98 |
Total | $ | 225 |  |  | $ | — |  |  | $ | 127 |  |  | $ | 98 |
Redeemable noncontrolling interest | $ | 76 |  |  | $ | — |  |  | $ | — |  |  | $ | 76 |
|  |  | Basis of Fair Value Measurements
December 31, 2022 | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |
Deferred compensation trading securities | $ | 68 |  |  | $ | 68 |  |  | $ | — |  |  | $ | — |
Cash surrender value of life insurance policies | 46 |  |  | — |  |  | 46 |  |  | — |
Available-for-sale debt securities | 2 |  |  | — |  |  | — |  |  | 2 |
Total | $ | 116 |  |  | $ | 68 |  |  | $ | 46 |  |  | $ | 2 |
Liabilities: |  |  |  |  |  |  |
Deferred compensation liabilities | $ | 120 |  |  | $ | — |  |  | $ | 120 |  |  | $ | — |
Contingent consideration | 23 |  |  | — |  |  | — |  |  | 23 |
Total | $ | 143 |  |  | $ | — |  |  | $ | 120 |  |  | $ | 23 |
Redeemable noncontrolling interest | $ | 77 |  |  | $ | — |  |  | $ | — |  |  | $ | 77 |
A detailed description regarding the Company's fair value measurements is contained in Note 8 to the audited consolidated financial statements in the Company's 2022 Annual Report on Form 10-K. The Company offers certain employees the opportunity to participate in a non-qualified supplemental deferred compensation plan. A participant's deferrals, together with Company matching credits, are invested in a variety of participant-directed stock and bond mutual funds that are classified as trading securities. The trading securities are classified within Level 1 of the fair value hierarchy because the changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held, exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are classified within Level 2 of the fair value hierarchy because their inputs are derived principally from observable market data by correlation to the trading securities. The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation program. A participant's deferrals, together with Company matching credits, are “invested” at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the purpose of funding the program's liability. Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments. Changes in the fair value of the deferred compensation obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. The cash surrender value and the deferred compensation obligation are classified within Level 2 of the fair value hierarchy because their inputs are derived principally from observable market data by correlation to the hypothetical investments. Deferrals under the plan currently may only be made by participants who made deferrals under the plan in 2017. The Company's available-for-sale debt securities are measured at fair value using discounted cash flows. These fair value measurements are classified within Level 3 of the fair value hierarchy as the fair value is based on significant inputs that are not observable. Significant inputs include cash flows projections and a discount rate. In connection with the acquisition of Haystack during the nine months ended September 30, 2023 (see Note 5 for further discussion), there is a contingent consideration obligation under which the seller can receive up to $100 million of additional consideration dependent upon the achievement of certain revenue benchmarks through 2028 and up to an additional $50 million of consideration dependent upon the Company receiving reimbursement coverage from the CMS. The portion of the contingent consideration obligation which is dependent upon the achievement of certain revenue benchmarks was measured at fair value using a Monte Carlo method and is classified within Level 3 of the fair value hierarchy as the fair value is determined based on significant inputs that are not observable. Significant inputs include management’s estimate of revenue and other market inputs, including comparable company revenue volatility (40%) and a discount rate (10.5%). The portion of the contingent consideration obligation which is dependent upon the Company receiving reimbursement coverage from the CMS is also classified within Level 3 of the fair value hierarchy as the fair value is principally determined based on management's estimate, which is a significant input that is not observable. Additionally, the fair value of the entire contingent consideration obligation was also impacted by a market discount rate (5%) which adjusted the estimated payments to present value. Such discount rate decreased the initial aggregate fair value of the contingent consideration obligation by $21 million. The fair value of the contingent consideration obligation is not overly sensitive to movements in the comparable company revenue volatility or the discount rate used for the portion of the obligation that is dependent upon the achievement of certain revenue benchmarks. For example, changing the comparable company revenue volatility from 40% to 30% impacts the fair value by $7 million (assuming no other inputs are modified) and changing the discount rate from 10.5% to 7.0% impacts the fair value by $5 million (assuming no other inputs are modified). Additionally, in connection with previous acquisitions, the Company had contingent consideration obligations based on the achievement of certain testing volume and revenue benchmarks during 2022. See Note 8 to the audited consolidated financial statements in the Company's 2022 Annual Report on Form 10-K. The following table provides a reconciliation of the beginning and ending balances of liabilities using significant unobservable inputs (Level 3):
| Contingent Consideration |  |  |  |
Balance, December 31, 2022 | $ | 23 |  |  |  |  |
Purchases, additions and issuances | 88 |  |  |  |  |
Settlements | (18) |  |  |  |  |
Total fair value adjustments included in earnings - realized/unrealized | 5 |  |  |  |  |
Balance, September 30, 2023 | $ | 98 |  |  |  |  |
The $5 million net loss included in earnings associated with the change in the fair value of contingent consideration for the nine months ended September 30, 2023 is reported in other operating expense (income), net. Of the aggregate $98 million contingent consideration obligation as of September 30, 2023, $93 million and $5 million were included in other liabilities and accounts payable and accrued expenses, respectively, in the Company's consolidated balance sheet. In connection with the sale of an 18.9% noncontrolling interest in a subsidiary to UMass Memorial Medical Center ("UMass") on July 1, 2015, the Company granted UMass the right to require the Company to purchase all of its interest in the subsidiary at fair value commencing July 1, 2020. As of September 30, 2023, the redeemable noncontrolling interest was presented at its fair value. The fair value measurement of the redeemable noncontrolling interest is classified within Level 3 of the fair value hierarchy because the fair value is based on a discounted cash flow analysis that takes into account, among other items, the joint venture's expected future cash flows, long term growth rates, and a discount rate commensurate with economic risk. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value based on the short maturities of these instruments. As of September 30, 2023 and December 31, 2022, the fair value of the Company’s debt was estimated at $3.9 billion and $3.7 billion, respectively. Principally all of the Company's debt is classified within Level 1 of the fair value hierarchy because the fair value of the debt is estimated based on rates currently offered to the Company with identical terms and maturities, using quoted active market prices and yields, taking into account the underlying terms of the debt instruments.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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