SEC Filings

10-Q
ENVISION HEALTHCARE CORP filed this Form 10-Q on 11/03/2017
Entire Document
 
Item 1. Financial Statements - (continued)


Net revenue for the Company consists of the following major payors (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016(1)
 
2017
 
2016(1)
Medicare
$
467.9

 
24
 %
 
$
166.8

 
20
 %
 
$
1,420.5

 
24
 %
 
$
475.4

 
21
 %
Medicaid
163.8

 
8

 
38.9

 
5

 
485.9

 
8

 
106.7

 
5

Commercial and managed care
1,271.2

 
64

 
616.8

 
75

 
3,708.4

 
64

 
1,702.9

 
73

Self-pay
900.6

 
45

 
111.8

 
14

 
2,596.3

 
45

 
253.3

 
11

Net fee for service revenue
2,803.5

 
141

 
934.3

 
114

 
8,211.1

 
141

 
2,538.3

 
110

Contract and other revenue
265.5

 
13

 
34.5

 
4

 
734.3

 
13

 
108.6

 
5

Provision for uncollectibles
(1,078.3
)
 
(54
)
 
(146.6
)
 
(18
)
 
(3,129.1
)
 
(54
)
 
(341.5
)
 
(15
)
Net revenue
$
1,990.7

 
100
 %
 
$
822.2

 
100
 %
 
$
5,816.3

 
100
 %
 
$
2,305.4

 
100
 %
 
(1)
On December 1, 2016, the Company completed the Merger. Accordingly, historical amounts from EHH for periods prior to that date are not included.

During the three and nine months ended September 30, 2017, the Company's net fee for service revenue associated with self-pay, prior to the provision for uncollectibles, has significantly increased primarily due to the payor mix of EHH, which has a higher percentage of self-pay patients from the concentration of emergency medicine services.

Due to the nature of the Company's operations, it is required to separate the presentation of its bad debt expense on the consolidated statements of operations. The Company records the portion of its bad debts associated with its physician services segment as a component of net revenue in the accompanying consolidated statements of operations, and the remaining portion, which is associated with its ambulatory services segment, is recorded as a component of other operating expenses in the accompanying consolidated statements of operations. The bifurcation is a result of the Company's ability to assess the ultimate collection of the patient service revenue associated with its ambulatory services segment before services are provided as those services are pre-scheduled and non-emergent. Bad debt expense for ambulatory services is included in other operating expenses and was $6.3 million and $5.7 million for the three months ended September 30, 2017 and 2016, respectively, and $18.6 million and $17.8 million for the nine months ended September 30, 2017 and 2016, respectively.

Accounts Receivable

The Company manages accounts receivable by regularly reviewing its accounts and contracts and by providing appropriate allowances for contractual adjustments and uncollectible amounts. Some of the factors considered by management in determining the amount of such allowances are the historical trends of cash collections, contractual and bad debt write-offs, accounts receivable agings, established fee schedules, contracts with payors, changes in payor mix and procedure statistics. Actual collections of accounts receivable in subsequent periods may require changes in the estimated contractual allowances and provision for uncollectibles.

The Company tests its analysis by comparing cash collections to net patient revenues and monitoring self-pay utilization. In addition, when actual collection percentages differ from expected results, on a contract by contract basis, supplemental detailed reviews of the outstanding accounts receivable balances may be performed by the Company’s billing operations to determine whether there are facts and circumstances existing that may cause a different conclusion as to the estimate of the collectability of that contract’s accounts receivable from the estimate resulting from using the historical collection experience. The Company also supplements its allowance for doubtful accounts analysis for its physician services segment quarterly using a hindsight calculation that utilizes write-off data for all payor classes during the previous twelve month period to estimate the allowance for doubtful accounts at a point in time. Changes in these estimates, if any, are charged or credited to the consolidated statements of operations in the period of change. Material changes in estimates may result from unforeseen write-offs of patient or third-party accounts receivable, unsuccessful disputes with managed care payors, adverse macro-economic conditions which limit patients’ ability to meet their financial obligations for the care provided by physicians, or broad changes to government regulations that adversely impact reimbursement rates for services provided by the Company. Significant changes in payor mix, changes in contractual arrangements with payors, business office operations, general economic conditions and health care coverage provided by federal or state governments or private insurers may have a significant impact on the Company’s estimates and significantly affect its results of operations and cash flows. Concentration of credit risk is limited by the diversity and number of facilities, patients, payors and by the geographic dispersion of the Company’s operations.

At September 30, 2017 and December 31, 2016, the allowance for doubtful accounts was $2.48 billion and $584.0 million, respectively. The increase in the allowance for doubtful accounts from December 31, 2016 to September 30, 2017 is attributable to the

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