REVENUE RECOGNITION AND ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

REVENUE RECOGITION AND ALLOWANCE FOR CREDIT LOSSES

REVENUE RECOGNITION AND ALLOWANCE FOR CREDIT LOSSES

DIS

Net revenues in the Company’s DIS business accounted for over 95% of the Company’s total net revenues for the three months ended March 31, 2020 and 2019 and are primarily comprised of a high volume of relatively low-dollar transactions. The DIS business, which provides clinical testing services and other services, satisfies its performance obligations and recognizes revenues upon completion of the testing process, when results are reported, or when services have been rendered. The Company estimates the amount of consideration it expects to be entitled to receive from customer groups, using the portfolio approach, in exchange for providing services. These estimates include the impact of contractual allowances, including payer denials and price concessions. The portfolios determined using the portfolio approach consist of the following groups of customers: healthcare insurers, government payers, client payers and patients.

DS

The Company’s DS businesses primarily satisfy their performance obligations and recognize revenues when delivery has occurred or services have been rendered.

The approximate percentage of net revenue by type of customer was as follows:

    

	Three Months Ended March 31,
	2020		2019
Healthcare insurers:
Fee-for-service	34	%	33	%
Capitated	3		4
Total healthcare insurers	37		37
Government payers	14		15
Client payers	33		31
Patients	12		13
Total DIS	96		96
DS	4		4
Net revenues	100	%	100	%

The approximate percentage of net accounts receivable by type of customer was as follows:

	March 31, 2020		December 31, 2019
Healthcare Insurers	22	%	22	%
Government Payers	10		11
Client Payers	42		42
Patients (including coinsurance and deductible responsibilities)	21		20
Total DIS	95		95
DS	5		5
Net accounts receivable	100	%	100	%

Allowance for Credit Losses Policy

When estimating its allowance for credit losses, the Company pools its trade receivables based on the following customer types: healthcare insurers, government payers, client payers and patients. 

For the healthcare insurers and government payers, collection of the Company’s net revenues is normally a function of providing the complete and correct billing information within the various filing deadlines, and provided that the Company has billed the payers accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. 

Client payers include physicians, hospitals, IDNs, ACOs, employers, other commercial laboratories and institutions for which services are performed on a wholesale basis and are billed based on negotiated fee schedules.  Credit risk and ability to pay are more of a consideration for these payers. 

With respect to patients, implicit price concessions, which represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, are recognized as a reduction of revenue.  Estimates of implicit price concessions consider historical collection experience (including the period the receivables have been outstanding) and other factors including current market conditions.

The Company principally estimates the allowance for credit losses by pool based on historical collection experience, the current credit worthiness of the customers, current economic conditions, expectations of future economic conditions and the period that the receivables have been outstanding.  To the extent that any individual payers are identified that have deteriorated in credit quality, the Company removes the customers from their respective pools and establishes allowances based on the individual risk characteristics of such customers.

Although the Company believes that its estimates for contractual allowances and patient price concessions as well as its allowance for credit losses are appropriate, it is possible that the Company will experience an adverse impact on cash collections as a result of the impact of the COVID-19 pandemic.