Net Revenues and Accounts Receivable

Net revenues in the Home Health and Hospice segments were derived from all major payer classes, while Community Care segment net revenues were derived primarily from Medicaid and Insurance payer classes. Net revenue by major payer classes were as follows (in millions):



	For the Year Ended
	2013		2012		2011
Medicare:
Home Health	$	787.3	$	749.0	$	799.2
Hospice	667.9		715.5		729.1
Total Medicare	1,455.2		1,464.6		1,528.3
Medicaid and Local Government	116.6		74.4		83.1
Commercial Insurance and Other:
Paid at episodic rates	59.6		85.2		77.7
Other	95.2		88.6		109.7
Total Commercial Insurance and Other	154.8		173.8		187.4
Total net revenues	$	1,726.6	$	1,712.8	$	1,798.8

Hospice Medicare Cap

For 2013, the Company recorded a net hospice Medicare cap credit of $4.6 million as compared to a hospice Medicare cap expense of $4.4 million and $4.3 million for 2012 and 2011, respectively, which is reflected in net revenues in the Company’s consolidated statements of comprehensive income. For the Medicare cap year 2014, which began November 1, 2013, the Company has recorded $0.2 million in Medicare cap expense and has two hospice providers currently estimated to be in excess of Medicare cap limits. For the Medicare cap year 2013, which began November 1, 2012, the Company recorded $1.9 million in Medicare cap expense and had five hospice providers in excess of Medicare cap limits.

The Medicare payment cap, which is calculated for each provider by the Medicare fiscal intermediary at the end of the hospice cap period, is determined under the proportional method. The proportional method allocates each beneficiary's Medicare payment cap based on the ratio of the number of days the beneficiary received hospice services from the Company over the total number of days the beneficiary received hospice services from all providers. The Medicare payment cap amount is then further allocated between the hospice cap periods based on the ratio of the number of days the Company provided hospices services during each cap period. The sum of each beneficiary's Medicare cap payment, as determined above, represents the aggregate Medicare payment cap. Medicare revenue paid to a provider during the hospice cap period cannot exceed the aggregate Medicare payment cap. As of December 31, 2013 and 2012, the Company had Medicare cap liabilities of $6.5 million and $15.9 million, respectively, which were reflected in Medicare liabilities in the Company’s consolidated balance sheets.

Odyssey, prior to the acquisition by Gentiva, had filed appeals with CMS to change the methodology previously used to calculate the Medicare payment cap in order to utilize the proportional method of determining the payment cap, as described above. This method allocates the Medicare payment cap over the cap years that the beneficiary is on service. In connection with those appeals, the Company has received final settlement letters for many of its providers and recorded approximately $6.1 million and $1.5 million as net revenue for the year ended December 31, 2013 and 2012, respectively, in the Company's consolidated financial statements.

Corporate Integrity Agreement

Under Odyssey's five-year Corporate Integrity Agreement ("CIA") with the Office of Inspector General of the United States Department of Health and Human Services ("OIG"), which became effective on February 15, 2012, Odyssey must engage a third party to perform verification and unallowable cost reviews. In addition, Odyssey's eligibility review team must review the eligibility of Odyssey's Medicare beneficiaries for the hospice services those beneficiaries received and prepare an eligibility review report. Odyssey must submit to the OIG annually a report with respect to the status of, and findings regarding, Odyssey's compliance activities. Any overpayments identified by Odyssey are paid back to the various Medicare administrative contractors by April 1st of the following year. If Odyssey fails to comply with the terms of the CIA, it will be subject to penalties. In connection with the outcomes of these eligibility reviews, the Company has recorded the impact of these audits and established related reserves for ongoing audits of approximately $12.0 million and $4.9 million for the years ended December 31, 2013 and 2012, respectively, which is reflected as a reduction of net revenues in the Company's consolidated statements of comprehensive income.

PRRB Appeal

During 2013, the Company finalized its year 2000 cost reports, which are currently being settled by CMS. In connection with the finalized audit and the cost report settlements, the Company has recorded approximately $4.0 million as a positive adjustment to net revenues in the Company's consolidated statement of comprehensive income for the year ended December 31, 2013. See Note 15 for additional information.

Accounts Receivable

Accounts receivable attributable to major payer sources of reimbursement are as follows (in thousands):



	December 31, 2013			December 31, 2012
Medicare	$	214,366		$	192,541
Medicaid and Local Government	48,183			31,259
Commercial Insurance and Other	38,036			36,057
Gross Accounts Receivable	300,585			259,857
Less: Allowance for doubtful accounts	(10,680		)	(8,777		)
Net Accounts Receivable	$	289,905		$	251,080

The Commercial Insurance and Other payer group included self-pay accounts receivable relating to patient co-payments of $2.4 million and $1.7 million, respectively, as of December 31, 2013 and December 31, 2012.

The Company’s only financing receivable is the notes receivable from CareCentrix, Inc. The Company measures impairment based on the present value of expected cash flows after considering assumptions relating to risk factors and economic conditions. On an ongoing basis, the Company assesses the credit quality based on the Company’s review of CareCentrix, Inc.’s financial position and receipt of interest payments when due. Based on the Company’s analysis, as of December 31, 2013 and 2012, the Company had no allowances for credit losses.