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):



	First Quarter
	2014		2013		Percentage Variance
Medicare:
Home Health	$	208.8	$	193.1	8.1	%
Hospice	163.2		167.3		(2.4	)%
Total Medicare	372.0		360.4		3.2	%
Medicaid and Local Government	71.1		18.2		289.3	%
Commercial Insurance and Other:
Paid at episodic rates	15.6		14.3		9.4	%
Other	28.8		22.7		27.0	%
Total Commercial Insurance and Other	44.4		37.0		20.2	%
Total net revenues	$	487.5	$	415.6	17.3	%

For the first quarter of 2014, the Company recorded hospice Medicare cap expense of $0.1 million compared to $0.1 million hospice Medicare cap credit being recorded for the first quarter of 2013, which are 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 $0.4 million in Medicare cap expense and has five hospice providers currently estimated to be 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 March 31, 2014 and December 31, 2013, the Company had Medicare cap liabilities of $3.2 million and $6.5 million, respectively, which are reflected in Medicare liabilities in the Company’s consolidated balance sheets.

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 these eligibility reviews, the Company recorded reserves of approximately $1.2 million and $0.9 million for the first quarter of 2014 and 2013, respectively, which are reflected as a reduction of net revenues in the Company's consolidated statements of comprehensive income.

Accounts Receivable

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



	March 31, 2014			December 31, 2013
Medicare	$	215,797		$	214,366
Medicaid and Local Government	49,731			48,183
Commercial Insurance and Other	37,709			38,036
Gross Accounts Receivable	303,237			300,585
Less: Allowance for doubtful accounts	(11,899		)	(10,680		)
Net Accounts Receivable	$	291,338		$	289,905

As of March 31, 2014 and December 31, 2013, the Commercial Insurance and Other payer group included self-pay accounts receivable relating to patient co-payments of $2.9 million and $2.4 million, respectively.