(11) Revenue

In May 2014 and March 2016, the FASB issued ASU 2014-09 and ASU 2016-08, “Revenue from Contracts with Customers (Topic 606)” and “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, respectively, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Under the new standards, our estimate for amounts not expected to be collected based on historical experience will continue to be recognized as a reduction to net revenue. However, subsequent changes in estimate of collectability due to a change in the financial status of a payor, for example a bankruptcy, will be recognized as bad debt expense in operating charges.

The performance obligation is separately identifiable from other promises in the customer contract. As the performance obligations are met (i.e.: room, board, ancillary services, level of care), revenue is recognized based upon allocated transaction price. The transaction price is allocated to separate performance obligations based upon the relative standalone selling price. In instances where we determine there are multiple performance obligations across multiple months, the transaction price will be allocated by applying an estimated implicit and explicit rate to gross charges based on the separate performance obligations.

In assessing collectability, we have elected the portfolio approach. This portfolio approach is being used as we have large volume of similar contracts with similar classes of customers. We reasonably expect that the effect of applying a portfolio approach to a group of contracts would not differ materially from considering each contract separately. Management’s judgment to group the contracts by portfolio is based on the payment behavior expected in each portfolio category. As a result, aggregating all of the contracts (which are at the patient level) by the particular payor or group of payors, will result in the recognition of the same amount of revenue as applying the analysis at the individual patient level.

On January 1, 2018, we adopted the new accounting standard using the modified retrospective method. The information in comparative periods have not been restated and continues to be reported under the accounting standards in effect for those periods. In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated income statement was as follows (in thousands):


			Balances Without
	As		Adoption		Effect
	Reported		ASC 606		of Change
For the three months ended September 30, 2018:
Net Revenue before provision for doubtful accounts			$	2,929,710
Less: Provision for doubtful accounts				285,044
Net Revenues	$	2,648,913	$	2,644,666	$	4,247

Other operating expenses	$	651,442	$	647,195	$	4,247

			Balances Without
	As		Adoption		Effect
	Reported		ASC 606		of Change
For the nine months ended September 30, 2018:
Net Revenue before provision for doubtful accounts			$	8,814,635
Less: Provision for doubtful accounts				807,747
Net Revenues	$	8,017,782	$	8,006,888	$	10,894

Other operating expenses	$	1,896,745	$	1,885,851	$	10,894

We group our revenues into categories based on payment behaviors. Each component has its own reimbursement structure which allows us to disaggregate the revenue into categories that share the nature and timing of payments. The other patient revenue consists primarily of self-pay, government-funded non-Medicaid, and other.

The following table disaggregates our revenue by major source for the three and nine month periods ended September 30, 2018 and 2017 (in thousands):

	For the three months ended September 30, 2018
	Acute Care				Behavioral Health				Other		Total
Medicare	$	295,691	21	%	$	155,642	12	%			$	451,333	17	%
Managed Medicare		175,248	13	%		55,285	4	%				230,533	9	%
Medicaid		126,977	9	%		169,614	13	%				296,591	11	%
Managed Medicaid		123,296	9	%		242,233	19	%				365,529	14	%
Managed Care (HMO and PPOs)		500,688	36	%		333,585	26	%				834,273	31	%
UK Revenue		0	0	%		129,965	10	%				129,965	5	%
Other patient revenue and adjustments, net		62,055	4	%		126,157	10	%				188,212	7	%
Other non-patient revenue		99,095	7	%		49,991	4	%		3,391		152,477	6	%
Total Net Revenue	$	1,383,050	100	%	$	1,262,472	100	%	$	3,391		2,648,913	100	%

	For the nine months ended September 30, 2018
	Acute Care				Behavioral Health				Other		Total
Medicare	$	972,073	23	%	$	444,812	12	%			$	1,416,885	18	%
Managed Medicare		550,683	13	%		151,323	4	%				702,006	9	%
Medicaid		349,794	8	%		522,916	14	%				872,710	11	%
Managed Medicaid		410,243	10	%		720,285	19	%				1,130,528	14	%
Managed Care (HMO and PPOs)		1,547,496	37	%		1,052,694	28	%				2,600,190	32	%
UK Revenue		0	0	%		364,163	10	%				364,163	5	%
Other patient revenue and adjustments, net		104,926	2	%		364,534	10	%				469,460	6	%
Other non-patient revenue		297,458	7	%		153,824	4	%		10,558		461,840	6	%
Total Net Revenue	$	4,232,673	100	%	$	3,774,551	100	%	$	10,558		8,017,782	100	%

	For the three months ended September 30, 2017
	Acute Care				Behavioral Health				Other		Total
Medicare	$	299,844	23	%	$	157,622	13	%			$	457,466	18	%
Managed Medicare		160,548	12	%		42,322	3	%				202,870	8	%
Medicaid		121,290	9	%		177,196	14	%				298,486	12	%
Managed Medicaid		124,079	9	%		209,463	17	%				333,542	13	%
Managed Care (HMO and PPOs)		471,623	36	%		335,373	27	%				806,996	32	%
UK Revenue		0	0	%		110,526	9	%				110,526	4	%
Other patient revenue and adjustments, net		26,022	2	%		136,714	11	%				162,736	6	%
Other non-patient revenue		113,342	9	%		55,332	5	%		568		169,242	7	%
Total Net Revenue	$	1,316,748	100	%	$	1,224,548	100	%	$	568		2,541,864	100	%

	For the nine months ended September 30, 2017
	Acute Care				Behavioral Health				Other		Total
Medicare	$	925,857	23	%	$	451,704	12	%			$	1,377,561	18	%
Managed Medicare		471,727	12	%		121,709	3	%				593,436	8	%
Medicaid		343,675	8	%		540,823	15	%				884,498	11	%
Managed Medicaid		384,340	9	%		650,327	18	%				1,034,667	13	%
Managed Care (HMO and PPOs)		1,452,448	36	%		1,050,550	29	%				2,502,998	32	%
UK Revenue		0	0	%		316,938	9	%				316,938	4	%
Other patient revenue and adjustments, net		141,919	3	%		381,723	10	%				523,642	7	%
Other non-patient revenue		352,786	9	%		171,456	5	%		9,096		533,338	7	%
Total Net Revenue	$	4,072,752	100	%	$	3,685,230	100	%	$	9,096		7,767,078	100	%