CONTRACT BALANCES

12 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

CONTRACT BALANCES

CONTRACT BALANCES

Hospital Operations Segment

Amounts related to services provided to patients for which we have not billed and that do not meet the conditions of unconditional right to payment at the end of the reporting period are contract assets. For our Hospital Operations segment, our contract assets include services that we have provided to patients who are still receiving inpatient care in our facilities at the end of the reporting period. Our Hospital Operations segment’s contract assets are included in other current assets in the accompanying Consolidated Balance Sheets at December 31, 2020 and 2019. Approximately 89% of our Hospital Operations segment’s contract assets meet the conditions for unconditional right to payment and are reclassified to patient receivables within 90 days.

In certain circumstances, when a hospital is experiencing financial difficulty due to delays in receiving payment for the Medicare services it provided, it may be eligible for an accelerated or advance payment pursuant to the Medicare accelerated payment program. As discussed in Note 1, the COVID Acts revised the Medicare accelerated payment program in an attempt to disburse payments to hospitals more quickly to mitigate shortfalls due to delays in non-essential procedures, as well as staffing and billing disruptions. During the year ended December 31, 2020, our Hospital Operations segment received advance payments from the Medicare accelerated payment program following expansion of the program under the COVID Acts. These advance payments are recorded as contract liabilities in the accompanying Consolidated Balance Sheet at December 31, 2020.

The opening and closing balances of contract assets for our Hospital Operations segment are as follows:

			Contract Liability –		Contract Liability –
			Current		Long-term
	Contract Assets		Advances from Medicare		Advances from Medicare
December 31, 2019	$	170	$	—	$	—
December 31, 2020	208		510		819
Increase	$	38	$	510	$	819
December 31, 2018	$	169	$	—	$	—
December 31, 2019	170		—		—
Increase	$	1	$	—	$	—

Ambulatory Care Segment

During the year ended December 31, 2020, our Ambulatory Care segment also received advance payments from the Medicare accelerated payment program following expansion of the program under the COVID Acts. At December 31, 2020, contract liabilities and contract liabilities – long-term in the accompanying Balance Sheet included $51 million and $62 million

of Medicare advance payments received by our unconsolidated affiliates for whom we provide cash management services. The opening and closing balances of contract liabilities for our Ambulatory Care segment are as follows:

	Contract Liability –		Contract Liability –
	Current		Long-term
	Advances from Medicare		Advances from Medicare
December 31, 2019	$	—	$	—
December 31, 2020	93		83
Increase	$	93	$	83
December 31, 2018	$	—	$	—
December 31, 2019	—		—
Increase	$	—	$	—

Conifer Segment

Conifer enters into contracts with customers to provide revenue cycle management and other services, such as value‑based care, consulting and project services. The payment terms and conditions in our customer contracts vary. In some cases, customers are invoiced in advance and (for other than fixed-price fee arrangements) a true-up to the actual fee is included on a subsequent invoice. In other cases, payment is due in arrears. In addition, some contracts contain performance incentives, penalties and other forms of variable consideration. When the timing of Conifer’s delivery of services is different from the timing of payments made by the customers, Conifer recognizes either unbilled revenue (performance precedes contractual right to invoice the customer) or deferred revenue (customer payment precedes Conifer service performance). In the following table, customers that prepay prior to obtaining control/benefit of the service are represented by deferred contract revenue until the performance obligations are satisfied. Unbilled revenue represents arrangements in which Conifer has provided services to and the customer has obtained control/benefit of services prior to the contractual invoice date. Contracts with payment in arrears are recognized as receivables in the month the service is performed.

The opening and closing balances of Conifer’s receivables, contract asset, and current and long-term contract liabilities are as follows:

					Contract Liability –		Contract Liability –
			Contract Asset –		Current		Long-Term
	Receivables		Unbilled Revenue		Deferred Revenue		Deferred Revenue
December 31, 2019	$	26	$	11	$	61	$	18
December 31, 2020	56		20		56		16
Increase/(decrease)	$	30	$	9	$	(5)	$	(2)
December 31, 2018	$	42	$	11	$	61	$	20
December 31, 2019	26		11		61		18
Decrease	$	(16)	$	—	$	—	$	(2)

The difference between the opening and closing balances of Conifer’s contract assets and contract liabilities are primarily related to prepayments for those customers who are billed in advance, changes in estimates related to metric-based services, and up-front integration services that are typically not distinct and are, therefore, recognized over the performance obligation period to which they relate. Our Conifer segment’s receivables and contract assets are reported as part of other current assets in our accompanying Consolidated Balance Sheets, and our Conifer segment’s current and long-term contract liabilities are reported as part of contract liabilities and contract liabilities – long-term, respectively, in our accompanying Consolidated Balance Sheets.

In both of the years ended December 31, 2020 and 2019, Conifer recognized $61 million of revenue that was included in the opening current deferred revenue liability. This revenue consists primarily of prepayments for those customers who are billed in advance, changes in estimates related to metric-based services, and up-front integration services that are recognized over the services period.

Contract CostsWe have elected to apply the practical expedient provided by FASB ASC 340-40-25-4 and expense as incurred the incremental customer contract acquisition costs for contracts in which the amortization period of the asset is one year or less. However, incremental costs incurred to obtain and fulfill customer contracts for which the amortization period of the asset is longer than one year, which consist primarily of Conifer deferred contract setup costs, are capitalized and amortized on a straight-line basis over the lesser of their estimated useful lives or the term of the related contract. During the years ended December 31, 2020, 2019 and 2018, we recognized amortization expense of $4 million, $5 million and $11 million, respectively. At December 31, 2020 and 2019, the unamortized customer contract costs were $24 million and $25 million, respectively, and are presented as part of investments and other assets in the accompanying Consolidated Balance Sheets.NET OPERATING REVENUES

Net operating revenues for our Hospital Operations and Ambulatory Care segments primarily consist of net patient service revenues, principally for patients covered by Medicare, Medicaid, managed care and other health plans, as well as certain uninsured patients under our Compact and other uninsured discount and charity programs. Net operating revenues for our Conifer segment primarily consist of revenues from providing revenue cycle management services to health systems, as well as individual hospitals, physician practices, self-insured organizations, health plans and other entities.

The table below shows our sources of net operating revenues less implicit price concessions from continuing operations:

	Years Ended December 31,
	2020		2019		2018
Hospital Operations:
Net patient service revenues from hospitals and related outpatient facilities:
Medicare	$	2,695	$	2,888	$	2,882
Medicaid	1,081		1,193		1,294
Managed care	9,022		9,516		9,213
Uninsured	162		92		96
Indemnity and other	658		679		596
Total	13,618		14,368		14,081
Other revenues(1)	1,172		1,154		1,204
Hospital Operations total prior to inter-segment eliminations	14,790		15,522		15,285
Ambulatory Care	2,072		2,158		2,085
Conifer	1,306		1,372		1,533
Inter-segment eliminations	(528)		(573)		(590)
Net operating revenues	$	17,640	$	18,479	$	18,313

(1)  Primarily physician practices revenues.

Adjustments for prior-year cost reports and related valuation allowances, principally related to Medicare and Medicaid, increased revenues in the years ended December 31, 2020, 2019 and 2018 by $6 million, $27 million and $24 million, respectively. Estimated cost report settlements and valuation allowances are included in accounts receivable in the accompanying Consolidated Balance Sheets (see Note 3). We believe that we have made adequate provision for any adjustments that may result from final determination of amounts earned under all the above arrangements with Medicare and Medicaid.

The table below shows the composition of net operating revenues for our Ambulatory Care segment:

	Years Ended December 31,
	2020		2019		2018
Net patient service revenues	$	1,960	$	2,040	$	1,965
Management fees	86		95		92
Revenue from other sources	26		23		28
Net operating revenues	$	2,072	$	2,158	$	2,085

The table below shows the composition of net operating revenues for our Conifer segment:

	Years Ended December 31,
	2020		2019		2018
Revenue cycle services – Tenet	$	514	$	556	$	568
Revenue cycle services – other customers	700		713		855
Other services – Tenet	14		17		22
Other services – other customers	78		86		88
Net operating revenues	$	1,306	$	1,372	$	1,533

Other services represented approximately 7% of Conifer’s revenue for the year ended December 31, 2020 and include value‑based care services, consulting services and other client-defined projects.

Performance Obligations

The following table includes Conifer’s revenue that is expected to be recognized in the future related to performance obligations that are unsatisfied, or partially unsatisfied, at the end of the reporting period. The amounts in the table primarily consist of revenue cycle management fixed fees, which are typically recognized ratably as the performance obligation is satisfied. The estimated revenue does not include volume- or contingency-based contracts, performance incentives, penalties or other variable consideration that is considered constrained. Conifer’s contract with Catholic Health Initiatives (“CHI”), a minority interest owner of Conifer Health Solutions, LLC, represents the majority of the fixed-fee revenue related to remaining performance obligations. Conifer’s contract term with CHI ends December 31, 2032.

			Years Ending December 31,										Later Years
	Total		2021		2022		2023		2024		2025
Performance obligations	$	6,650	$	594	$	593	$	593	$	541	$	541	$	3,788