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Segment and Related Information
 12 Months Ended
Dec. 31, 2021
Segment Reporting [Abstract]  
Segment and Related Information Segment and Related Information
We have identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each operating segment’s income from operations. The operating segments are described further below:
Patient Care - This segment consists of (i) our owned and operated patient care clinics, and (ii) our contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care, and maintenance of the devices. The principal reimbursement sources for our services are:
•Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, HMOs, PPOs, hospitals, vocational rehabilitation, workers’ compensation programs, and similar sources;
•Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain persons with disabilities, which provides reimbursement for O&P products and services based on prices set forth in published fee schedules (generally with either 10 regional pricing areas or state level prices) for prosthetics and orthotics and by state for durable medical equipment (DMEPOS);
•Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons requiring financial assistance, regardless of age, which may supplement Medicare benefits for persons aged 65 or older requiring financial assistance; and
•U.S. Department of Veterans Affairs.
Our contract and network management business, known as Linkia, is the only network management company dedicated solely to serving the O&P market and is focused on managing the O&P services of national and regional insurance companies. We partner with healthcare insurance companies by securing a national or regional contract either as a preferred provider or to manage their O&P network of providers.
Products & Services - This segment consists of our distribution business, which distributes and fabricates O&P products and components to sell to both the O&P industry and our own patient care clinics, and our therapeutic solutions business. The therapeutic solutions business leases and sells rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training.
Corporate & Other - This consists of corporate overhead and includes unallocated expense such as personnel costs, professional fees, and corporate offices expenses.
The accounting policies of the segments are the same as those described in Note A - “Organization and Summary of Significant Accounting Policies.”
Intersegment revenue primarily relates to sales of O&P components from the Products & Services segment to the Patient Care segment. The sales are priced at the cost of the related materials plus overhead.
We had no foreign and export sales or assets for the years ended December 31, 2021, 2020, and 2019.
For the Patient Care segment, government reimbursement, comprised of Medicare, Medicaid, and the VA, in the aggregate, accounted for approximately, 58.5%, 57.7%, and 57.5% of their net revenue in 2021, 2020, and 2019, respectively.
Additionally, for the Products & Services segment, no single customer accounted for more than 10% of net revenues in 2021, 2020, or 2019, respectively.
Summarized financial information concerning our reporting segments is shown in the following tables.
Patient CareProducts & Services
For the Year Ended December 31,For the Year Ended December 31,
(in thousands)202120202019202120202019
Net revenue
Third party$943,328 $831,603 $905,691 $177,160 $169,547 $192,355 
Intersegments— — — 220,792 189,604 203,496 
Total net revenue943,328 831,603 905,691 397,952 359,151 395,851 
Material costs
Third party suppliers248,961 221,566 250,407 105,381 93,844 107,364 
Intersegments38,243 25,818 24,394 182,549 163,786 179,102 
Total material costs287,204 247,384 274,801 287,930 257,630 286,466 
Personnel expenses339,578 302,206 319,633 57,996 48,985 52,592 
Other expenses152,947 115,924 151,140 26,951 24,638 28,178 
Depreciation & amortization19,622 18,892 18,541 7,860 10,173 10,650 
Segment income from operations$143,977 $147,197 $141,576 $17,215 $17,725 $17,965 
Purchase of property, plant and equipment$10,242 $10,607 $16,102 $9,215 $11,040 $2,368 
Purchase of therapeutic program equipment leased to third parties under operating leases$— $— $— $2,280 $3,592 $6,672 
A reconciliation of the total of the reportable segment’s income (loss) from operations to consolidated income from operations is as follows:
(in thousands)202120202019
Income from operations
Patient Care$143,977 $147,197 $141,576 
Products & Services17,215 17,725 17,965 
Corporate & other(88,521)(93,015)(94,113)
Income from operations72,671 71,907 65,428 
Interest expense, net28,864 32,445 34,258 
Non-service defined benefit plan expense667 632 691 
Income before income taxes43,140 38,830 30,479 
Provision for income taxes1,158 638 2,954 
Net income$41,982 $38,192 $27,525 
A reconciliation of the reportable segment’s net revenue (loss) to consolidated net revenue is as follows:
(in thousands)202120202019
Net Revenue
Patient Care$943,328 $831,603 $905,691 
Products & Services397,952 359,151 395,851 
Corporate & other— — — 
Consolidating adjustments(220,792)(189,604)(203,496)
Consolidated net revenue$1,120,488 $1,001,150 $1,098,046 
A reconciliation of the reportable segment’s material costs to consolidated material costs is as follows:
(in thousands)202120202019
Material costs
Patient Care$287,204 $247,384 $274,801 
Products & Services287,930 257,630 286,466 
Corporate & other— — — 
Consolidating adjustments(220,792)(189,604)(203,496)
Consolidated material costs$354,342 $315,410 $357,771 
A reconciliation of the reportable segment’s purchase of property, plant and equipment to consolidated purchase of property, plant and equipment, including purchases of therapeutic program equipment leased to third parties under operating leases, is as follows:
(in thousands)202120202019
Purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases
Patient Care$10,242 $10,607 $16,102 
Products & Services
Property, plant and equipment9,215 11,040 2,368 
Therapeutic program equipment leased to third parties under operating leases2,280 3,592 6,672 
Corporate & other3,122 2,853 7,963 
Total consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases
$24,859 $28,092 $33,105 
A reconciliation of the total of the reportable segment’s assets to consolidated assets is as follows:
(in thousands)20212020
Assets
Patient Care$705,614 $578,319 
Products & Services133,075 121,564 
Corporate & other159,450 250,868 
Total consolidated assets$998,139 $950,751