Note T — 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 with 10 regional pricing areas for prosthetics and orthotics and by state for durable medical equipment;

Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons in financial need, regardless of age, which may supplement Medicare benefits for persons aged 65 or older in financial need; 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. This segment also develops emerging neuromuscular technologies for the O&P and rehabilitation markets.

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 and assets for the years ended December 31, 2019, 2018, and 2017.

For the Patient Care segment, government reimbursement, comprised of Medicare, Medicaid, and the VA, in the aggregate, accounted for approximately, 57.5%, 56.5%, and 54.8% of their net revenue in 2019, 2018, and 2017, respectively.

Additionally, for the Products & Services segment, no single customer accounted for more than 10% of net revenues in 2019, 2018, or 2017, respectively.

Summarized financial information concerning our reporting segments is shown in the following tables.


	Patient Care						Products & Services
	For the Year Ended December 31,						For the Year Ended December 31,
(in thousands)	2019		2018		2017		2019		2018		2017
Net revenue
Third party	$	905,691	$	857,382	$	851,973	$	192,355	$	191,378	$	188,796
Intersegments		—		—		—		203,496		192,096		178,768
Total net revenue		905,691		857,382		851,973		395,851		383,474		367,564
Material costs
Third party suppliers		250,407		234,409		228,091		107,364		103,608		101,132
Intersegments		24,394		23,792		23,808		179,102		168,304		154,960
Total material costs		274,801		258,201		251,899		286,466		271,912		256,092
Personnel expenses		319,633		312,736		312,695		52,592		51,353		48,395
Other expenses		151,140		140,527		143,598		28,178		24,306		25,855
Depreciation & amortization		18,541		19,113		21,363		10,650		10,197		10,163
Impairment of intangible assets		—		—		—		—		183		54,735
Segment income (loss) from operations	$	141,576	$	126,805	$	122,418	$	17,965	$	25,523	$	(27,676)

Purchase of property, plant and equipment	$	16,102	$	12,781	$	8,163	$	2,368	$	1,890	$	2,153
Purchase of therapeutic program equipment leased to third parties under operating leases	$	—	$	—	$	—	$	6,672	$	9,835	$	6,000

A reconciliation of the total of the reportable segment's income (loss) from operations to consolidated income (loss) from operations is as follows:


(in thousands)	2019		2018		2017
Income (loss) from operations
Patient Care	$	141,576	$	126,805	$	122,418
Products & Services		17,965		25,523		(27,676)
Corporate & other		(94,113)		(92,681)		(113,692)
Income (loss) from operations		65,428		59,647		(18,950)
Interest expense, net		34,258		37,566		57,688
Loss on extinguishment of debt		—		16,998		—
Non-service defined benefit plan expense		691		703		736
Income (loss) before income taxes		30,479		4,380		(77,374)
Provision for income taxes		2,954		5,238		27,297
Net income (loss)	$	27,525	$	(858)	$	(104,671)

A reconciliation of the reportable segment net revenue to consolidated net revenue is as follows:


(in thousands)	2019		2018		2017
Net Revenue
Patient Care	$	905,691	$	857,382	$	851,973
Products & Services		395,851		383,474		367,564
Corporate & other		—		—		—
Consolidating adjustments		(203,496)		(192,096)		(178,768)
Consolidated net revenue	$	1,098,046	$	1,048,760	$	1,040,769

A reconciliation of the reportable segment material costs to consolidated material costs is as follows:


(in thousands)	2019		2018		2017
Material costs
Patient Care	$	274,801	$	258,201	$	251,899
Products & Services		286,466		271,912		256,092
Corporate & other		—		—		—
Consolidating adjustments		(203,496)		(192,096)		(178,768)
Consolidated material costs	$	357,771	$	338,017	$	329,223

A reconciliation of the reportable segment 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)	2019		2018		2017
Purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases
Patient Care	$	16,102	$	12,781	$	8,163
Products & Services
Property, plant and equipment		2,368		1,890		2,153
Therapeutic program equipment leased to third parties under operating leases		6,672		9,835		6,000
Corporate & other		7,963		4,313		6,039
Total consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases	$	33,105	$	28,819	$	22,355

A reconciliation of the total of the reportable segment's assets to consolidated assets is as follows:


(in thousands)	2019		2018
Assets
Patient Care	$	552,644	$	415,469
Products & Services		105,673		100,953
Corporate & other		183,936		186,588
Total consolidated assets	$	842,253	$	703,010