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Segment and Related Information
 9 Months Ended
Sep. 30, 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 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, health management organizations (“HMOs”), preferred provider organizations (“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
•the VA.
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” in our 2020 Form 10-K.
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.
Summarized financial information concerning our reporting segments is shown in the following tables. Total assets for each of the segments has not materially changed from December 31, 2020.
Patient CareProducts & Services
For the Three Months Ended
September 30,		For the Three Months Ended
September 30,
(in thousands)2021202020212020
Net revenues
Third party$244,356 $212,664 $45,471 $43,973 
Intersegments— — 58,495 50,011 
Total net revenues244,356 212,664 103,966 93,984 
Material costs
Third party suppliers65,356 56,599 27,205 24,863 
Intersegments9,408 7,339 49,087 42,672 
Total material costs74,764 63,938 76,292 67,535 
Personnel expenses84,479 76,989 14,469 12,738 
Other expenses38,923 34,713 6,636 5,957 
Depreciation & amortization4,870 4,786 1,974 2,633 
Segment income from operations$41,320 $32,238 $4,595 $5,121 
Patient CareProducts & Services
For the Nine Months Ended
September 30,		For the Nine Months Ended
September 30,
(in thousands)2021202020212020
Net revenues
Third party$676,825 $598,706 $131,291 $125,104 
Intersegments— — 160,986 138,899 
Total net revenues676,825 598,706 292,277 264,003 
Material costs
Third party suppliers179,060 160,212 77,942 68,463 
Intersegments27,343 18,639 133,643 120,260 
Total material costs206,403 178,851 211,585 188,723 
Personnel expenses243,431 216,910 42,946 35,824 
Other expenses112,509 86,462 19,202 18,614 
Depreciation & amortization14,472 14,089 5,872 7,883 
Segment income from operations$100,010 $102,394 $12,672 $12,959 
A reconciliation of the total of the reportable segments’ income from operations to consolidated net income is as follows:
For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
(in thousands)2021202020212020
Income from operations
Patient Care$41,320 $32,238 $100,010 $102,394 
Products & Services4,595 5,121 12,672 12,959 
Corporate & other(20,247)(24,284)(64,899)(72,590)
Income from operations25,668 13,075 47,783 42,763 
Interest expense, net7,313 8,013 21,805 24,918 
Non-service defined benefit plan expense167 158 501 474 
Income before income taxes18,188 4,904 25,477 17,371 
Benefit for income taxes(2,929)(1,911)(2,469)(4,750)
Net income$21,117 $6,815 $27,946 $22,121 
A reconciliation of the reportable segments’ net revenues to consolidated net revenues is as follows:
For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
(in thousands)2021202020212020
Net revenues
Patient Care$244,356 $212,664 $676,825 $598,706 
Products & Services103,966 93,984 292,277 264,003 
Corporate & other— — — — 
Consolidating adjustments(58,495)(50,011)(160,986)(138,899)
Consolidated net revenues$289,827 $256,637 $808,116 $723,810 
A reconciliation of the reportable segments’ material costs to consolidated material costs is as follows:
For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
(in thousands)2021202020212020
Material costs
Patient Care$74,764 $63,938 $206,403 $178,851 
Products & Services76,292 67,535 211,585 188,723 
Corporate & other— — — — 
Consolidating adjustments(58,495)(50,011)(160,986)(138,899)
Consolidated material costs$92,561 $81,462 $257,002 $228,675 
During the third quarter 2021, we have reclassified certain amounts related to the intercompany cost transfer between segment net revenues, segment material costs, and consolidating adjustments from the first six months of 2021 to be consistent with current presentation.