Business Combinations

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Business Combinations

Business Combinations

In February 2016, we acquired 50% of the inpatient rehabilitation hospital at CHI St. Vincent Hot Springs (“Hot Springs”), a 20-bed inpatient rehabilitation hospital in Hot Springs, Arkansas, through a joint venture with St. Vincent Community Health Services, Inc. The acquisition, which was funded through a contribution to the consolidated joint venture, was not material to our financial position, results of operations, or cash flows. The Hot Springs transaction was made to enhance our position and ability to provide inpatient rehabilitative services to patients in Hot Springs and its surrounding areas. As a result of this transaction, Goodwill increased by $1.8 million, none of which is deductible for federal income tax purposes. The goodwill reflects our expectations of our ability to gain access to and penetrate the acquired hospital’s historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in this market.

We accounted for this transaction under the acquisition method of accounting and reported the results of operations of the acquired hospital from its respective date of acquisition. Assets acquired and liabilities assumed, if any, were recorded at their estimated fair values as of the respective acquisition date. The fair value of the identifiable intangible asset was based on valuations using the income approach. The income approach is based on management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill.

The fair value of the assets acquired at the acquisition date were as follows (in millions):

Property and equipment	$	5.1
Identifiable intangible asset:
Trade name (useful life of 20 years)	0.2
Goodwill	1.8
Total assets acquired	$	7.1

Information regarding the net cash paid was as follows (in millions):

	Three Months Ended March 31, 2016
Fair value of assets acquired	$	5.3
Goodwill	1.8
Fair value of noncontrolling interest owned by joint venture partner	(7.1		)
Net cash paid for acquisition	$	—

Pro Forma Results of Operations

The following table summarizes the results of operations of the above mentioned transaction from its respective date of acquisition included in our consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the date of the acquisition been January 1, 2015 (in millions):

	Net Operating Revenues		Net Income Attributable to HealthSouth
Acquired entities only: Actual from acquisition date to March 31, 2016	$	0.3	$	(0.7	)
Combined entity: Supplemental pro forma from 01/01/2016-03/31/2016	910.1		58.0
Combined entity: Supplemental pro forma from 01/01/2015-03/31/2015	741.6		42.6

See Note 2, Business Combinations, to the consolidated financial statements accompanying the 2015 Form 10-K for information regarding acquisitions completed in 2015.