Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities Policy

Variable Interest Entities—

Effective January 1, 2016, in connection with our adoption of ASU 2015-02, we updated our evaluation of all jointly held legal entities to determine whether they are now variable interest entities (“VIEs”) under the new guidance. Any entity considered a VIE is evaluated to determine which party is the primary beneficiary and thus should consolidate the VIE. This analysis is complex, involves uncertainties, and requires significant judgment on various matters. In order to determine if we are the primary beneficiary of a VIE, we must determine what activities most significantly impact the economic performance of the entity, whether we have the power to direct those activities, and if our obligation to absorb losses or receive benefits from the VIE could potentially be significant to the VIE.

Net Operating Revenues Policy

Net Operating Revenues—

We derived consolidated Net operating revenues from the following payor sources:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Medicare	74.7	%	74.5	%	75.1	%	74.7	%
Medicare Advantage	8.1	%	7.7	%	7.9	%	8.0	%
Managed care	10.0	%	10.1	%	9.8	%	10.0	%
Medicaid	3.2	%	3.1	%	3.3	%	2.9	%
Other third-party payors	1.4	%	1.8	%	1.4	%	1.6	%
Workers’ compensation	0.7	%	0.9	%	0.8	%	0.9	%
Patients	0.5	%	0.6	%	0.5	%	0.6	%
Other income	1.4	%	1.3	%	1.2	%	1.3	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

Inpatient Rehabilitation Revenues

Our inpatient rehabilitation segment derived its Net operating revenues from the following payor sources:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Medicare	73.1	%	72.7	%	73.3	%	73.1	%
Medicare Advantage	7.8	%	7.8	%	7.7	%	8.1	%
Managed care	11.5	%	11.4	%	11.2	%	11.3	%
Medicaid	2.9	%	2.6	%	3.0	%	2.3	%
Other third-party payors	1.7	%	2.1	%	1.7	%	1.9	%
Workers’ compensation	0.8	%	1.1	%	1.0	%	1.1	%
Patients	0.6	%	0.7	%	0.6	%	0.7	%
Other income	1.6	%	1.6	%	1.5	%	1.5	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

Home Health and Hospice Revenues

Our home health and hospice segment derived its Net operating revenues from the following payor sources:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Medicare	82.3	%	83.9	%	82.9	%	83.8	%
Medicare Advantage	9.0	%	7.2	%	8.9	%	7.3	%
Managed care	3.7	%	2.9	%	3.2	%	3.0	%
Medicaid	4.8	%	5.8	%	4.8	%	5.7	%
Other third-party payors	—	%	0.1	%	—	%	0.1	%
Patients	0.1	%	0.1	%	0.1	%	0.1	%
Other income	0.1	%	—	%	0.1	%	—	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2015 Form 10-K for our policies related to Net operating revenues, Accounts receivable, and our Allowance for doubtful accounts.

Recent Accounting Pronouncements Policy

Recent Accounting Pronouncements—

In February 2015, the FASB issued ASU 2015-02, “Consolidations (Topic 810) - Amendments to the Consolidation Analysis,” which provides guidance on evaluating whether a reporting entity should consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are VIEs. Under this analysis, limited partnerships and other similar entities will be considered a VIE unless the limited partners hold substantive kick-out rights or participating rights. Further, the amendments eliminate the presumption that a general partner should consolidate a limited partnership under the voting interest model, as well as affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. This standard was effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. We elected to adopt this guidance using the modified retrospective approach. Our adoption of this guidance resulted in certain limited partnership-like entities that were previously consolidated as voting interest entities to now be consolidated as VIEs, for which additional disclosures are required. Our adoption of ASU 2015-02 did not have a material impact on our financial position, results of operations, or cash flows. See Note 3, Variable Interest Entities.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” in order to increase transparency and comparability by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new standard, lessees will recognize a right-of-use asset and a corresponding lease liability for all leases other than leases that meet the definition of a short-term lease. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in an expense pattern similar to current capital leases. Classification will be based on criteria that are similar to those applied in current lease accounting. This standard will be effective for HealthSouth for the annual reporting period beginning after December 15, 2018. Early adoption is permitted. We continue to review the requirements of this standard and any potential impact it may have on our financial position, results of operations, or cash flows.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting (Topic 718),” to simplify various aspects of share-based payment accounting and presentation. The new standard requires entities to record all of the tax effects related to share-based payments at settlement (or expiration) through the income statement. This will require us to reclassify tax benefits in excess of compensation cost (“windfalls”) and tax deficiencies (“shortfalls”) to the extent of previous windfalls from Capital in excess of par value to Provision for income tax expense. This change is required to be applied prospectively to all excess tax benefits and tax deficiencies resulting from settlements after the date of adoption of the ASU. The standard eliminates the requirement to delay recognition of a windfall tax benefit until it reduces current taxes payable. This change is required to be applied on a modified retrospective basis, with a cumulative-effect adjustment to opening retained earnings. In addition, all income tax-related cash flows resulting from share-based payments are required to be reported as operating activities on the statement of cash flows as opposed to the current presentation as an inflow from financing activities and an outflow from operating activities. Either prospective or retrospective transition of this provision is permitted. Finally, the standard clarifies that all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement of cash flows. This change will be applied retrospectively. For HealthSouth, this guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within that reporting period. Early adoption is permitted, with any adjustments reflected as of the beginning of the fiscal year of adoption. We continue to review the requirements of this standard and any potential impact it may have on our financial position, results of operations, or cash flows.