Summary Of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2012

Summary Of Significant Accounting Policies [Abstract]

Description of Business: Lincare Holdings Inc. and subsidiaries ("Lincare" or the "Company") provides oxygen, respiratory therapy services, specialty pharmaceuticals, infusion therapy services and home medical equipment such as hospital beds, wheelchairs and other medical supplies to the home health care market. The Company's customers are serviced from locations in 48 states in the United States and Canada. The Company's equipment and supplies are readily available and the Company is not dependent on a single supplier or even a few suppliers.

Basis Of Presentation

Basis of Presentation: The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles accepted in the United States for interim financial information and with the instructions to Form 10-Q. They should be read in conjunction with the consolidated financial statements and related notes to the financial statements of Lincare Holdings Inc. and Subsidiaries on Form 10-K for the fiscal year ended December 31, 2011. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. It is at least reasonably possible that a change in those estimates will occur in the near term.

Investments

Investments: The Company determines the appropriate classification of investments at the time of purchase based upon management's intent with regard to such investments. Based upon the Company's intentions and ability to hold certain assets until maturity, the Company classifies certain debt securities as held-to-maturity and measures them at amortized cost. The Company classifies certain other debt securities as available-for-sale and measures them at fair value with unrealized gains or losses recorded in other comprehensive income. Realized gains and losses from both categories of investments are included in net income and are determined on a specific identification basis. Interest income and dividend income, if any, for both categories of investments are included in net income.

Concentration Of Credit Risk

Concentration of Credit Risk: The Company's revenues are generated through locations in 48 states in the United States and Canada. The Company generally does not require collateral or other security in extending credit to customers; however, the Company routinely obtains assignment of (or is otherwise entitled to receive) benefits receivable under the health insurance programs, plans or policies of its customers. Included in the Company's net revenues is reimbursement from government sources under Medicare, Medicaid and other federally and state funded programs, which represented approximately 61% and 59% of net revenues for the three months ended March 31, 2012 and 2011, respectively. The exclusion of the Company from participating in state and federally funded programs would have a material adverse effect on the Company's business, financial condition, operating results and cash flows.

Self-Insurance Risk

Self-Insurance Risk: The Company is subject to workers' compensation, professional liability, auto liability and employee health benefit claims, which are primarily self-insured. However, the Company maintains certain stop-loss and other insurance coverage which it believes to be appropriate. Provisions for estimated settlements relating to these self-insured liabilities are provided in the period of the related claims on a case-by-case basis plus an amount for incurred but not reported claims. Differences between the amounts accrued and subsequent settlements are recorded in operations in the period of settlement.

Revenue Recognition And Accounts Receivable

Revenue Recognition and Accounts Receivable: The Company's revenues are recognized on an accrual basis in the period in which services and related products are provided to customers and are recorded at net realizable amounts expected to be paid by customers and third-party payors. The Company's billing system contains payor-specific price tables that reflect the fee schedule amounts in effect or contractually agreed upon by various government and commercial payors for each item of equipment or supply provided to a customer. The Company has established an allowance to account for sales adjustments that result from differences between the payment amount received and the expected realizable amount. Actual adjustments that result from differences between the payment amount received and the expected realizable amount are recorded against the allowance for sales adjustments and are typically identified and ultimately recorded at the point of cash application or when otherwise determined pursuant to the Company's collection procedures. The Company reports revenues in its financial statements net of such sales adjustments.

Certain items provided by the Company are reimbursed under rental arrangements that generally provide for fixed monthly payments established by fee schedules for as long as the patient is using the equipment and medical necessity continues (subject to capped rental arrangements which limit the rental payment periods in some instances and which may result in a transfer of title to the equipment at the end of the rental payment period). Once initial delivery of rental equipment is made to the patient, a monthly billing cycle is established based on the initial date of delivery. The Company recognizes rental arrangement revenues ratably over the monthly service period and defers revenue for the portion of the monthly bill that is unearned. No separate payment is earned from the initial equipment delivery and setup process. During the rental period, the Company is responsible for servicing the equipment and providing routine maintenance, if necessary.

The Company recognizes revenue at the time the following criteria are met:

•

persuasive evidence of an arrangement exists;

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delivery has occurred;

•

the seller's price to the buyer is fixed or determinable; and

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collectability is reasonably assured.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenues and accounts receivable at their net realizable values at the time products and/or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such sales adjustments are typically identified and recorded by the Company at the point of cash application, claim denial or account review. Included in accounts receivable are earned but unbilled accounts receivable from earned revenues. Unbilled accounts receivable represent charges for equipment and supplies delivered to customers for which invoices have not yet been generated by the Company's billing system. Prior to the delivery of equipment and supplies to customers, the Company performs certain certification and approval procedures to ensure collection is reasonably assured. Once the items are delivered, unbilled accounts receivable are recorded at net amounts expected to be paid by customers and third-party payors. Billing delays, generally ranging from several days to several weeks, can occur due to delays in obtaining certain required payor-specific documentation from internal and external sources as well as interim transactions occurring between cycle billing dates established for each customer within the billing system, and business acquisitions awaiting assignment of new provider enrollment identification numbers. In the event that a third-party payor does not accept the claim, the customer may be responsible for payment for the products or services. Accounts receivable are reported net of allowances for sales adjustments and uncollectible accounts. Sales adjustments are recorded against revenues and result from differences between the payment amount received and the expected realizable amount. Bad debt is recorded as an operating expense and consists of billed charges that are ultimately deemed uncollectible due to the customer's or third-party payor's inability or refusal to pay.

The Company performs analyses to evaluate the net realizable value of accounts receivable. Specifically, the Company considers historical realization data, accounts receivable aging trends, other operating trends and relevant business conditions. Because of continuing changes in the health care industry and third-party reimbursement, it is possible that the Company's estimates could change, which could have a material impact on the Company's results of operations and cash flows.

Net Revenues

Net Revenues: The following table sets forth, for the periods indicated, a summary of the Company's net revenues by product category:


	For The Three Months Ended March 31,
	2012		2011
	(In thousands)
Respiratory and other chronic therapies	$	449,544	$	386,020
DME, infusion and enteral therapies		51,334		45,547

Total	$	500,878	$	431,567

Included in net revenues in the three months ended March 31, 2012 are rental items that comprise approximately 54.1% of total revenues and sale items that comprise approximately 45.9% of total revenues. Included in net revenues in the three months ended March 31, 2011 are rental items that comprise approximately 59.3% of total revenues and sale items that comprise approximately 40.7% of total revenues.

Sales And Certain Other Taxes

Sales and Certain Other Taxes: In its consolidated financial statements, the Company accounts for taxes imposed on revenue-producing transactions by government authorities on a net basis, and accordingly, excludes such taxes from net revenues. Such taxes include, but are not limited to, sales, use, privilege and excise taxes.

Cost Of Goods And Services

Cost of Goods and Services: Cost of goods and services includes the cost of medical equipment (excluding depreciation of $29.1 million and $26.8 million for the three-month periods in 2012 and 2011, respectively), drugs and supplies sold to patients and certain operating costs related to the Company's respiratory drug product line. These costs include an allocation of customer service, distribution and administrative costs relating to the respiratory drug product line of approximately $13.9 million for the three-month period ended March 31, 2012. For the three-month period of 2011, such costs amounted to $13.9 million. Included in cost of goods and services in the three-month period ended March 31, 2012 are salary and related expenses of pharmacists and other service professionals of approximately $3.1 million. Such salary and related expenses for the three-month period ended March 31, 2011, were $2.8 million.

Operating Expenses

Operating Expenses: The Company manages 1,091 operating centers from which customers are provided equipment, supplies and services. An operating center averages approximately seven to eight employees and is typically comprised of a center manager, two customer service representatives (referred to as "CSR's" – telephone intake, scheduling, documentation), two or three service representatives (referred to as "Service Reps" – delivery, maintenance and retrieval of equipment and delivery of disposables), a respiratory therapist (non-reimbursable clinical follow-up with the customer and communication to the prescribing physician) and a sales representative (marketing calls to local physicians and other referral sources).

The Company includes in operating expenses the costs incurred at the Company's operating centers for certain service personnel (center manager, CSR's and Service Reps), facilities (rent, utilities, communications, property taxes, etc.), vehicles (vehicle leases, gasoline, repair and maintenance), and general business supplies and miscellaneous expenses. Operating expenses for the interim periods of 2012 and 2011 within these major categories were as follows:


Operating Expenses (in thousands)	For The Three Months Ended March 31,
	2012		2011

Salary and related	$	74,717	$	66,430

Facilities		16,410		15,765

Vehicles		15,020		12,664

General supplies/miscellaneous		8,835		7,048


Total	$	114,982	$	101,907

Included in operating expenses during the three-month period ended March 31, 2012 are salary and related expenses for Service Reps in the amount of $28.9 million. Such salary and related expenses for the three-month period ended March 31, 2011, were $27.6 million.

Selling, General And Administrative Expenses

Selling, General and Administrative Expenses: Selling, general and administrative expenses ("SG&A") include costs related to sales and marketing activities, corporate overhead and other business support functions. Included in SG&A during the three-month period ended March 31, 2012 are salary and related expenses of $69.4 million. These salary and related expenses include the cost of the Company's respiratory therapists for the three-month period ended March 31, 2012, of $17.7 million. Included in SG&A during the three-month period ended March 31, 2011 are salary and related expenses of $62.2 million. These salary and related expenses include the cost of the Company's respiratory therapists for the three-month period ended March 31, 2011, of $16.6 million. The Company's respiratory therapists generally provide non-reimbursable clinical follow-up with the customer and communication, as appropriate, to the prescribing physician with respect to the customer's prescribed plan of care. The Company includes the salaries and related expenses of its respiratory therapist personnel (licensed respiratory therapists or, in some cases, registered nurses) in SG&A because it believes that these personnel enhance the Company's business relative to its competitors who do not employ respiratory therapists.

Comprehensive Income

Comprehensive Income: Total comprehensive income and the components of other comprehensive income (loss) are presented in the Condensed Consolidated Statements of Comprehensive Income. Other comprehensive income (loss) is composed of foreign currency translation effects.