Segment reporting

9 Months Ended

Sep. 30, 2019

Segment reporting

The Company’s operations are comprised of its U.S. dialysis and related lab services business, various ancillary services and strategic initiatives, including its international operations, and its corporate administrative support.

On June 19, 2019, the Company completed the sale of its DMG division to Optum, a subsidiary of UnitedHealth Group Inc. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, each of its ancillary services and strategic initiatives, its kidney care operations in each foreign sovereign jurisdiction, its other health operations in each foreign sovereign jurisdiction, and its equity method investment in the APAC JV. The U.S. dialysis and related lab services business qualifies as a separately reportable segment, and all other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the Company's operating segments. For internal management reporting, segment operations include direct segment operating expenses but generally exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive-based compensation expenses of certain departments which provide support to all of the Company’s various operating lines of business, except to the extent that such costs are charged to and borne by certain ancillary services and strategic initiatives via internal management fees. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of business.

The following is a summary of segment net revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income before income taxes:



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Segment revenues:
U.S. dialysis and related lab services
Patient service revenues:
External sources	$	2,652,946		$	2,559,345		$	7,782,435		$	7,661,244
Intersegment revenues	32,150			25,424			92,611			63,943
U.S. dialysis and related lab services patient service revenues	2,685,096			2,584,769			7,875,046			7,725,187
Provision for uncollectible accounts	(3,977		)	(12,900		)	(19,689		)	(37,108		)
Net U.S. dialysis and related lab services patient service revenues	2,681,119			2,571,869			7,855,357			7,688,079
Other revenues⁽¹⁾:
External sources	10,096			4,932			19,989			14,965
Intersegment revenues	212			—			726			—
Total U.S. dialysis and related lab services revenues	2,691,427			2,576,801			7,876,072			7,703,044
Other—Ancillary services and strategic initiatives
Patient service revenues, net	128,223			112,279			367,951			320,204
Other external sources	116,790			183,674			339,209			624,422
Intersegment revenues	3,483			8,361			10,222			27,748
Total ancillary services and strategic initiatives revenues	248,496			304,314			717,382			972,374
Total net segment revenues	2,939,923			2,881,115			8,593,454			8,675,418
Elimination of intersegment revenues	(35,845		)	(33,785		)	(103,559		)	(91,691		)
Consolidated revenues	$	2,904,078		$	2,847,330		$	8,489,895		$	8,583,727
Segment operating margin:
U.S. dialysis and related lab services	$	500,742		$	390,006		$	1,416,680		$	1,272,828
Other—Ancillary services and strategic initiatives	(97,725		)	(60,132		)	(170,405		)	(64,307		)
Total segment operating margin	403,017			329,874			1,246,275			1,208,521
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(24,681		)	(40,836		)	(65,546		)	(70,605		)
Consolidated operating income	378,336			289,038			1,180,729			1,137,916
Debt expense	(88,589		)	(125,927		)	(351,774		)	(359,135		)
Debt prepayment, refinancing and redemption charges	(21,242		)	—			(33,402		)	—
Other income, net	5,280			4,007			17,863			10,583
Consolidated income from continuing operations before income taxes	$	273,785		$	167,118		$	813,416		$	789,364


(1)	Includes management fee revenue from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling equity investment or which are wholly-owned by third parties.

A summary of assets by reportable segment was as follows:



	September 30, 2019		December 31, 2018
Segment assets
U.S. dialysis and related lab services (including equity investments of $100,815 and $95,290, respectively)	$	15,997,552	$	12,333,641
Other—Ancillary services and strategic initiatives (including equity investments of $118,571 and $129,321, respectively)	1,454,278		1,387,046
DMG—Held for sale (including equity investments of $0 and $4,833, respectively)	—		5,389,565
Consolidated assets	$	17,451,830	$	19,110,252

Depreciation and amortization expense by reportable segment was as follows:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
U.S. dialysis and related lab services	$	147,607	$	138,669	$	433,008	$	411,697
Other—Ancillary services and strategic initiatives	8,308		7,331		23,677		24,181
	$	155,915	$	146,000	$	456,685	$	435,878

Expenditures for property and equipment by reportable segment were as follows:



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
U.S. dialysis and related lab services	$	157,721	$	214,728	$	477,533	$	603,186
Other—Ancillary services and strategic initiatives	15,544		5,019		31,184		37,191
DMG—Held for sale	—		11,935		38,466		65,282
	$	173,265	$	231,682	$	547,183	$	705,659