Segment Information | Segment Information In the second quarter of 2018, in recognition of the changes to the Company's business segments resulting from the addition of Almost Family and its subsidiaries through the Merger, the Company redefined its reporting segments to include (1) home health services, (2) hospice services, (3) home and community-based services, formerly referred to by the Company as community-based services, (4) facility-based services and (5) healthcare innovations (“HCI”). In management’s opinion, this approach provides investors clarity and best aligns with the Company’s internal decision-making processes as viewed by the chief operating decision maker. Reportable segments have been identified based upon how management has organized the business by services provided to customers and how the chief operating decision maker manages the business and allocates resources, consistent with the criteria in ASC 280, Segment Reporting. The home health segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. Approximately 72.9% of the home health services segment revenues were generated from the Medicare program, while the balance is generated from Medicaid and private insurance programs. The hospice segment services are largely provided in patients’ homes and generally require specialized hospice nursing skills. Hospice services segment revenues are generated on a per diem basis and are primarily from Medicare, which account for approximately 91.1% of hospice services segment revenues. The home and community-based segment services includes traditional home and community-based services (generally provided by paraprofessional staff such as home health aides) which are generally of a custodial rather than skilled nature. Home and community-based services segment revenues are generated on an hourly basis and are primarily from Medicaid, which account for approximately 24.7% of home and community-based services segment revenues. The facility-based segment services includes services provided through LTACHs, a family health center, two pharmacies, a rural health clinic, and two physical therapy clinics. The facility-based services segment is reimbursed primarily by Medicare under the LTACH prospective payment system, which accounts for approximately 58.7% of facility-based services segment revenue. The HCI segment combines reporting on the Company’s developmental activities outside its other business segments. The HCI segment includes (a) Imperium Health Management, LLC, an ACO enablement company, (b) Long Term Solutions, Inc., an in-home assessment company serving the long-term care insurance industry, and certain assets operated by Advanced Care House Calls, which provides primary medical care for home-bound or home-limited patients with chronic and acute illnesses who have difficulty traveling to a doctor’s office, (c) Ingenios Health Co., a Nurse-Practitioner-oriented and mobile technology-enabled health risk assessment company primarily serving managed care organizations, and (d) an investment in Care Journey (formerly NavHealth, Inc.), a population-health analytics company. These activities are intended ultimately, whether directly or indirectly, to benefit the Company’s patients and payors through the enhanced provision of services in the Company’s other segments. The activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care-coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies, as described in Note 2 of the Notes to Condensed Consolidated Financial Statements, including the adoption of ASU 2014-09. The following tables summarize the Company’s segment information for the three and six months ended June 30, 2018 and 2017 (amounts in thousands): Three Months Ended June 30, 2018 Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 360,276 $ 50,554 52,753 $ 28,304 $ 10,137 $ 502,024 Cost of service revenue 230,293 33,493 40,349 19,307 6,204 329,646 General and administrative expenses 99,162 14,613 11,777 11,088 4,710 141,350 Operating income (loss) 30,821 2,448 627 (2,091 ) (777 ) 31,028 Interest expense (2,256 ) (473 ) (158 ) (159 ) (156 ) (3,202 ) Income (loss) before income taxes and noncontrolling interest 28,565 1,975 469 (2,250 ) (933 ) 27,826 Income tax expense 7,091 483 139 (313 ) (230 ) 7,170 Net income (loss) 21,474 1,492 330 (1,937 ) (703 ) 20,656 Less net income (loss) attributable to noncontrolling interests 3,810 412 (90 ) (207 ) (66 ) 3,859 Net income (loss) attributable to LHC Group, Inc.’s common stockholders $ 17,664 $ 1,080 $ 420 $ (1,730 ) $ (637 ) $ 16,797 Total assets $ 1,306,773 $ 189,447 $ 255,456 $ 66,665 $ 63,329 $ 1,881,670 Three Months Ended June 30, 2017 (as adjusted) Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 192,409 $ 37,851 $ 10,746 $ 16,529 $ — $ 257,535 Cost of service revenue 117,606 24,473 7,986 11,093 — 161,158 General and administrative expenses 55,268 10,743 2,261 5,280 — 73,552 Operating income 19,535 2,635 499 156 — 22,825 Interest expense (630 ) (126 ) (42 ) (42 ) — (840 ) Income before income taxes and noncontrolling interest 18,905 2,509 457 114 — 21,985 Income tax expense 6,757 849 180 6 — 7,792 Net income 12,148 1,660 277 108 — 14,193 Less net income attributable to noncontrolling interests 2,266 480 5 138 — 2,889 Net income (loss) attributable to LHC Group, Inc.’s common stockholders $ 9,882 $ 1,180 $ 272 $ (30 ) $ — $ 11,304 Total assets $ 466,308 $ 138,519 $ 33,292 $ 34,547 $ — $ 672,666 Six Months Ended Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 564,463 $ 93,180 66,844 $ 58,454 $ 10,137 $ 793,078 Cost of service revenue 360,453 61,512 51,139 38,956 6,204 518,264 General and administrative expenses 165,452 27,910 15,075 20,234 4,710 233,381 Operating income 38,558 3,758 630 (736 ) (777 ) 41,433 Interest expense (3,343 ) (690 ) (230 ) (232 ) (157 ) (4,652 ) Income (loss) before income taxes and noncontrolling interest 35,215 3,068 400 (968 ) (934 ) 36,781 Income tax expense 7,813 594 124 (154 ) (230 ) 8,147 Net income (loss) 27,402 2,474 276 (814 ) (704 ) 28,634 Less net income (loss) attributable to noncontrolling interests 6,047 829 (70 ) 102 (66 ) 6,842 Net income (loss) attributable to LHC Group, Inc.’s common stockholders $ 21,355 $ 1,645 $ 346 $ (916 ) $ (638 ) $ 21,792 Six Months Ended (as adjusted) Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 373,067 $ 73,799 $ 21,287 $ 33,631 $ — $ 501,784 Cost of service revenue 229,692 47,746 15,934 22,156 — 315,528 General and administrative expenses 109,190 21,149 4,572 10,652 — 145,563 Operating income 34,185 4,904 781 823 — 40,693 Interest expense (1,215 ) (243 ) (81 ) (81 ) — (1,620 ) Income before income taxes and noncontrolling interest 32,970 4,661 700 742 — 39,073 Income tax expense 11,010 1,508 263 184 — 12,965 Net income 21,960 3,153 437 558 — 26,108 Less net income attributable to noncontrolling interests 4,294 766 13 264 — 5,337 Net income attributable to LHC Group, Inc.’s common stockholders $ 17,666 $ 2,387 $ 424 $ 294 $ — $ 20,771 |