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. During the nine months ended September 30, 2018, 72.2% 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 accounted for 90.5% of hospice services segment revenues during the nine months ended September 30, 2018. The home and community-based segment provides 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 accounted for 23.4% of home and community-based services segment revenues during the nine months ended September 30, 2018. 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 accounted for 59.9% of facility-based services segment revenue during the nine months ended September 30, 2018. 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 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 nine months ended September 30, 2018 and 2017 (amounts in thousands): Three Months Ended September 30, 2018 Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 360,000 $ 52,962 $ 52,773 $ 27,891 $ 13,417 $ 507,043 Cost of service revenue 222,765 34,540 39,860 20,146 4,885 322,196 General and administrative expenses 105,457 14,685 12,922 9,823 7,030 149,917 Operating income (loss) 31,778 3,737 (9 ) (2,078 ) 1,502 34,930 Interest expense (2,284 ) (491 ) (163 ) (163 ) (163 ) (3,264 ) Income (loss) before income taxes and noncontrolling interest 29,494 3,246 (172 ) (2,241 ) 1,339 31,666 Income tax expense (benefit) 6,209 774 (74 ) (541 ) 317 6,685 Net income (loss) 23,285 2,472 (98 ) (1,700 ) 1,022 24,981 Less net income (loss) attributable to noncontrolling interests 3,425 386 (87 ) 27 — 3,751 Net income (loss) attributable to LHC Group, Inc.’s common stockholders $ 19,860 $ 2,086 $ (11 ) $ (1,727 ) $ 1,022 $ 21,230 Total assets $ 1,316,792 $ 203,921 $ 246,963 $ 61,089 $ 81,999 $ 1,910,764 Three Months Ended September 30, 2017 (as adjusted) Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 196,317 $ 41,057 $ 12,116 $ 20,188 $ — $ 269,678 Cost of service revenue 123,204 27,441 8,971 13,240 — 172,856 General and administrative expenses 56,000 11,276 2,387 5,829 — 75,492 Operating income 17,113 2,340 758 1,119 — 21,330 Interest expense (746 ) (149 ) (50 ) (50 ) — (995 ) Income before income taxes and noncontrolling interest 16,367 2,191 708 1,069 — 20,335 Income tax expense 5,703 931 338 473 — 7,445 Net income 10,664 1,260 370 596 — 12,890 Less net income (loss) attributable to noncontrolling interests 1,759 273 (21 ) (27 ) — 1,984 Net income attributable to LHC Group, Inc.’s common stockholders $ 8,905 $ 987 $ 391 $ 623 $ — $ 10,906 Total assets $ 515,562 $ 156,296 $ 44,621 $ 48,574 $ — $ 765,053 Nine Months Ended September 30, 2018 Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 924,463 $ 146,142 $ 119,617 $ 86,345 $ 23,554 $ 1,300,121 Cost of service revenue 576,416 95,557 90,331 59,102 10,412 831,818 General and administrative expenses 277,711 43,090 28,664 30,058 12,417 391,940 Operating income (loss) 70,336 7,495 622 (2,815 ) 725 76,363 Interest expense (5,627 ) (1,181 ) (393 ) (395 ) (320 ) (7,916 ) Income (loss) before income taxes and noncontrolling interest 64,709 6,314 229 (3,210 ) 405 68,447 Income tax expense (benefit) 14,022 1,368 50 (695 ) 87 14,832 Net income (loss) 50,687 4,946 179 (2,515 ) 318 53,615 Less net income (loss) attributable to noncontrolling interests 9,472 1,215 (157 ) 129 (66 ) 10,593 Net income (loss) attributable to LHC Group, Inc.’s common stockholders $ 41,215 $ 3,731 $ 336 $ (2,644 ) $ 384 $ 43,022 Nine Months Ended September 30, 2017 (as adjusted) Home health services Hospice services Home and community-based services Facility-based services HCI Total Net service revenue $ 569,384 $ 114,856 $ 33,403 $ 53,819 $ — $ 771,462 Cost of service revenue 352,896 75,187 24,905 35,396 — 488,384 General and administrative expenses 165,192 32,425 6,957 16,480 — 221,054 Operating income 51,296 7,244 1,541 1,943 — 62,024 Interest expense (1,961 ) (393 ) (130 ) (131 ) — (2,615 ) Income before income taxes and noncontrolling interest 49,335 6,851 1,411 1,812 — 59,409 Income tax expense 16,712 2,439 602 657 — 20,410 Net income 32,623 4,412 809 1,155 — 38,999 Less net income (loss) attributable to noncontrolling interests 6,053 1,038 (7 ) 237 — 7,321 Net income attributable to LHC Group, Inc.’s common stockholders $ 26,570 $ 3,374 $ 816 $ 918 $ — $ 31,678 |