REVENUE

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not restated and continue to be reported in accordance with accounting standards in effect for those periods.

Infusion Revenues

The Company generates revenue principally through the provision of infusion services to provide clinical management services and the delivery of cost effective prescription medications. Prescription drugs are dispensed either through a pharmacy participating in the Company’s pharmacy network or a pharmacy owned by the Company. Fee-for-service agreements include pharmacy agreements, under which we dispense prescription medications through the Company’s pharmacy facilities.

The Company provides a variety of therapies to patients. For infusion-related therapies, the Company frequently provides multiple deliverables of drugs and related nursing services. After applying the criteria from Topic 606, the Company concluded that multiple performance obligations exist in its contracts with its customers. Revenue is allocated to each performance obligation based on relative standalone price, determined based on reimbursement rates established in the third party payor contracts. Drug revenue is recognized at the time the drug is shipped, and nursing revenue is recognized on the date of service.

Revenue Recognition

ASC 606 requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled in exchange for those goods or services. ASC 606 requires application of a five-step model to determine when to recognize revenue and at what amount. The revenue standard applies to all contracts with customers and revenues are to be recognized when control of the promised goods or services is transferred to the Company’s patients in an amount that reflects consideration expected to be received in exchange for those goods or services.

The following table presents our revenues at amounts initially recognized for each associated payor class during the first quarter of 2018 (in millions). Sales and usage-based taxes are excluded from revenues.



	Three Months Ended March 31, 2018
Commercial	$	140,541
Government	26,542
Patient	1,501
Total Revenue	$	168,584

Absent implementation of Topic 606, the Company would have reported revenue of $174.0 million, gross profit of $60.5 million, bad debt expense of $5.5 million, and allowance for doubtful accounts of $41.2 million for the three months ended March 31, 2018.

Contract Assets and Liabilities

In accordance with Topic 606, contract assets are to be recognized when an entity has the right to receive consideration in exchange for goods or service that have been transferred to a customer when that right is conditional on something other than the passage of time. The Company does not recognize contract assets as the right to receive consideration is unconditional in accordance with the passage of time criteria. Also in accordance with Topic 606, contract liabilities are to be recognized when an entity is obligated to transfer goods or services for which revenue has already been received. The Company does not receive revenue prior to the transfer of goods or services and, therefore, will not recognize contract liabilities

Significant Judgments

The Company determines implicit price concessions based on historical collection experience using a portfolio approach. The Company determines the transaction price based on gross charges for services provided, reduced by contractual adjustments based on contractual agreements and historical experience. Pursuant to the requirements of Topic 606, the transaction price to be recognized as revenue is estimated based upon the amount of cash ultimately expected to be collected. Therefore, amounts expected to be written off are reflected in the amount of revenue recognized upon fulfillment of the performance obligation.

The Company elected a practical expedient to expense sales commissions when incurred as the amortization period associated therewith is generally one year or less and the total paid is representative of less than 1.0% of total revenue. These costs are recorded in operating expenses.

The Company elected the practical expedient to continue to expense costs associated with obtaining and fulfilling its contracts. These costs are recorded in operating expenses.