Business Segment Information

The Company’s operations involve servicing its patients and customers through its Home Health segment and its Hospice segment. In connection with the Harden transaction and the alignment of the Company's businesses under a common regional management structure, the Company is evaluating the impact of these changes on its reportable segments.

Home Health

The Home Health segment is comprised of direct home nursing and therapy services operations, including specialty programs. The Company conducts direct home nursing and therapy services operations through licensed and Medicare-certified agencies, located in 38 states, from which the Company provides various combinations of skilled nursing and therapy services and paraprofessional nursing services to adult and elder patients. The Company’s direct home nursing and therapy services operations also deliver services to its customers through focused specialty programs that include:


•	Gentiva Orthopedics, which provides individualized home orthopedic rehabilitation services to patients recovering from joint replacement or other major orthopedic surgery;


•	Gentiva Safe Strides^®, which provides therapies for patients with balance issues who are prone to injury or immobility as a result of falling;


•	Gentiva Cardiopulmonary, which helps patients and their physicians manage heart and lung health in a home-based environment;


•	Gentiva Neurorehabilitation, which helps patients who have experienced a neurological injury or condition by removing the obstacles to healing in the patient’s home; and


•	Gentiva Senior Health, which addresses the needs of patients with age-related diseases and issues to effectively and safely stay in their homes.

In addition, through May 31, 2012, the Company provided consulting services to home health agencies, which included operational support, billing and collection activities, and on-site agency support and consulting.

Hospice

The Hospice segment serves terminally ill patients and their families through Medicare-certified providers operating in 30 states. Comprehensive management of the healthcare services and products needed by hospice patients and their families are provided through the use of an interdisciplinary team. Depending on a patient’s needs, each hospice patient is assigned an interdisciplinary team comprised of a physician, nurse(s), home health aide(s), medical social worker(s), chaplain, dietary counselor and bereavement coordinator, as well as other care professionals.

The Hospice segment also provides services under its focused Memory Care Specialty Program, which provides an individualized disease management program addressing the physical needs specific to Alzheimer's and dementia patients and support mechanisms for their caregivers, and has under development a focused Cardiac Specialty Program, which will help patients and their physicians aggressively manage symptoms associated with heart disease, focusing on quality of life and pain control.

Corporate Expenses

Corporate expenses consist of costs relating to executive management and corporate and administrative support functions that are not directly attributable to a specific segment, including equity-based compensation expense. Corporate and administrative support functions represent primarily information services, accounting and finance, tax compliance, risk management, procurement, marketing, clinical administration, training, legal and human resource benefits and administration.

Other Information

The Company’s senior management evaluates performance and allocates resources based on operating contributions of the reportable segments, which exclude corporate expenses, depreciation, amortization and net interest costs, but include revenues and all other costs (including special items) directly attributable to the specific segment. Segment assets represent net accounts receivable, identifiable intangible assets, goodwill, and certain other assets associated with segment activities. All other assets are assigned to corporate assets for the benefit of all segments for the purposes of segment disclosure.

Segment net revenues by major payer source were as follows (in millions):



	Third Quarter
	2013						2012
	Home Health		Hospice		Total		Home Health		Hospice		Total
Medicare	$	191.8	$	163.8	$	355.6	$	185.0	$	177.4	$	362.4
Medicaid and Local Government	10.8		6.6		17.4		12.2		6.9		19.1
Commercial Insurance and Other:
Paid at episodic rates	15.1		—		15.1		21.4		—		21.4
Other	17.2		5.2		22.4		16.1		5.4		21.5
Total net revenues	$	234.9	$	175.6	$	410.5	$	234.7	$	189.7	$	424.4



	First Nine Months
	2013						2012
	Home Health		Hospice		Total		Home Health		Hospice		Total
Medicare	$	577.7	$	498.8	$	1,076.5	$	561.7	$	539.0	$	1,100.7
Medicaid and Local Government	33.1		21.3		54.4		35.7		21.2		56.9
Commercial Insurance and Other:
Paid at episodic rates	43.3		—		43.3		62.8		—		62.8
Other	52.0		14.3		66.3		50.1		17.3		67.4
Total net revenues	$	706.1	$	534.4	$	1,240.5	$	710.3	$	577.5	$	1,287.8

Segment information about the Company’s operations is as follows (in thousands):



	Home Health			Hospice			Total
For the three months ended September 30, 2013
Net revenue	$	234,864		$	175,628		$	410,492
Operating contribution	$	31,922	(1)	$	22,365		$	54,287
Corporate expenses							(20,672		)	(1)
Depreciation and amortization							(4,421		)
Interest expense and other, net							(22,342		)
Income before income taxes and equity in earnings of affiliate							$	6,852

For the three months ended September 30, 2012
Net revenue	$	234,670		$	189,774		$	424,444
Operating contribution	$	32,268		$	34,798		$	67,066
Corporate expenses							(21,065		)	(1)
Goodwill, intangibles and other long-lived asset impairment							(19,132		)	(2)
Depreciation and amortization							(6,653		)
Interest expense and other, net							(22,894		)
Loss before income taxes and equity in earnings of affiliate							$	(2,678	)

For the nine months ended September 30, 2013
Net revenue	$	706,141		$	534,366		$	1,240,507
Operating contribution	$	92,027	(1)	$	76,223	(1)	$	168,250
Corporate expenses							(57,443		)	(1)
Goodwill, intangibles and other long-lived asset impairment							(224,320		)	(2)
Depreciation and amortization							(13,932		)
Interest expense and other, net							(66,783		)
Loss before income taxes and equity in earnings of affiliate							$	(194,228	)
Segment assets	$	249,313		$	624,819	(2)	$	874,132
Corporate assets							377,936			(2)
Total assets							$	1,252,068

For the nine months ended September 30, 2012
Net revenue	$	710,321		$	577,466		$	1,287,787
Operating contribution	$	94,527	(1)	$	102,426	(1)	$	196,953
Corporate expenses							(66,120		)	(1)
Goodwill, intangibles and other long-lived asset impairment							(19,132		)	(2)
Depreciation and amortization							(21,375		)
Gain on sale of businesses							5,447
Interest expense and other, net							(67,051		)	(3)
Income before income taxes and equity in earnings of affiliate							$	28,722
Segment assets	$	242,217	(2)	$	864,139	(2)	$	1,106,356
Corporate assets							377,858
Total assets							$	1,484,214

(1)

For the third quarter and first nine months of 2013, the Company recorded charges relating to cost savings initiatives and other restructuring costs, acquisition and integration costs and legal settlements of $1.7 million and $2.6 million, respectively. For the third quarter and first nine months of 2012, the Company recorded charges relating to cost savings initiatives and other restructuring costs, acquisition and integration costs and legal settlements of $0.1 million and $5.5 million, respectively.

The charges were reflected as follows for segment reporting purposes (in millions):



	Third Quarter				First Nine Months
	2013		2012		2013		2012
Home Health	$	0.1	$	—	$	0.1	$	5.7
Hospice	—		—		0.7		0.1
Corporate expenses	1.6		0.1		1.8		(0.3		)
Total	$	1.7	$	0.1	$	2.6	$	5.5

(2)

At March 31, 2013, the Company performed an interim impairment test of its Hospice reporting unit. Based on the results of the interim impairment test, the Company recorded a non-cash impairment charge relating to goodwill of approximately $220.8 million. As part of that analysis, the Company reviewed the valuation of its owned real estate utilized in the Hospice business. The analysis indicated that two of the Company's hospice inpatient units had estimated fair values lower than their carrying values and, as such, the Company recorded a non-cash impairment charge of approximately $1.9 million. See Note 9.

In addition, the Company conducted an evaluation of the various systems used to support its field operations. In connection with that review, the Company made a strategic decision to replace its business intelligence software platform and, as such, recorded a non-cash impairment charge, related to developed software, of approximately $1.6 million.

Hospice and corporate assets were reduced by $220.8 million and $3.5 million, respectively, as a result of the impairment.

For both the third quarter and first nine months of 2012, the Company recorded non-cash impairment charges associated with a write-off of its trade name intangibles of $19.1 million in connection with the Company's initiative to re-brand its operations under the Gentiva name. Home Health and Hospice assets were reduced by $6.0 million and $13.1 million, respectively, as of September 30, 2012 as a result of the impairment.


(3)	For the first nine months of 2012, interest expense and other, net included charges of $0.5 million relating to the write-off of deferred debt issuance costs associated with the revolving credit facility. See Note 2 for additional information.