Note 5 - Discontinued Operations

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

5. Discontinued Operations

We are presenting our ancillary network business as discontinued operations in our consolidated statement of operations and the related asset and liability accounts are presented as held for sale. To allow for meaningful comparison of continuing operations, amounts previously reported have been reclassified, as necessary, to conform to this presentation.

The ancillary network business offers cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers.  Services are marketed to a number of healthcare companies including third-party administrators, insurance companies, large self-funded organizations, various employer groups, and preferred provider organizations. Since October 1, 2014, HealthSmart has managed our ancillary network business under a management services agreement.

Major classes of assets and liabilities of the ancillary network business held for sale are as follows (in thousands):

	March 31, 2016		December 31, 2015
	(Unaudited)		(Audited)
Accounts receivable	$	1,111	$	1,589
Prepaid expenses and other current assets		43		43
Deferred income taxes		18		18
Total current assets held for sale		1,172		1,650
Property and equipment, net		588		588
Intangible assets, net		406		406
Total other assets held for sale		994		994
Total assets held for sale	$	2,166	$	2,644
Due to service providers	$	1,388	$	3,225
Due to HealthSmart		3,739		2,210
Total current liabilities held for sale		5,127		5,435
Total liabilities held for sale	$	5,127	$	5,435

Summary results of operations for the ancillary network business were as follows (in thousands):

	Three Months Ended March 31,
	2016		2015
Net revenues	$	4,695	$	5,743
Operating expenses:
Provider payments		3,256		4,331
Administrative fees		324		330
Other operating costs		816		972
Depreciation and amortization		-		125
Total operating expenses		4,396		5,758
Income/(loss) from discontinued operations	$	299	$	(15	)

We recognize revenue on the services we provide, which include (i) providing payor clients with a comprehensive network of ancillary healthcare providers; (ii) providing claims management, reporting, processing and payment services; (iii) providing network/need analysis to assess the benefits to payor clients of adding additional/different service providers to the client-specific provider networks; and (iv) providing credentialing of network service providers for inclusion in the client payor-specific provider networks.  Revenue is recognized when services are delivered, which occurs after processed claims are billed to the payor clients and collections are reasonably assured.  We estimate revenues and costs of revenues using average historical collection rates and average historical margins earned on claims.  Revenues are adjusted periodically to reflect actual cash collections so that revenues recognized accurately reflect cash collected.

We record a provision for refunds based on an estimate of historical refund amounts.  Refunds are paid to payors for overpayment on claims, claims paid in error, and claims paid for non-covered services.  In some instances, we will recoup payments made to the ancillary service provider if the claim has been fully resolved.  The evaluation is performed periodically and is based on historical data.  We present revenue net of the provision for refunds on the consolidated statement of operations.

After careful evaluation of the key gross and net revenue recognition indicators, we have concluded that our circumstances are most consistent with those key indicators that support gross revenue reporting, since we are fulfilling the services of a principal versus an agent.

Payments to providers is the largest component of our cost of revenues and it consists of payments for ancillary care services in accordance with contracts negotiated with providers for specific ancillary services, separately from contracts negotiated with our clients.