10. Business Segment Information

The accounting policies of the Company’s segments are the same as those described in Note 2—“Summary of Significant Accounting Policies.” The Company evaluates performance of its segments based on profit or loss from operations before stock compensation expense, depreciation and amortization, interest expense, interest and other income, changes in the fair value of contingent consideration recorded in relation to acquisitions, gain on sale of assets, special charges or benefits, and income taxes (“Segment Profit”). Management uses Segment Profit information for internal reporting and control purposes and considers it important in making decisions regarding the allocation of capital and other resources, risk assessment and employee compensation, among other matters. Healthcare subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Healthcare’s customers. In addition, Pharmacy Management provides pharmacy benefits management for the Company’s employees covered under its medical plan. As such, revenue, cost of goods sold and direct service costs and other related to these arrangements are eliminated. The Company’s segments are defined in Note 1—“General.”

The following tables summarize, for the periods indicated, operating results by business segment (in thousands):


					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Year Ended December 31, 2016
Managed care and other revenue	$	2,659,685	$	243,561	$	(304)	$	2,902,942
PBM and dispensing revenue		—		2,053,188		(119,246)		1,933,942
Cost of care		(1,882,614)		—		—		(1,882,614)
Cost of goods sold		—		(1,933,086)		114,366		(1,818,720)
Direct service costs and other		(573,706)		(261,570)		(41,336)		(876,612)
Stock compensation expense (1)		4,440		20,509		12,473		37,422
Changes in fair value of contingent consideration (1)		(231)		127		—		(104)
Impairment of intangible assets (1)		4,800		—		—		4,800
Less: non-controlling interest segment profit (loss) (2)		(567)		—		(170)		(737)
Segment profit (loss)	$	212,941	$	122,729	$	(33,877)	$	301,793
Identifiable assets by business segment (3)
Restricted cash	$	81,608	$	1	$	167	$	81,776
Net accounts receivable		191,058		405,611		10,095		606,764
Investments		293,034		10,703		1,516		305,253
Pharmaceutical inventory		—		58,995		—		58,995
Goodwill		350,576		391,478		—		742,054
Other intangible assets, net		55,756		130,476		—		186,232


					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Year Ended December 31, 2017
Managed care and other revenue	$	3,206,277	$	273,489	$	(584)	$	3,479,182
PBM revenue		—		2,491,044		(131,643)		2,359,401
Cost of care		(2,413,770)		—		—		(2,413,770)
Cost of goods sold		—		(2,341,979)		130,069		(2,211,910)
Direct service costs and other		(601,201)		(302,525)		(38,157)		(941,883)
Stock compensation expense (1)		10,689		19,881		8,546		39,116
Changes in fair value of contingent consideration (1)		696		—		—		696
Less: non-controlling interest segment profit (loss) (2)		(56)		—		(3)		(59)
Segment profit (loss)	$	202,747	$	139,910	$	(31,766)	$	310,891
Identifiable assets by business segment (3)
Restricted cash	$	220,786	$	8,059	$	168	$	229,013
Net accounts receivable		244,486		403,880		12,409		660,775
Investments		327,865		—		—		327,865
Pharmaceutical inventory		—		40,945		—		40,945
Goodwill		610,867		395,421		—		1,006,288
Other intangible assets, net		165,159		103,129		—		268,288


					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Year Ended December 31, 2018
Managed care and other revenue	$	4,638,622	$	240,427	$	(607)	$	4,878,442
PBM revenue		—		2,625,417		(189,708)		2,435,709
Cost of care		(3,762,412)		—		—		(3,762,412)
Cost of goods sold		—		(2,468,170)		185,148		(2,283,022)
Direct service costs and other		(735,366)		(298,713)		(37,456)		(1,071,535)
Stock compensation expense (1)		6,982		5,458		17,032		29,472
Changes in fair value of contingent consideration (1)		1,307		—		—		1,307
Segment profit (loss)	$	149,133	$	104,419	$	(25,591)	$	227,961
Identifiable assets by business segment (3)
Restricted cash	$	157,437	$	576	$	2,954	$	160,967
Net accounts receivable		290,564		465,345		150		756,059
Investments		378,706		7,037		—		385,743
Pharmaceutical inventory		—		40,818		—		40,818
Goodwill		622,604		395,552		—		1,018,156
Other intangible assets, net		136,644		82,072		13,167		231,883

(1)

Stock compensation expense, changes in the fair value of contingent consideration recorded in relation to the acquisitions and impairment of intangible assets are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit.

(2)

The non-controlling interest portion of AlphaCare’s segment profit (loss) is excluded from the computation of Segment Profit in 2016 and 2017.

(3)

Identifiable assets by business segment are those assets that are used in the operations of each segment. The remainder of the Company’s assets cannot be specifically identified by segment.

The following table reconciles consolidated income before income taxes to Segment Profit for the years ended December 31, 2016, 2017 and 2018 (in thousands):


	2016		2017		2018
Income before income taxes	$	145,517	$	135,224	$	43,194
Stock compensation expense		37,422		39,116		29,472
Changes in fair value of contingent consideration		(104)		696		1,307
Impairment of intangible assets		4,800		—		—
Non-controlling interest segment (profit) loss		737		59		—
Depreciation and amortization		106,046		115,706		132,660
Interest expense		10,193		25,977		35,396
Interest and other income		(2,818)		(5,887)		(14,068)
Segment Profit	$	301,793	$	310,891	$	227,961