(11) Revenue

In May 2014 and March 2016, the FASB issued ASU 2014-09 and ASU 2016-08, “Revenue from Contracts with Customers (Topic 606)” and “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, respectively, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Under the new standards, our estimate for amounts not expected to be collected based on historical experience will continue to be recognized as a reduction to net revenue. However, subsequent changes in estimate of collectability due to a change in the financial status of a payor, for example a bankruptcy, will be recognized as bad debt expense in operating charges.

The performance obligation is separately identifiable from other promises in the contract. As the performance obligations are met (i.e.: room, board, ancillary services, level of care), revenue is recognized based upon allocated transaction price. The transaction price is allocated to separate performance obligations based upon the relative standalone selling price. In instances where we determine there are multiple performance obligations across multiple months, the transaction price will be allocated by applying an estimated implicit and explicit rate to gross charges based on the separate performance obligations.

In assessing collectability, we have elected the portfolio approach. This portfolio approach is being used as we have large volume of similar contracts with similar classes of customers. We reasonably expect that the effect of applying a portfolio approach to a group of contracts would not differ materially from considering each contract separately. Management’s judgment to group the contracts by portfolio is based on the payment behavior expected in each portfolio category. As a result, aggregating all of the contracts (which are at the patient level) by the particular payor or group of payors, will result in the recognition of the same amount of revenue as applying the analysis at the individual patient level.

On January 1, 2018, we adopted the new accounting standard using the modified retrospective method. The information in comparative periods have not been restated and continues to be reported under the accounting standards in effect for those periods. In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated income statement was as follows (in thousands):

			Balances
			Without
	As		Adoption		Effect
2018	Reported		ASC 606		of Change
Net Revenue before provision for doubtful accounts			$	2,931,527
Less: Provision for doubtful accounts				246,543
Net Revenues	$	2,687,516	$	2,684,984	$	2,532

Other operating expenses	$	620,819	$	618,287	$	2,532

We group our revenues into categories based on payment behaviors. Each component has its own reimbursement structure which allows us to disaggregate the revenue into categories that share the nature and timing of payments. The other patient revenue consists primarily of self-pay, government-funded non-Medicaid, and other.

The following table disaggregates our revenue by major source for the three month periods ended March 31, 2018 and 2017 (in thousands):

2018	Acute Care				Behavioral Health				Other		Total
Medicare	$	342,718	24	%	$	142,527	12	%			$	485,245	18	%
Managed Medicare		176,957	12	%		44,995	4	%				221,952	8	%
Medicaid		105,966	7	%		177,336	14	%				283,302	11	%
Managed Medicaid		111,277	8	%		230,776	19	%				342,053	13	%
Managed Care (HMO and PPOs)		497,780	34	%		358,062	29	%				855,842	32	%
UK Revenue		0	0	%		114,741	9	%				114,741	4	%
Other patient revenue		112,570	8	%		116,985	9	%				229,555	9	%
Other non-patient revenue		98,364	7	%		52,574	4	%		3,888		154,826	6	%
Total Net Revenue	$	1,445,632	100	%	$	1,237,996	100	%	$	3,888		2,687,516	100	%


2017	Acute Care				Behavioral Health				Other		Total
Medicare	$	316,385	23	%	$	146,645	12	%			$	463,030	18	%
Managed Medicare		144,047	10	%		36,674	3	%				180,721	7	%
Medicaid		92,657	7	%		180,949	15	%				273,606	10	%
Managed Medicaid		114,552	8	%		217,645	18	%				332,197	13	%
Managed Care (HMO and PPOs)		477,266	34	%		355,338	29	%				832,604	32	%
UK Revenue		0	0	%		100,022	8	%				100,022	4	%
Other patient revenue		123,374	9	%		124,798	10	%				248,172	9	%
Other non-patient revenue		121,266	9	%		56,051	5	%		5,189		182,506	7	%
Total Net Revenue	$	1,389,547	100	%	$	1,218,122	100	%	$	5,189		2,612,858	100	%