2.Segment Data

In the first quarter of 2017, the Company redefined its reporting segments to include a) Home Health (“HH”), formerly Visiting Nurse, b) Other Home-Based Services (“OHBS”), which includes all other home care services outside of Home Health services and c) the Healthcare Innovations (“HCI”) segment. The OHBS segment consists of the historical personal care operations plus hospice services. Prior year segment information was reclassified to conform to the new segment definitions. In management’s opinion, this approach provides investors clarity for the largest segment, Home Health, and best aligns with the Company’s internal decision-making processes as viewed by the chief operating decision maker.

Reportable segments have been identified based upon how management has organized the business by services provided to customers and how the chief operating decision maker manages the business and allocates resources, consistent with the criteria in ASC 280, Segment Reporting.

Consistent with information given to the chief operating decision maker, the Company does not allocate certain expenses to the reportable segments. The Company evaluates the performance of its business segments based on operating income. Intercompany and intersegment transactions have been eliminated.

The HH segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. Approximately 95% of the HH segment revenues were generated from the Medicare program, while the balance is generated from Medicaid and private insurance programs.

The OHBS segment includes traditional personal care services (generally provided by paraprofessional staff such as home health aides) which are generally of a custodial rather than skilled nature. Personal care revenues are generated on an hourly basis and are primarily from Medicaid (approximately 79% of personal care revenues). Hospice services are largely provided in patients’ homes and generally require specialized hospice nursing skills. Hospice revenues are generated on a per diem basis and are primarily from Medicare (approximately 92% of hospice revenues).

The Company’s HCI business segment is used to report on the Company’s developmental activities outside its HH and OHBS businesses. These activities are intended ultimately, whether directly or indirectly, to benefit the Company’s patients and payors through the enhanced provision of HH and OHBS. The activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care-coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments.


	Quarter ended				Six months ended
Consolidated	June 30, 2017		July 1, 2016		June 30, 2017		July 1, 2016

Net service revenues:
Home Health	$	148,373		110,340		299,528		219,762
Other Home-Based Services		46,519		40,012		92,117		79,896
Healthcare Innovations		5,841		5,644		10,400		10,036
		200,733		155,996		402,045		309,694
Operating income (loss) before corporate expenses:
Home Health		20,213		15,267		40,095		30,308
Other Home-Based Services		4,051		3,051		7,865		6,722
Healthcare Innovations		327		720		(16)		47
		24,591		19,038		47,944		37,077

Corporate expenses		9,336		6,951		18,394		14,645
Deal, transition and other costs		5,424		2,589		12,655		5,198
Operating income		9,831		9,498		16,895		17,234
Interest expense, net (1)		1,579		1,604		3,475		2,936
Net income (loss) - noncontrolling interests		725		(133)		1,485		(323)
Net income before income taxes	$	7,527	$	8,027	$	11,935	$	14,621

(1) Allocation of interest for the quarter ended June 30, 2017 was $686, $212 and $160 to the HH, OHBS and HCI segments, respectively, and $440, $440, and $333 to the HH, OHBS and HCI segments, respectively, for the quarter ended July 1, 2016. Allocation of interest for the six months ended June 30, 2017 was $1,631, $501 and $354 to the HH, OHBS and HCI segments, respectively, and $798, $798, and $711 to the HH, OHBS and HCI segments, respectively, for the six months ended July 1, 2016.