Revenue Recognition

Ambulatory Services

Ambulatory services revenues consist of billing for the use of the centers’ facilities directly to the patient or third-party payor and, at certain of the Company’s centers (primarily centers that perform gastrointestinal endoscopy procedures), billing for anesthesia services provided by medical professionals employed or contracted by the Company’s centers. Such revenues are recognized when the related surgical procedures are performed. Revenues exclude any amounts billed for physicians’ surgical services, which are billed separately by the physicians to the patient or third-party payor.

Revenues from ambulatory services are recognized on the date of service, net of estimated contractual adjustments from third-party medical service payors including Medicare and Medicaid. During the years ended December 31, 2014, 2013 and 2012, the Company derived approximately 25%, 25% and 27%, respectively, of its ambulatory services revenues from governmental healthcare programs, primarily Medicare and managed Medicare programs. Concentration of credit risk with respect to other payors is limited due to the large number of such payors.

Physician Services

Physician services revenue primarily consists of fee for service revenue and contract revenue and is derived principally from the provision of physician services to patients of the healthcare facilities the Company serves. Contract revenue represents income earned from the Company's hospital customers to subsidize contract costs when payments from third-party payors are inadequate to support such costs.

The Company records revenue at the time services are provided, net of a contractual allowance and a provision for uncollectibles. Revenue less the contractual allowance represents the net revenue expected to be collected from third-party payors (including managed care, commercial and governmental payors such as Medicare and Medicaid) and patients insured by these payors.

The Company also recognizes revenue for services provided during the period but are not yet billed. Expected collections are estimated based on fees and negotiated payment rates in the case of third-party payors, the specific benefits provided for under each patients’ healthcare plan, mandated payment rates under the Medicare and Medicaid programs, and historical cash collections.

The Company's provision for uncollectibles includes its estimate of uncollectible balances due from uninsured patients, uncollectible co-pay and deductible balances due from insured patients and special charges, if any, for uncollectible balances due from managed care, commercial and governmental payors. The Company records net revenue from uninsured patients at its estimated realizable value, which includes a provision for uncollectible balances, based on historical cash collections (net of recoveries).

Net revenue for the physician services segment consists of the following major payors (in thousands):



	July 16, 2014 - December 31, 2014 ⁽¹⁾
Medicare	$	61,378		12.0	%
Medicaid	28,224			5.5
Commercial and managed care	382,343			74.7
Self-pay	102,727			20.1
Net fee for service revenue	574,672			112.3
Contract and other revenue	54,343			10.6
Provision for uncollectibles	(117,001		)	(22.9	)
Net revenue for physician services	$	512,014		100.0	%


(1)	Net revenue by payor is for the period July 16, 2014, the date of the acquisition of Sheridan, through December 31, 2014. As such, historical amounts are not included.