Goodwill And Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

The Company’s intangible assets include goodwill and other intangibles, which include the fair value of both the customer relationships with hospitals and trade names acquired in the Company's physician services segment. The Company's indefinite lived intangibles include goodwill and trade names. Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company evaluates indefinite lived intangible assets, including goodwill, for impairment at least on an annual basis and more frequently if certain indicators are encountered. Indefinite lived intangibles are to be tested at the reporting unit level, defined as an operating segment or one level below an operating segment (referred to as a component), with the fair value of the reporting unit being compared to its carrying amount. If the fair value of a reporting unit exceeds its carrying amount, the indefinite lived intangibles associated with the reporting unit is not considered to be impaired. The Company completed its annual impairment test as of October 1, 2015, and determined that its indefinite lived intangibles were not impaired. The Company's finite-lived intangibles includes its customer relationship with hospitals. The Company tests its finite-lived intangibles for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. The Company's policy is to recognize an impairment charge when the carrying amount is not recoverable and such amount exceeds fair value. During the year ended December 31, 2015, there were no events or circumstances that indicated a potential impairment in the Company's finite-lived intangibles.

The changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 are as follows (in thousands):



	2015			2014
Balance, beginning of year	$	3,381,149		$	1,758,970
Goodwill acquired, including post acquisition adjustments	674,476			1,636,521
Goodwill disposed, including impact of deconsolidation transactions	(85,415		)	(14,342		)
Balance, end of year	$	3,970,210		$	3,381,149

As of December 31, 2015, the ambulatory services segment and the physician services segment each had approximately $2.0 billion of goodwill compared to $1.9 billion for ambulatory services and $1.5 billion for physician services, respectively, at December 31, 2014. During the year ended December 31, 2015, goodwill increased $123.4 million for the ambulatory services segment primarily due to the acquisition of seven centers, net of nine deconsolidations. During the year ended December 31, 2015, goodwill increased by $465.7 million for the physician services segment primarily due to the acquisition of nine physician practices, net of three deconsolidations. For the years ended December 31, 2015 and 2014 approximately $295.7 million and $64.5 million, respectively, of goodwill recorded was deductible for tax purposes.

Intangible assets consist primarily of customer relationships with hospitals, deferred financing costs, capitalized software and certain amortizable and non-amortizable non-compete and customer agreements. Customer relationships with hospitals are initially recorded at their estimated fair value and amortized on a straight-line basis over 20 years. Deferred financing costs and amortizable non-compete agreements and customer agreements are amortized over the term of the related debt as interest expense and the contractual term or estimated life (five to ten years) of the agreements as amortization expense. Capitalized software is amortized over estimated useful lives of three to eight years.

Intangible assets at December 31, 2015 and 2014 consisted of the following (in thousands):



	2015							2014
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
Amortizable intangible assets:
Customer relationships with hospitals	$	1,379,977	$	(74,490	)	$	1,305,487	$	971,645	$	(22,145	)	$	949,500
Deferred financing costs	60,664		(13,490		)	47,174		59,574		(5,151		)	54,423
Capitalized software	71,462		(28,125		)	43,337		50,387		(19,197		)	31,190
Agreements, contracts and other	11,267		(2,449		)	8,818		3,523		(2,752		)	771
Total amortizable intangible assets	1,523,370		(118,554		)	1,404,816		1,085,129		(49,245		)	1,035,884
Non-amortizable intangible assets:
Trade name	228,000		—			228,000		228,000		—			228,000
Restrictive covenant arrangements	8,995		—			8,995		9,995		—			9,995
Total non-amortizable intangible assets	236,995		—			236,995		237,995		—			237,995
Total intangible assets	$	1,760,365	$	(118,554	)	$	1,641,811	$	1,323,124	$	(49,245	)	$	1,273,879

Amortization of intangible assets for the years ended December 31, 2015, 2014 and 2013 was $70.5 million, $32.5 million and $2.2 million, respectively. Included in the 2014 amount above is also $12.8 million that was charged to interest expenses related to a write-off of a commitment fee for bridge financing, which the Company had secured in order to complete the acquisition of Sheridan but did not require upon obtaining permanent financing. Estimated amortization of intangible assets for the five years and thereafter subsequent to December 31, 2015 is $90.3 million, $89.1 million, $87.8 million, $84.8 million, $81.6 million and $971.2 million, respectively. The Company expects to recognize amortization of all intangible assets over a weighted average period of 17.8 years with no expected residual values.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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