Segment Reporting

12 Months Ended

Dec. 31, 2019

Segment reporting

The Company's operations are comprised of its U.S. dialysis and related lab services business, its various ancillary services and strategic initiatives, including its international operations, and its corporate administrative support. See Note 1 "Organization" for a summary description of the Company's businesses.

On June 19, 2019, the Company completed the sale of its DMG business to Optum. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented.

The Company’s operating segments have been defined based on the separate financial information that is regularly produced and reviewed by the Company’s chief operating decision maker in making decisions about allocating resources to and assessing the financial performance of the Company’s various operating lines of business. The chief operating decision maker for the Company is its Chief Executive Officer.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, each of its ancillary services and strategic initiatives, its kidney care operations in each foreign sovereign jurisdiction, its other health operations in each foreign sovereign jurisdiction, and its equity method investment in the Asia Pacific joint venture. The U.S. dialysis and related lab services business qualifies as a separately reportable segment, and all other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the Company's operating segments. For internal management reporting, segment operations include direct segment operating expenses but generally exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive compensation expenses of certain departments which provide support to all of the Company’s various operating lines of business, except to the extent that such costs are charged to and borne by certain ancillary services and strategic initiatives via internal management fees. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of business.

The following is a summary of segment revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:



	Year ended December 31,
	2019			2018			2017
Segment revenues:⁽¹⁾
U.S. dialysis
Patient service revenues:
External sources	$	10,421,401		$	10,274,046		$	9,767,123
Intersegment revenues	131,199			92,950			55,176
Total U.S. dialysis revenues	10,552,600			10,366,996			9,822,299
Provision for uncollectible accounts	(21,715		)	(50,927		)	(481,973		)
Net U.S. dialysis patient service revenues	10,530,885			10,316,069			9,340,326
Other revenues⁽²⁾
External sources	30,895			19,880			19,739
Intersegment revenues	1,126			—			—
Total net U.S. dialysis revenues	$	10,562,906		$	10,335,949		$	9,360,065
Other - Ancillary services
Net patient service revenues	$	497,021		$	437,275		$	323,156
Other external sources	460,877			724,577			1,248,589
Intersegment revenues	14,030			34,236			24,603
Total ancillary services	$	971,928		$	1,196,088		$	1,596,348
Total net segment revenues	11,534,834			11,532,037			10,956,413
Elimination of intersegment revenues	(146,355		)	(127,186		)	(79,779		)
Consolidated revenues	$	11,388,479		$	11,404,851		$	10,876,634
Segment operating margin (loss):
U.S. dialysis	$	1,924,826		$	1,709,721		$	2,297,198
Other - Ancillary services	(189,174		)	(93,789		)	(439,477		)
Total segment margin	1,735,652			1,615,932			1,857,721
Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:
Corporate administrative support	(92,335		)	(90,108		)	(44,966		)
Consolidated operating income	1,643,317			1,525,824			1,812,755
Debt expense	(443,824		)	(487,435		)	(430,634		)
Debt prepayment, refinancing and redemption charges	(33,402		)	—			—
Other income	29,348			10,089			17,665
Income from continuing operations before income taxes	$	1,195,439		$	1,048,478		$	1,399,786


(1)	On January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) using the cumulative effect method for those contracts that were not substantially completed as of January 1, 2018. See Notes 1 and 2 for further discussion of the Company's adoption of Topic 606.


(2)	Includes management fee revenues from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling interest or which are wholly-owned by third parties.

Depreciation and amortization expense by reportable segment was as follows:



	Year ended December 31,
	2019		2018		2017
U.S. dialysis	$	583,454	$	558,810	$	520,965
Other - Ancillary services	31,698		32,225		38,946
	$	615,152	$	591,035	$	559,911

Summary of assets by reportable segment was as follows:



	Year ended December 31,
	2019		2018
Segment assets
U.S. dialysis (including equity investments of $124,188 and $95,290, respectively)	$	15,778,880	$	12,333,641
Other - Ancillary services⁽¹⁾(including equity investments of $117,795 and $129,321, respectively)	1,532,514		1,387,046
DMG - Discontinued operations (including equity investments of $0 and $4,833 respectively)	—		5,389,565
Consolidated assets	$	17,311,394	$	19,110,252


(1)	Includes approximately $154,572 and $136,052 in 2019 and 2018, respectively, of net property and equipment related to the Company’s international operations.

Expenditures for property and equipment by reportable segment were as follows:



	Year ended December 31,
	2019		2018		2017
U.S. dialysis	$	681,339	$	856,108	$	769,732
Other - Ancillary services	46,741		45,806		40,377
DMG - Discontinued operations	38,466		85,224		95,141
	$	766,546	$	987,138	$	905,250