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Revenue Recognition and Accounts Receivables
9 Months Ended
Mar. 31, 2019
Receivables [Abstract]  
Revenue Recognition and Accounts Receivables

Note 5. – Revenue Recognition and Accounts Receivables

Revenue Recognition

Effective July 1, 2018, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” which supersedes most existing revenue recognition guidance, including industry-specific healthcare guidance, by applying the full retrospective method for all periods presented. ASC 606 provides for a single comprehensive principles-based standard for the recognition of revenue across all industries through the application of the following five-step process:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The adoption of the provisions of ASC 606 had no material impact on the Company’s current or historical financial position, results of operations or cash flows. Additionally, management does not anticipate that the provisions of ASC 606 will have a material impact on the amount or timing of when the Company recognizes revenue prospectively. However, in accordance with ASC 606 the Company now recognizes the majority of its previously reported provision for doubtful accounts, primarily related to its self-pay patient population, as a direct reduction to revenues as an implicit pricing concession, instead of separately as a discrete deduction to arrive at revenue, and the related presentation of the allowance for doubtful accounts has been eliminated for all periods presented.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with its patients by reportable operating segments and payors. The Company determines that disaggregating revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. A reconciliation of disaggregated revenue to segment revenue is disclosed in Note 13, Financial Information by Segment.

The Company’s service specific revenue recognition policies are as follows:

Healthcare Services

The Company’s revenue is derived primarily from providing healthcare services to patients and is recognized on the date services are provided at amounts billable to individual patients, adjusted for estimates for variable consideration. For patients under reimbursement arrangements with third-party payors, including Medicaid, Medicare and private insurers, revenue is recorded based on contractually agreed-upon amounts or rates, adjusted for estimates for variable consideration, on a per patient, daily basis or as services are performed.

Pharmacy

The Company’s revenue is derived primarily from providing pharmacy services to patients and is recognized on the date services are provided at amounts billable to individual patients, adjusted for estimates for variable consideration. Revenue is recognized when control of the promised goods or services are transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Each prescription claim represents a separate performance obligation of the Company, separate and distinct from other prescription claims under customer arrangements. Significant portions of the revenue from sales of pharmaceutical and medical products are reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. The Company monitors its revenues and receivables from these reimbursement sources, as well as other third-party insurance payors, and reduces revenue at the revenue recognition date, to properly account for the variable consideration due to anticipated differences between billed and reimbursed amounts. Accordingly, the total net revenues and receivables reported in the Company’s financial statements are recorded at the amount expected to be ultimately received from these payors.

Medicare Revenue

Net healthcare services revenue is recorded under the Medicare prospective payment system based on an episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if patient care was unusually costly; (b) a low utilization payment adjustment if the number of visits was fewer than five; (c) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the episode; (d) a payment adjustment based upon the level of therapy services required; (e) the number of episodes of care provided to a patient, regardless of whether the same provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare program; (g) adjustments to the base episode payments for case mix and geographic wages; and (h) recoveries of overpayments.

The Company makes adjustments to Medicare revenue on completed episodes to reflect differences between estimated and actual payment amounts, an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. Revenue is also adjusted for estimates for variable consideration. Therefore, the Company believes that its reported net service revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered.

In addition to revenue recognized on completed services, the Company also recognizes a portion of revenue associated with services in progress. Services in progress are days of care that begin during the reporting period but were not completed as of the end of the period. As such, the Company estimates revenue and recognizes it on a daily basis. The primary factors underlying this estimate are the number of services in progress at the end of the reporting period, expected Medicare revenue per episode and its estimate of the average percentage complete based on services performed.

Non-Medicare Revenue

The Company recognizes revenue in a similar manner as it recognizes Medicare revenue for service-based rates that are paid by other insurance carriers, including Medicare Advantage programs; however, these rates can vary based upon the negotiated terms.

Revenue is recorded on an accrual basis based upon the date of service at amounts equal to its established or estimated per-visit rates, and adjusted for estimates for variable consideration, as applicable.

Impact of New Revenue Guidance on Financial Statement Line Items

The following tables summarize the impacts of adopting ASC 606 on the Company’s condensed consolidated statements of operations and comprehensive earnings (loss). There was no impact to the condensed consolidated balance sheet as of June 30, 2018 or condensed consolidated statements of cash flows for the year ended June 30, 2018 and for the year ended June 30, 2017, respectively. The majority of which was previously presented as bad debt expense of the Pharmacy Segment under operating expenses has been incorporated as an implicit price concession factored into the calculation of net revenues. Subsequent material events that alter the payor’s ability to pay are recorded as bad debt expense.

There is no material change, related to the adoption of ASC 606, for the presentation of the Company’s Fiscal 2018 revenues or prior years. Historically, the Company only presented total revenue for all revenue services in “Operating Revenues”. What was previously presented as provision for bad debts of Pharmacy segment under operating expenses has been incorporated as an implicit price concession factored into the calculation of net revenues, as shown in the “Adjustments” line in the table below. The Condensed Consolidated Statement of Operations and Comprehensive Earnings (Loss) for the three and nine months ended March 31, 2017 have been restated to reflect the adoption of ASC 606. Subsequent material events that alter the payor’s ability to pay are recorded as bad debt expense.

Prior period results reflect reclassifications, for comparative purposes, related to the adoption of ASC 606, for the presentation of the Company’s revenues. Historically, the Company only presented total revenue for all revenue services. This reclassification had no effect on the reported results of operations.

Revenues for the nine months ended March 31, 2018 and the fiscal year ended June 30, 2018 are summarized in the following tables:

 

 

Nine Months Ended

 

 

Fiscal Years Ended June 30,

 

 

 

March 31, 2018

 

 

2018

 

Total Net Revenues

 

$

35,435

 

 

$

45,912

 

Adjustment for bad debts of Pharmacy segment

 

 

(445

)

 

 

(703

)

Net Revenues

 

$

34,990

 

 

$

45,209

 

Total Cost of goods sold

 

$

14,623

 

 

$

18,529

 

Adjustment for bad debts of Pharmacy segment

 

 

0

 

 

 

0

 

Cost of goods sold

 

$

14,623

 

 

$

18,529

 

Total Expenses

 

$

35,933

 

 

$

45,492

 

Adjustment for bad debts of Pharmacy segment

 

 

(445

)

 

 

(703

)

Total Expenses

 

$

35,488

 

 

$

44,789

 

 

Practical Expedients and Exemptions

The Company’s contracts with its patients have an original duration of one year or less, therefore, the Company uses the practical expedient applicable to its contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. In addition, the Company has applied the practical expedient provided by ASC 340, Other Assets and Deferred Costs, and all incremental customer contract acquisition costs are expensed as they are incurred because the amortization period would have been one year or less.

Revenues by payor were as follows for the three and nine months ended March 31, 2019 and 2018:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Medicare

 

$

5,934

 

 

$

4,337

 

 

 

13,517

 

 

 

14,139

 

Medicaid

 

 

2,743

 

 

 

3,539

 

 

 

10,890

 

 

 

9,744

 

Retail and Institutional Pharmacy

 

 

1,698

 

 

 

1,609

 

 

 

4,973

 

 

 

5,052

 

Managed Care & Other Insurance

 

 

1,871

 

 

 

1,707

 

 

 

4,743

 

 

 

5,394

 

Self-pay

 

 

65

 

 

 

104

 

 

 

449

 

 

 

526

 

Rent

 

 

22

 

 

 

21

 

 

 

52

 

 

 

48

 

Other

 

 

28

 

 

 

16

 

 

 

95

 

 

 

87

 

Total Net Revenues

 

$

12,361

 

 

$

11,333

 

 

$

34,719

 

 

$

34,990

 

 

Summary information for accounts receivable is as follows:

 

 

 

March 31,

2019

 

 

June 30,

2018

 

Accounts receivable (net of contractual allowances)

 

$

5,717

 

 

$

5,352

 

Less allowance for concession adjustments

 

 

(466

)

 

 

(529

)

Patient accounts receivable - net

 

$

5,251

 

 

$

4,823

 

 

The following is a summary of the activity in the allowance for concession adjustments for the Healthcare Services Segment and the Pharmacy Segment for the three and nine months ended March 31, 2019 and 2018:

 

Three Months Ended March 31, 2019

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at January 1, 2019

 

$

231

 

 

$

228

 

 

$

459

 

Additions recognized as a reduction to revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

 

106

 

 

 

140

 

 

 

246

 

Discontinued Operations

 

 

15

 

 

 

0

 

 

 

15

 

Accounts written off, net of recoveries

 

 

(87

)

 

 

(167

)

 

 

(254

)

Balance at March 31, 2019

 

$

265

 

 

$

201

 

 

$

466

 

 

Nine Months Ended March 31, 2019

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at July 1, 2018

 

$

253

 

 

$

276

 

 

$

529

 

Additions recognized as a reduction to revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

 

236

 

 

 

339

 

 

 

575

 

Discontinued Operations

 

 

23

 

 

 

0

 

 

 

23

 

Accounts written off, net of recoveries

 

 

(247

)

 

 

(414

)

 

 

(661

)

Balance at March 31, 2019

 

$

265

 

 

$

201

 

 

$

466

 

 

Three Months Ended March 31, 2018

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at January 1, 2018

 

$

326

 

 

$

219

 

 

$

545

 

Additions recognized as a reduction to revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

 

117

 

 

 

237

 

 

 

354

 

Discontinued Operations

 

 

12

 

 

 

0

 

 

 

12

 

Accounts written off, net of recoveries

 

 

(82

)

 

 

(260

)

 

 

(342

)

Balance at March 31, 2018

 

$

373

 

 

$

196

 

 

$

569

 

 

Nine months Ended March 31, 2018

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at July 1, 2017

 

$

328

 

 

$

224

 

 

$

552

 

Additions recognized as a reduction to revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

 

371

 

 

 

445

 

 

 

816

 

Discontinued Operations

 

 

(6

)

 

 

0

 

 

 

(6

)

Accounts written off, net of recoveries

 

 

(320

)

 

 

(473

)

 

 

(793

)

Balance at March 31, 2018

 

$

373

 

 

$

196

 

 

$

569