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| SSY > SEC Filings for SSY > Form 10-K on 20-Sep-2012 | All Recent SEC Filings |
20-Sep-2012
Annual Report
This Annual Report and the documents that are incorporated by reference in this Annual Report contain certain forward-looking statements within the meaning of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts and may be identified by the use of words such as "may," "believe," "will," "seeks to", "expect," "project," "estimate," "anticipate," "plan" or "continue." These forward-looking statements are based on the current plans and expectations and are subject to a number of risks, uncertainties and other factors which could significantly affect current plans and expectations and our future financial condition and results. For a listing and a discussion of such factors, which could cause actual results, performance and achievements to differ materially from those anticipated, see Certain Cautionary Statements-Forward Looking Information and Item 1A.
Critical Accounting Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:
• it requires assumptions to be made that were uncertain at the time the estimate was made; and
• changes in the estimate or different estimates that could have been made could have a material impact on our consolidated statement of earnings or financial condition.
The table of critical accounting estimates that follows is not intended to be a comprehensive list of all of our accounting policies that require estimates. We believe that of our significant accounting policies, as discussed in Note 2 of our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for the fiscal year ended June 30, 2012, the estimates discussed below involve a higher degree of judgment and complexity. We believe the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations and financial condition.
The table that follows presents information about our critical accounting estimates, as well as the effects of hypothetical changes in the material assumptions used to develop each estimate:
Balance Sheet or Income Statement Assumption / Approach Used Sensitivity Analysis
Caption/Nature of Critical Estimate Item (dollar amounts in thousands, (dollar amounts in
(dollar amounts in thousands, except per except thousands, except
share) per share) per share)
Receivables-net and Provision for Bad
Debts
Receivables-net for our Healthcare The largest component of bad A significant increase in
Facilities Segment primarily consists of debts in our patient accounts our provision for doubtful
amounts due from third-party payors and receivable for our healthcare accounts (as a percentage
patients from providing healthcare facilities and Specialty of revenues) would lower
services to hospital facility patients. Pharmacy Segments relates to our earnings. This would
Receivables-net for our Specialty accounts for which patients are adversely affect our
Pharmacy Segment primarily consists of responsible, which we refer to results of operations,
amounts due from third-party payors; as patient responsibility financial condition,
institutions such as nursing homes, home accounts. These accounts liquidity and potentially
health, hospice, hospitals; pharmacy include both amounts payable by our future access to
stores; Medicaid Part D program; and uninsured patients and capital.
customers from the sale of pharmacy co-payments and deductibles
services and merchandise. Our ability to payable by insured patients. In If net revenues during
collect outstanding receivables is general, we attempt to collect fiscal year 2012 were
critical to our results of operations deductibles, co-payments and changed by 1%, our 2012
and cash flows. To provide for accounts self-pay accounts prior to the after-tax income from
receivable that could become time of service for continuing operations
uncollectible in the future, we non-emergency care. If we do would change by
establish an allowance for doubtful not collect these patient approximately $968 or
accounts to reduce the carrying value of responsibility accounts prior diluted earnings per share
such receivables to their estimated net to the delivery of care, the of $0.10.
realizable value. The primary accounts are handled through
uncertainty lies with accounts for which our billing and collections This is only one example
patients are responsible, which we refer processes. of reasonably possible
to as patient responsibility accounts. sensitivity scenarios. The
These accounts include both amounts We attempt to verify each process of determining the
payable by uninsured patients and patient's insurance coverage as allowance requires us to
co-payments and deductibles payable by early as possible before a estimate uncollectible
insured patients. Our allowance for scheduled non-emergency patient accounts that are
doubtful accounts, included in our admission or procedure, highly uncertain and
balance sheets as of June 30 was as including with respect to requires a high degree of
follows: eligibility, benefits and judgment. It is impacted
authorization/pre-certification by, among other things,
2012-$9,121; and requirements, in order to changes in regional
2011-$12,317. notify patients of the economic conditions,
estimated amounts for which business office
Our provision for bad debts, included in they will be responsible. We operations, payor mix and
our results of operations, was as attempt to verify insurance trends in private and
follows : coverage within a reasonable federal or state
amount of time for all governmental healthcare
2012-$14,024; emergency room visits and coverage.
2011-$16,841; and non-emergency urgent admissions
2010-$20,364 in compliance with the
Emergency Medical Treatment and
Active Labor Act.
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Index to Financial Statements
Sensitivity
Analysis
Assumption / Approach (dollar
Balance Sheet or Income Statement Used amounts in
Caption/Nature of Critical Estimate Item (dollar amounts in thousands,
(dollar amounts in thousands, except per thousands, except except
share) per share) per share)
Receivables-net and Provision for Bad
Debts (continued)
In general, we utilize
the following steps in
collecting accounts
receivable: if
possible, cash
collection of all or a
portion of deductibles,
co-payments and
self-pay accounts prior
to or at the time
service is
provided; billing and
follow-up with third
party
payors; collection
calls; utilization of
collection agencies;
sue to collect if the
patient has the means
to pay and chooses not
to pay; and if
collection efforts are
unsuccessful, write off
the accounts.
Our policy is to write
off accounts after all
collection efforts have
failed, which is
typically no longer
than 120 days after the
date of discharge of
the patient or service
to the patient or
customer. Patient
responsibility accounts
represent the majority
of our write-offs. All
of our hospitals retain
third-party collection
agencies for billing
and collection of
delinquent accounts. At
most of our hospitals,
more than one
collection agency is
used to promote
competition and
improved performance.
The selection of
collection agencies and
the timing of the
referral of an account
to a collection agency
vary among hospitals.
Generally, we do not
write off accounts
prior to utilizing the
services of a
collection agency. Once
collection efforts have
proven unsuccessful, an
account is written off
from our patient
accounting system
against the allowance
for doubtful accounts.
We determine the
adequacy of the
allowance for doubtful
accounts utilizing a
number of analytical
tools and benchmarks.
No single statistic or
measurement alone
determines the adequacy
of the allowance.
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Index to Financial Statements
Sensitivity
Analysis
Assumption / Approach (dollar
Balance Sheet or Income Statement Used amounts in
Caption/Nature of Critical Estimate Item (dollar amounts in thousands,
(dollar amounts in thousands, except per thousands, except except
share) per share) per share)
Receivables-net and Provision for Bad
Debts (continued)
We monitor our revenue
trends by payor
classification on a
quarter-by-quarter
basis along with the
composition of our
accounts receivable
agings. This review is
focused primarily on
trends in self-pay
revenues, accounts
receivable, co-payment
receivables and
historic payment
patterns.
In addition, we analyze
other factors such as
day's revenue in
accounts receivable and
we review admissions
and charges by
physicians, primarily
focusing on recently
recruited physicians.
Days Outstanding1
Payor Class 0 - 30 31 - 60 61 - 90 91 - 120 121 - 150 151 - 180 >180 Total
Medicare $ 2,836 $ 299 $ 85 $ 104 $ 67 $ 30 $ 216 $ 3,637
Commercial 1,306 183 164 128 77 54 238 2,150
Medicaid 2,006 517 345 172 141 92 161 3,434
Self Pay 117 109 80 79 67 27 75 554
$ 6,265 $ 1,108 $ 674 $ 483 $ 352 $ 203 $ 690 $ 9,775
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1 The above table shows, as of June 30, 2012, net hospital patient accounts receivable aged from patient date of service and are grouped by classification of verified insurance coverage. The receivables are net of contractual allowances and allowance for doubtful accounts. Contractual allowances and the allowance for doubtful accounts are calculated by payor class and are not calculated by the aging of the patient billing date; therefore, these allowances have been allocated within the aging of the various payor classes based upon gross patient receivable amounts.
Revenue recognition / Net
Patient Service Revenues
For our Healthcare Revenues are recorded at
Facilities Segment, we estimated amounts due
recognize revenues in the from patients,
period in which services are third-party payors,
provided. For our Specialty institutions,
Pharmacy Segment, we pharmacies, and others
recognize revenues in the for healthcare and
period in which services are pharmacy services and
provided and at the time the goods provided net of
customer takes possession of contractual discounts
merchandise. Patient pursuant to contract or
receivables primarily government payment
consist of amounts due rates. Estimates for
contractual allowances
are calculated using
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Index to Financial Statements
Balance Sheet or Income Statement Assumption / Approach Used
Caption/Nature of Critical Estimate Item (dollar amounts in Sensitivity Analysis
(dollar amounts in thousands, except thousands, except (dollar amounts in thousands, except
per share) per share) per share)
Revenue recognition / Net Patient
Service Revenues (continued)
from third-party payors and patients. computerized and manual
Amounts we receive for treatment of processes depending on the
patients covered by governmental type of payor involved. In
programs, such as Medicare and Medicaid, certain hospitals, the
and other third-party payors, such as contractual allowances are
HMOs, PPOs and other private insurers, calculated by a computerized
are determined pursuant to contracts or system based on payment
established government rates and are terms for each payor. In
generally less than our established other hospitals, the
billing rates. Accordingly, our gross contractual allowances are
revenues and patient receivables are estimated manually using
reduced to net amounts receivable historical collections for
pursuant to such contracts or government each type of payor. For all
payment rates through an allowance for hospitals, certain manual
contractual discounts. Approximately estimates are used in
84.8%, 84.1% and 82.4% of our revenues calculating contractual
during the years ended June 30, 2012, allowances based on
2011 and 2010, respectively, relate to historical collections from
discounted charges. The sources of these payors that are not
revenues were as follows (as a significant or have not
percentage of total revenues): entered into a contract with
us. All contractual
Medicare-40.3%; adjustments regardless of
Medicaid-13.1%; and type of payor or method of
Commercial insurance-31.4%. calculation are reviewed and
compared to actual
experience on a periodic
basis.
Accounts receivable
primarily consist of amounts
due from third party payors,
institutions, pharmacies,
and patients. Amounts we
receive for the treatment of
patients covered by HMOs,
PPOs and other private
insurers are generally less
than our established billing
rates. We include
contractual allowances as a
reduction to revenues in our
financial statements based
on payor specific
identification and payor
specific factors for rate
increases and denials.
Governmental payors Governmental payors
The majority of services Because the laws and regulations
performed on Medicare and governing the Medicare and Medicaid
Medicaid patients are programs are complexand subject to
reimbursed at predetermined change, the estimates of contractual
reimbursement rates. The discounts we record could
differences between the
established billing rates
(i.e., gross
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Index to Financial Statements
Balance Sheet or Income Statement Assumption / Approach Used
Caption/Nature of Critical Estimate Item (dollar amounts in Sensitivity Analysis
(dollar amounts in thousands, except thousands, except (dollar amounts in thousands, except
per share) per share) per share)
Revenue recognition / Net Patient
Service Revenues (continued)
charges) and the change by material amounts.
predetermined reimbursement Adjustments related to final
rates are recorded as settlements for revenues
contractual discounts and retrospectively increased our
deducted from gross charges. revenues by the following amounts:
Under this prospective
reimbursement system, there 2011-$510;
is no adjustment or 2010-$709; and
settlement of the difference 2009-$1,201.
between the actual cost to
provide the service and the
predetermined reimbursement
rates.
Discounts for
retrospectively cost-based
revenues, which were more
prevalent in periods before
2000, are estimated based on
historical and current
factors and are adjusted in
future periods when
settlements of filed cost
reports are received.
Final settlements under all
programs are subject to
adjustment based on
administrative review and
audit by third party
intermediaries, which can
take several years to
resolve completely.
Commercial Insurance Commercial Insurance
For most managed care plans, If our overall estimated contractual
contractual allowances discount percentage on all of our
estimated at the time of commercial revenues during 2011 were
service are adjusted to changed by 1%, our 2012 after-tax
actual contractual income from continuing operations
allowances as cash is would change by approximately $225.
received and claims are This is only one example of
reconciled. We evaluate the reasonably possible sensitivity
following criteria in scenarios. The process of
developing the estimated determining the allowance requires
contractual allowance us to estimate the amount expected
percentages: historical to be received and requires a high
contractual allowance trends degree of judgment. It is impacted
based on actual claims paid by changes in managed care contracts
. . .
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