Community Health Systems 2015 Annual Report Download - page 117

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Included in the provision for contractual allowance shown above is $453 million, $550 million and
$681 million for the years ended December 31, 2015, 2014 and 2013, respectively, representing the value (at the
Company’s standard charges) of these charity care services that are excluded from net operating revenues.
The estimated cost incurred by the Company to provide these charity care services to patients who are unable
to pay was approximately $64 million, $84 million and $116 million for the years ended December 31, 2015,
2014 and 2013, respectively. The estimated cost of these charity care services was determined using a ratio of
cost to gross charges and applying that ratio to the gross charges associated with providing care to charity
patients for the period.
Currently, several states utilize supplemental reimbursement programs for the purpose of providing
reimbursement to providers to offset a portion of the cost of providing care to Medicaid patients. These programs
are designed with input from Centers for Medicare and Medicaid Services and are funded with a combination of
state and federal resources, including, in certain instances, fees or taxes levied on the providers. Similar programs
are also being considered by other states. After these supplemental programs are signed into law, the Company
recognizes revenue and related expenses in the period in which amounts are estimable and collection is
reasonably assured. Reimbursement under these programs is reflected in net operating revenues and fees, taxes or
other program-related costs are reflected in other operating expenses.
Operating revenues, net of contractual allowances and discounts (but before the provision for bad debts),
recognized during the years ended December 31, 2015, 2014 and 2013, were as follows (in millions):
Year Ended December 31,
2015 2014 2013
Medicare ......................................... $ 5,439 $ 5,327 $ 3,682
Medicaid ......................................... 2,532 2,332 1,442
Managed Care and other third-party payors .............. 11,816 11,109 7,706
Self-pay .......................................... 2,777 2,793 2,023
Total .......................................... $ 22,564 $ 21,561 $ 14,853
Allowance for Doubtful Accounts. Accounts receivable are reduced by an allowance for amounts that could
become uncollectible in the future. Substantially all of the Company’s receivables are related to providing
healthcare services to patients at its hospitals and affiliated businesses.
The Company estimates the allowance for doubtful accounts by reserving a percentage of all self-pay accounts
receivable without regard to aging category, based on collection history, adjusted for expected recoveries and any
anticipated changes in trends. Our ability to estimate the allowance for doubtful accounts is not impacted by not
utilizing an aging of our net accounts receivable as we believe that substantially all of the risk exists at the point
in time such accounts are identified as self-pay. For all other non-self-pay payor categories, the Company
reserves an estimated amount on historical collection rates for the uncontractualized portion of all accounts aging
over 365 days from the date of discharge. These amounts represent an immaterial percentage of our outstanding
accounts receivable. The percentage used to reserve for all self-pay accounts is based on our collection history.
The Company collects substantially all of its third-party insured receivables, which include receivables from
governmental agencies.
Collections are impacted by the economic ability of patients to pay and the effectiveness of the Company’s
collection efforts. Significant changes in payor mix, business office operations, economic conditions or trends in
federal and state governmental healthcare coverage could affect the Company’s collection of accounts receivable
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