Community Health Systems 2015 Annual Report Download - page 119

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Company recognized approximately $160 million, $259 million and $162 million for the years ended
December 31, 2015, 2014 and 2013, respectively, of incentive reimbursement for HITECH incentives from
Medicare and Medicaid related to certain of the Company’s hospitals and for certain of the Company’s employed
physicians that have demonstrated meaningful use of certified EHR technology or have completed attestations to
their adoption or implementation of certified EHR technology. These incentive reimbursements are presented as
a reduction of operating costs and expenses on the consolidated statements of income. The Company received
cash related to the incentive reimbursement for HITECH incentives of approximately $75 million, $253 million
and $203 million for the year ended December 31, 2015, 2014 and 2013, respectively. The Company recorded no
deferred revenue at December 31, 2015 and $81 million as deferred revenue at December 31, 2014, as all criteria
for gain recognition had not been met.
Physician Income Guarantees. The Company enters into physician recruiting agreements under which it
supplements physician income to a minimum amount over a period of time, typically one year, while the
physicians establish themselves in the community. As part of the agreements, the physicians are committed to
practice in the community for a period of time, typically three years, which extends beyond their income
guarantee period. The Company records an asset and liability for the estimated fair value of minimum revenue
guarantees on new agreements. Adjustments to the ultimate value of the guarantee paid to physicians are
recognized in the period that the change in estimate is identified. The Company amortizes an asset over the life of
the agreement. As of December 31, 2015 and 2014, the unamortized portion of these physician income
guarantees was $47 million and $48 million, respectively.
Concentrations of Credit Risk. The Company grants unsecured credit to its patients, most of whom reside in
the service area of the Company’s facilities and are insured under third-party payor agreements. Because of the
economic diversity of the Company’s facilities and non-governmental third-party payors, Medicare represents
the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances,
from Medicare were $453 million as of both December 31, 2015 and 2014, representing 6% and 7% of
consolidated net accounts receivable, before allowance for doubtful accounts, as of December 31, 2015 and 2014,
respectively.
Accounting for the Impairment or Disposal of Long-Lived Assets. Whenever events or changes in
circumstances indicate that the carrying values of certain long-lived assets may be impaired, the Company
projects the undiscounted cash flows expected to be generated by these assets. If the projections indicate that the
reported amounts are not expected to be recovered, such amounts are reduced to their estimated fair value based
on a quoted market price, if available, or an estimate based on valuation techniques available in the
circumstances.
During the year ended December 31, 2015, the Company recorded a pretax impairment charge of
approximately $68 million related to the write-off of approximately $6 million of allocated reporting unit
goodwill for Payson Regional Medical Center and $62 million for the impairment of certain long-lived assets for
several smaller hospitals to their estimated fair value. During the year ended December 31, 2014, the Company
recorded a pretax impairment charge of $17 million to reduce the carrying value of certain long-lived assets at
three of its smaller hospitals to their estimated fair value. During the year ended December 31, 2013, the
Company recorded a pretax impairment charge of $12 million to reduce the carrying value of certain long-lived
assets at four of its smaller hospitals to their estimated fair value. The impairments for 2015, 2014 and 2013 were
identified because of declining operating results and projections of future cash flows at these hospitals caused by
competitive and operational challenges specific to the markets in which these hospitals operate.
Income Taxes. The Company accounts for income taxes under the asset and liability method, in which
deferred income tax assets and liabilities are recognized for the tax consequences of “temporary differences” by
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