Community Health Systems 2015 Annual Report Download - page 99

The approximate percentage of total gross accounts receivable (prior to allowances for contractual adjustments
and doubtful accounts) summarized by payor is as follows:
December 31,
2015 2014
Insured receivables ............................................... 60.6 % 61.9 %
Self-pay receivables .............................................. 39.4 38.1
Total ........................................................ 100.0 % 100.0 %
For the hospital segment, the combined total of the allowance for doubtful accounts for self-pay accounts
receivable and related allowances for other self-pay discounts and contractuals, as a percentage of gross self-pay
receivables, was approximately 88% and 87% at December 31, 2015 and 2014, respectively. If the receivables
that have been written-off, but where collections are still being pursued by outside collection agencies, were
included in both the allowances and gross self-pay receivables specified above, the percentage of combined
allowances to total self-pay receivables would have been approximately 92% and 91% at December 31, 2015 and
2014, respectively.
Goodwill and Other Intangibles
Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair
value of net assets acquired. Goodwill is evaluated for impairment at the same time every year and when an event
occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its
carrying value. There is a two-step method for determining goodwill impairment. Step one is to compare the fair
value of the reporting unit with the unit’s carrying amount, including goodwill. If this test indicates the fair value
is less than the carrying value, then step two is required to compare the implied fair value of the reporting unit’s
goodwill with the carrying value of the reporting unit’s goodwill.
At December 31, 2015, we had approximately $9.0 billion of goodwill recorded on our books, including
approximately $4.5 billion of goodwill resulting from the acquisition of HMA. Substantially all of our goodwill
resides at our hospital operations reporting unit. We performed our last annual goodwill evaluation during the
fourth quarter of 2015. No impairment was indicated by this evaluation, however, a decline in our stock price
during the fourth quarter and lower projections of future discounted cash flows reduced the excess of fair value
over the carrying value of our hospital operations reporting unit to approximately $1 billion. This decline in the
excess fair value over carrying value of our hospital operations reporting unit increases the risk that future
declines in fair value could result in goodwill impairment. The determination of fair value in step one of our
goodwill impairment analysis is based on an estimate of fair value for each reporting unit utilizing known and
estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, the most recent price
of our common stock, estimates of future revenue and expense growth, expected capital expenditures, income tax
rates, and costs of invested capital. Future estimates of fair value could be adversely affected if the actual
outcome of one or more of these assumptions changes materially in the future, including a decline in our stock
price, lower than expected hospital volumes, or increased operating costs.
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, we project 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.
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