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Business Combinations
 6 Months Ended
Jun. 30, 2017
Business Combinations [Abstract]  
Business Combinations
Business Combinations
Inpatient Rehabilitation
During the six months ended June 30, 2017, we completed the following inpatient rehabilitation acquisitions, none of which were individually material to our financial position, results of operations, or cash flows. Each acquisition was made to enhance our position and ability to provide inpatient rehabilitation services to patients in the applicable geographic areas.
•
In April 2017, we acquired approximately 80% of Memorial Hospital at Gulfport, a 33-bed inpatient rehabilitation hospital in Gulfport, Mississippi, through a joint venture with Memorial Hospital at Gulfport. This acquisition was funded on March 31, 2017 using cash on hand.
•
In April 2017, we also acquired 80% of Mount Carmel West, an inpatient rehabilitation unit in Columbus, Ohio, through a joint venture with Mount Carmel Health System. This acquisition was funded through a contribution of a 60‑bed de novo inpatient rehabilitation hospital to the consolidated joint venture.
We accounted for these transactions under the acquisition method of accounting and reported the results of operations of the acquired hospitals from their respective dates of acquisition. Assets acquired were recorded at their estimated fair values as of the respective acquisition dates. The fair values of the identifiable intangible assets were based on valuations using the income approach. The income approach is based on management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill. The goodwill reflects our expectations of our ability to gain access to and penetrate the acquired hospital’s historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in these markets. None of the goodwill recorded as a result of these transactions is deductible for federal income tax purposes.
The fair value of the assets acquired at the acquisition date were as follows (in millions):
Identifiable intangible assets:
 

Noncompete agreements (useful lives of 2 to 3 years)
$
0.4

Trade name (useful life of 20 years)
0.5

Certificate of need (useful life of 20 years)
4.7

Goodwill
15.0

Total assets acquired
$
20.6


Information regarding the net cash paid for the inpatient rehabilitation acquisitions during each period presented is as follows (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Fair value of assets acquired
$
5.6

 
$
—

 
$
5.6

 
$
5.3

Goodwill
15.0

 
—

 
15.0

 
1.8

Fair value of noncontrolling interest owned by joint venture partner
(9.7
)
 
—

 
(9.7
)
 
(7.1
)
Prepaid acquisition consideration
(10.9
)
 
—

 
—

 
—

Net cash paid for acquisition
$
—

 
$
—

 
$
10.9

 
$
—


Home Health and Hospice
During the six months ended June 30, 2017, we completed the following home health acquisitions, none of which were individually material to our financial position, results of operations, or cash flows. Each acquisition was made to enhance our position and ability to provide post-acute healthcare services to patients in the applicable geographic areas. Each acquisition was funded using cash on hand.
•
In February 2017, we acquired the assets of Celtic Healthcare of Maryland, Inc., a home health provider with locations in Owings Mill, Maryland and Rockville, Maryland.
•
In February 2017, we also acquired the assets of two home health locations from Community Health Services, Inc., located in Owensboro, Kentucky and Elizabethtown, Kentucky.
•
In May 2017, we acquired the assets of two home health locations from Bio Care Home Health Services, Inc. and Kinsman Enterprises, Inc., located in Irving, Texas and Longview, Texas.
We accounted for these transactions under the acquisition method of accounting and reported the results of operations of the acquired locations from their respective dates of acquisition. Assets acquired or liabilities assumed were recorded at their estimated fair values as of the respective acquisition dates. The fair values of identifiable intangible assets were based on valuations using the cost and income approaches. The cost approach is based on amounts that would be required to replace the asset (i.e., replacement cost). The income approach is based on management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill. The goodwill reflects our expectations of our ability to utilize the acquired locations’ mobile workforce and established relationships within each community and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in these markets. All goodwill recorded as a result of these transactions is deductible for federal income tax purposes.
The fair value of the assets acquired and liabilities assumed at the acquisition date were as follows (in millions):
Total current assets
$
0.1

Identifiable intangible asset:
 

Noncompete agreements (useful lives of 5 years)
0.2

Trade name (useful life of 1 year)
0.1

Certificates of need (useful lives of 10 years)
0.7

Licenses (useful lives of 10 years)
1.6

Goodwill
7.4

Total assets acquired
10.1

Total liabilities assumed
(0.1
)
Net assets acquired
$
10.0


Information regarding the net cash paid for the home health acquisitions during each period presented is as follows (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Fair value of assets acquired
$
1.4

 
$
1.4

 
$
2.7

 
$
1.4

Goodwill
3.2

 
8.1

 
7.4

 
8.1

Fair value of liabilities assumed
(0.1
)
 
(0.1
)
 
(0.1
)
 
(0.1
)
Net cash paid for acquisitions
$
4.5

 
$
9.4

 
$
10.0

 
$
9.4


Pro Forma Results of Operations
The following table summarizes the results of operations of the above mentioned acquisitions from their respective dates of acquisition included in our consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the date of the acquisitions been January 1, 2016 (in millions):
 
Net Operating Revenues
 
Net Income Attributable to HealthSouth
Acquired entities only: Actual from acquisition date to June 30, 2017
$
4.6

 
$
(4.1
)
Combined entity: Supplemental pro forma from 04/01/2017-06/30/2017
982.0

 
63.0

Combined entity: Supplemental pro forma from 04/01/2016-06/30/2016
928.7

 
63.5

Combined entity: Supplemental pro forma from 01/01/2017-06/30/2017
1,963.6

 
130.6

Combined entity: Supplemental pro forma from 01/01/2016-06/30/2016
1,846.3

 
122.3

See Note 2, Business Combinations, to the consolidated financial statements accompanying the 2016 Form 10-K for information regarding acquisitions completed in 2016.