Goodwill

Changes in goodwill by reportable segments were as follows:



	U.S. dialysis and related lab services			DMG			Other-ancillary services and strategic initiatives			Consolidated total
Balance at January 1, 2016	$	5,629,183		$	3,398,264		$	267,032		$	9,294,479
Acquisitions	75,295			248,901			123,632			447,828
Divestitures	(12,891		)	(2,223		)	(29,645		)	(44,759		)
Goodwill impairment charges	—			(253,000		)	(28,415		)	(281,415		)
Foreign currency and other adjustments	—			—			(8,816		)	(8,816		)
Balance at December 31, 2016	$	5,691,587		$	3,391,942		$	323,788		$	9,407,317
Acquisitions	427,299			31,796			113,669			572,764
Divestitures	(32,260		)	(29		)	(54		)	(32,343		)
Goodwill impairment charges	—			(50,619		)	(34,696		)	(85,315		)
Foreign currency and other adjustments	—			—			27,368			27,368
Balance at June 30, 2017	$	6,086,626		$	3,373,090		$	430,075		$	9,889,791

Balance at June 30, 2017:
Goodwill	$	6,086,626		$	3,865,478		$	499,095		$	10,451,199
Accumulated impairment charges	—			(492,388		)	(69,020		)	(561,408		)
	$	6,086,626		$	3,373,090		$	430,075		$	9,889,791

The Company elected to early adopt ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment effective January 1, 2017. The amendments in this ASU simplify the test for goodwill impairment by eliminating the second step in the assessment. All goodwill impairment tests performed during 2017 have been performed under this new guidance.

Each of the Company’s operating segments described in Note 18 to these condensed consolidated financial statements represents an individual reporting unit for goodwill impairment testing purposes, except that each sovereign jurisdiction within the Company’s international operating segments is considered a separate reporting unit.

Within the U.S. dialysis and related lab services operating segment, the Company considers each of its dialysis centers to constitute an individual business for which discrete financial information is available. However, since these dialysis centers have similar operating and economic characteristics, and the allocation of resources and significant investment decisions concerning these businesses are highly centralized and the benefits broadly distributed, the Company has aggregated these centers and deemed them to constitute a single reporting unit.

The Company has applied a similar aggregation to the DMG operations in each region, to the vascular access service centers in its vascular access reporting unit, to the physician practices in its physician services and direct primary care reporting units, and to the dialysis centers within each international reporting unit. For the Company’s other operating segments, discrete business components below the operating segment level constitute individual reporting units.

Based on continuing developments at the Company’s DMG and vascular access reporting units during the second quarter of 2017, the Company performed impairment assessments for certain at-risk reporting units.

As a result of the assessments performed during the three months ended June 30, 2017, the Company recognized goodwill impairment charges of $49,946 at its DMG Florida reporting unit and $673 at its DMG New Mexico reporting unit. These charges resulted primarily from changes in expectations concerning government reimbursement, including the effect of Medicare Advantage final benchmark payment rates for 2018 announced on April 3, 2017 and the Company’s expected ability to mitigate them, as well as medical cost and utilization trends.

During the three months ended June 30, 2017, the Company also recognized an incremental goodwill impairment charge

of $10,498 at its vascular access reporting unit. This additional charge resulted primarily from continuing changes in the Company’s outlook as the Company’s partners and operators have continued to evaluate and make decisions concerning changes in operations, including termination of their management services agreements and center closures as a result of the Centers for Medicare and Medicaid Services (CMS) 2017 Physician Fee Schedule Final Rule and the Ambulatory Surgical Center Payment Final Rule released November 2, 2016, which introduced significant changes in reimbursement structure for this business unit. As of June 30, 2017, there was no goodwill remaining at the Company's vascular access reporting unit.

For the three and six months ended June 30, 2017, the Company has recognized total goodwill impairment charges of $61,117 and $85,315, respectively.

During the three months ended June 30, 2016, the Company recognized goodwill impairment charges of $97,000 at its DMG Florida reporting unit and $79,000 at its DMG Nevada reporting unit. These charges resulted primarily from changes in expectations concerning government reimbursement and the Company’s expected ability to mitigate them, as well as medical cost trends and other market conditions.

For the three and six months ended June 30, 2016, the Company recognized total goodwill impairment charges of $176,000 and $253,000, respectively.

Further reductions in reimbursement rates, increases in medical cost or utilization trends, or other significant adverse changes in expected future cash flows or valuation assumptions could result in goodwill impairment charges in the future for the following reporting units, which remain at risk of goodwill impairment:



	Goodwill balance as of June 30, 2017		Carrying amount coverage⁽¹⁾		Sensitivities
					Operating income⁽²⁾		Discount rate⁽³⁾
Reporting unit					Operating income⁽²⁾		Discount rate⁽³⁾
DMG Nevada	$	275,914	17.0	%	(2.4	)%	(3.8	)%
DMG Florida	$	397,127	—	%	(1.6	)%	(2.8	)%
DMG New Mexico	$	70,253	—	%	(1.6	)%	(2.4	)%
DMG Washington	$	247,552	9.3	%	(1.7	)%	(3.6	)%


(1)	Excess of estimated fair value of the reporting unit over its carrying amount as of the latest assessment date.


(2)	Potential impact on estimated fair value of a sustained, long-term reduction of 3% in operating income as of the latest assessment date.


(3)	Potential impact on estimated fair value of an increase in discount rates of 100 basis points as of the latest assessment date.

Except as described above, none of the Company’s various other reporting units was considered at risk of goodwill impairment as of June 30, 2017. Since the dates of their last annual goodwill impairment tests, there have been certain developments, events, changes in operating performance and other changes in key circumstances that have affected these other businesses. However, except as further described above, these changes did not cause management to believe it is more likely than not that the fair value of any of its reporting units would be less than their respective carrying amounts.