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Revenue
 12 Months Ended
Dec. 31, 2020
Revenue From Contract With Customer [Abstract]  
Revenue

5. Revenue

Revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and residential treatment. The services provided by the Company have no fixed duration and can be terminated by the patient or the facility at any time, and therefore, each treatment is its own stand-alone contract.

Services ordered by a healthcare provider in an episode of care are not separately identifiable and therefore have been combined into a single performance obligation for each contract. The Company recognizes revenue as its performance obligations are completed. The performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits of the healthcare services provided. For inpatient services, the Company recognizes revenue equally over the patient stay on a daily basis. For outpatient services, the Company recognizes revenue equally over the number of treatments provided in a single episode of care. Typically, patients and third-party payors are billed within several days of the service being performed or the patient being discharged, and payments are due based on contract terms.

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize the revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain admitted in our facilities.

At December 31, 2020 and 2019, estimated implicit price concessions of $62.1 million and $45.9 million, respectively, had been recorded as reductions to our accounts receivable balances to enable us to record our revenues and accounts receivable at the estimated amounts we expected to collect. The adoption of ASU 2014-09 did not have a significant impact on the Company’s consolidated statements of operations.

The Company disaggregates revenue from contracts with customers by service type and by payor.

The Company’s U.S. Facilities and services provided by the U.S. Facilities can generally be classified into the following categories: acute inpatient psychiatric facilities; specialty treatment facilities; residential treatment centers; and outpatient community-based facilities.

Acute inpatient psychiatric facilities. Acute inpatient psychiatric facilities provide a high level of care in order to stabilize patients that are either a threat to themselves or to others. The acute setting provides 24-hour observation, daily intervention and monitoring by psychiatrists.

Specialty treatment facilities. Specialty treatment facilities include residential recovery facilities, eating disorder facilities and comprehensive treatment centers. The Company provides a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders. Inpatient, including detoxification and rehabilitation, partial hospitalization and outpatient treatment programs give patients access to the least restrictive level of care.

Residential treatment centers. Residential treatment centers treat patients with behavioral disorders in a non-hospital setting, including outdoor programs. The facilities balance therapy activities with social, academic and other activities.

Outpatient community-based facilities. Outpatient community-based programs are designed to provide therapeutic treatment to children and adolescents who have a clinically-defined emotional, psychiatric or chemical dependency disorder while enabling the youth to remain at home and within their community.

The table below presents total U.S. revenue attributed to each category (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

Acute inpatient psychiatric facilities

 

$

984,609

 

 

$

912,097

 

 

$

814,124

 

Specialty treatment facilities

 

 

802,022

 

 

 

788,232

 

 

 

761,017

 

Residential treatment centers

 

 

281,158

 

 

 

286,959

 

 

 

293,053

 

Outpatient community-based facilities

 

 

22,140

 

 

 

21,093

 

 

 

36,501

 

Revenue

 

$

2,089,929

 

 

$

2,008,381

 

 

$

1,904,695

 

 

The Company receives payments from the following sources for services rendered in our U.S. Facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”); and (iv) individual patients and clients.

The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience. Most of our U.S. Facilities have contracts containing variable consideration. However, it is unlikely a significant reversal of revenue will occur when the uncertainty is resolved, and therefore, the Company has included the variable consideration in the estimated transaction price. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a component of other operating expenses in the consolidated statements of operations. Bad debt expense for the years ended December 31, 2020 and 2019 was not significant.

The Company derives a significant portion of its revenue from Medicare, Medicaid and other payors that receive discounts from established billing rates. The Medicare and Medicaid regulations and various managed care contracts under which these discounts must be estimated are complex, subject to interpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in the Company’s facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from the Company’s estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management.

Settlements under cost reimbursement agreements with third-party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. Final determination of amounts earned under the Medicare and Medicaid programs often occurs in subsequent years because of audits by such programs, rights of appeal and the application of numerous technical provisions. In the opinion of management, adequate provision has been made for any adjustments and final settlements. However, there can be no assurance that any such adjustments and final settlements will not have a material effect on the Company’s financial condition or results of operations. The Company’s cost report receivables were $5.8 million and $13.7 million for the years ended December 31, 2020 and 2019, respectively, and were included in other

current assets in the consolidated balance sheets. Management believes that these receivables are properly stated and are not likely to be settled for a significantly different amount. The net adjustments to estimated cost report settlements resulted in a decreases to revenue of $1.3 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively, and an increase to revenue of $0.5 million for the year ended December 31, 2018.

The Company provides care without charge to patients who are financially unable to pay for the healthcare services they receive based on Company policies and federal and state poverty thresholds. Such amounts determined to qualify as charity care are not reported as revenue. The cost of providing charity care services were $4.4 million, $4.3 million and $4.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. The estimated cost of charity care services was determined using a ratio of cost to gross charges determined from our most recently filed Medicare cost reports and applying that ratio to the gross charges associated with providing charity care for the period.

The following table presents revenue by payor type and as a percentage of revenue in our U.S. Facilities for the years ended December 31, 2020, 2019 and 2018 (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Commercial

 

$

596,698

 

 

 

28.5

%

 

$

565,350

 

 

 

28.2

%

 

$

573,089

 

 

 

30.1

%

Medicare

 

 

330,070

 

 

 

15.8

%

 

 

294,691

 

 

 

14.7

%

 

 

280,340

 

 

 

14.7

%

Medicaid

 

 

1,037,852

 

 

 

49.7

%

 

 

1,007,102

 

 

 

50.1

%

 

 

893,644

 

 

 

46.9

%

Self-Pay

 

 

98,302

 

 

 

4.7

%

 

 

118,716

 

 

 

5.9

%

 

 

134,054

 

 

 

7.1

%

Other

 

 

27,007

 

 

 

1.3

%

 

 

22,522

 

 

 

1.1

%

 

 

23,568

 

 

 

1.2

%

Revenue

 

$

2,089,929

 

 

 

100.0

%

 

$

2,008,381

 

 

 

100.0

%

 

$

1,904,695

 

 

 

100.0

%

 

Contract liabilities in the U.S. Facilities primarily consisted of unearned revenue from CMS’ Accelerated and Advance Payment Program. In April 2020, the Company received approximately $45 million from CMS’ Accelerated and Advance Payment Program for Medicare providers, which the Company expects to repay over the 12 month period beginning in April 2021. Once repayment begins, the amount will be recouped from the provider’s or supplier’s new Medicare claims. Approximately $35.9 million and $11.3 million of contract liabilities are included in other accrued liabilities and other liabilities, respectively, on the consolidated balance sheets. A summary of the activity in unearned revenue in the U.S. Facilities is as follows (in thousands):

 

Balance at December 31, 2019

 

$

1,895

 

Payments received

 

 

51,044

 

Revenue recognized

 

 

(5,743

)

Balance at December 31, 2020

 

$

47,196