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Business Acquisitions
 12 Months Ended
Dec. 31, 2011
Business Acquisitions [Abstract]  
Business Acquisitions

6.    Business Acquisitions:

During 2011, the Company completed the acquisition of 10 physician group practices for total consideration of $159.5 million, consisting of $146.5 million in cash and $13.0 million of contingent consideration. In connection with these acquisitions, the Company recorded goodwill of approximately $138.6 million, other intangible assets consisting primarily of physician and hospital agreements of approximately $22.5 million, fixed assets of approximately $0.4 million, and other liabilities of approximately $2.0 million. These acquisitions expand the Company's national network of physician practices. The Company expects to improve the results of these physician practices through improved managed care contracting, improved collections, identification of growth initiatives, as well as, operating and cost savings based upon the significant infrastructure it has developed.

The contingent consideration of $13.0 million recorded during 2011 is related to agreements to pay additional amounts based on the achievement of certain performance measures for up to five years ending after the acquisition dates. The accrued contingent consideration for each acquisition was recorded at acquisition-date fair value using the income approach with assumed discount rates ranging from 3.0% to 6.0% over the applicable terms and an assumed payment probability of 100% for each of the applicable years. The range of the undiscounted amount the Company could pay under the contingent consideration agreements is between $0 and $14.4 million.

During 2011, the Company paid and accrued for payments of approximately $16.2 million for contingent consideration related to certain prior-period acquisitions, of which $7.9 million was accrued as of December 31, 2010. In connection with prior-period acquisitions, the Company also recorded additional intangible assets consisting primarily of physician and hospital agreements of $1.3 million, fixed assets of approximately $1.0 million and other liabilities of $0.8 million during the year ended December 31, 2011.

During 2010, the Company completed the acquisition of 15 physician group practices for total consideration of $339.3 million, consisting of $328.7 million in cash and $10.6 million of contingent consideration. In connection with these acquisitions, the Company recorded goodwill of approximately $317.5 million, other intangible assets consisting primarily of physician and hospital agreements of approximately $21.4 million, fixed assets of approximately $0.9 million, and other liabilities of approximately $0.5 million.

Certain purchase agreements contain contingent consideration provisions based on volume and other performance measures. Potential payments under these provisions are not contingent upon the future employment of the sellers. The amount of the payments due under these provisions cannot be determined until the specific targets or measures are attained. In some cases, the sellers are eligible for annual contingent consideration payments over a three- to five-year period based on the growth in profitability of the physician practice with no stated limit on the annual payment amount. Under all contingent consideration provisions, payments of up to $42.9 million may be due through 2016, of which $33.7 million is accrued as of December 31, 2011.

The results of operations of the practices acquired in 2011 and 2010 have been included in the Company's Consolidated Financial Statements from the dates of acquisition. The following unaudited pro forma information combines the consolidated results of operations of the Company on a GAAP basis and the acquisitions completed during 2011 and 2010 as if the transactions had occurred on January 1, 2010 and January 1, 2009, respectively (in thousands, except per share data):

 

     Years Ended December 31,  
     2011     2010  

Net patient service revenue

    $ 1,673,979      $ 1,620,475   

Net income (1)

      227,333        237,078   

Net income per share (2):

     

Basic

    $ 4.77      $ 5.08   

Diluted

    $ 4.66      $ 4.98   

Weighted average shares (2):

     

Basic

      47,706        46,630   

Diluted

      48,796        47,570   

Effective tax rate (1):

      38.29 %      34.86 % 

 

(1) The comparison of net income is affected by the change in the effective tax rate. The effective tax rate was 38.29% for the year ended December 31, 2011 as compared to 34.29% for the year ended December 31, 2010.
(2) The comparison of net income per share is affected by the changes in the number of weighted average shares outstanding in each period. The basic and diluted weighted average shares outstanding for the year ended December 31, 2011 were 47.7 million and 48.8 million, respectively, as compared to 46.6 million and 47.6 million, respectively, for the year ended December 31, 2010.

The pro forma results do not necessarily represent results which would have occurred if the acquisitions had taken place at the beginning of the periods indicated, nor are they indicative of the results of future combined operations.