Humana 2014 Annual Report Download - page 103

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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rate securities, valuation methodologies include consideration of the quality of the sector and issuer, underlying
collateral, underlying final maturity dates, and liquidity.
Recently Issued Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board, or FASB, issued new guidance related to discontinued
operations which changes the criteria for determining which disposals can be presented as discontinued operations and
modifies related disclosure requirements. The new guidance is effective for us beginning with annual and interim
periods in 2015 with early adoption permitted under certain circumstances. Based upon existing facts and circumstances,
the adoption of the new guidance is not expected to have a material impact on our results of operations, financial
condition, or cash flows.
In May 2014, the FASB issued new guidance that amends the accounting for revenue recognition. The amendments
are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue
recognition practices, and improve disclosure requirements. Insurance contracts are not in the scope of this new guidance.
The new guidance is effective for us beginning with annual and interim periods in 2017. We are currently evaluating
the impact on our results of operations, financial condition, and cash flows.
There are no other recently issued accounting standards that apply to us or that are expected to have a material
impact on our results of operations, financial condition, or cash flows.
3. ACQUISITIONS
On September 6, 2013, we acquired American Eldercare Inc., or American Eldercare, the largest provider of nursing
home diversion services in the state of Florida, serving frail and elderly individuals in home and community-based
settings. American Eldercare complements our core capabilities and strength in serving seniors and disabled individuals
with a unique focus on individualized and integrated care, and has contracts to provide Medicaid long-term support
services across the entire state of Florida. The enrollment effective dates for the various regions ranged from August
2013 to March 2014. The allocation of the purchase price resulted in goodwill of $76 million and other intangible assets
of $75 million. The goodwill was assigned to the Retail segment. The other intangible assets, which primarily consist
of customer contracts and technology, have a weighted average useful life of 9.3 years. Goodwill and other intangible
assets are amortizable as deductible expenses for tax purposes.
On December 21, 2012, we acquired Metropolitan Health Networks, Inc., or Metropolitan, an MSO that coordinates
medical care for Medicare Advantage beneficiaries and Medicaid recipients, primarily in Florida. We acquired all of
the outstanding shares of Metropolitan and repaid all outstanding debt of Metropolitan for a transaction value of $851
million, plus transaction expenses. The total consideration of $851 million exceeded our estimated fair value of the net
tangible assets acquired by approximately $827 million, of which we allocated $263 million to other intangible assets
and $564 million to goodwill. A majority of the goodwill was assigned to the Healthcare Services segment and a portion
to our Retail segment. Goodwill and other intangible assets are not amortizable as deductible expenses for tax purposes.
The other intangible assets, which primarily consist of customer contracts and trade names, have a weighted average
useful life of 8.4 years.
On October 29, 2012, we acquired a noncontrolling equity interest in MCCI, a privately held MSO headquartered
in Miami, Florida that coordinates medical care for Medicare Advantage and Medicaid beneficiaries primarily in Florida
and Texas.
The Metropolitan and MCCI transactions provide us with components of a successful integrated care delivery
model that has demonstrated scalability to new markets. A substantial portion of the revenues for both Metropolitan
and MCCI are derived from services provided to Humana Medicare Advantage members under capitation contracts
with our health plans. In addition, Metropolitan and MCCI provide services to Medicare Advantage and Medicaid
members under capitation contracts with third party health plans. Under these capitation agreements with Humana and
third party health plans, Metropolitan and MCCI assume financial risk associated with these Medicare Advantage and
Medicaid members.