Annual report pursuant to Section 13 and 15(d)

Revenue Recognition

v3.20.2
Revenue Recognition
12 Months Ended
Jul. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition

Note 3 – Revenue Recognition


Clinical Services Revenue


Service revenues in the Company’s clinical services business accounted for 63%, 63% and 71% of the Company’s total revenues for fiscal years ended July 31, 2020, 2019, and 2018, respectively and are primarily comprised of a high volume of relatively low-dollar transactions. The services business, which provides clinical testing services, satisfies its performance obligation and recognizes revenues upon completion of the testing process for a specific patient and reporting to the ordering physician. The Company may also perform clinical testing services for other laboratories and will recognize revenue from those services when reported to the ordering laboratory. The Company estimates the amount of consideration it expects to receive from customer groups using the portfolio approach. These estimates of the expected consideration include the impact of contractual allowances and price concessions on our customer group portfolios consisting of healthcare insurers, government payers, client payers and patients as described below. Contracts with customers in our laboratory services business do not contain a financing component, based on the typically limited period of time between performance of services and collection of consideration. The transaction price includes variable consideration in the form of the contractual allowance and price concessions as well as the collectability of the transaction based on patient intent and ability to pay. The Company uses the expected value method in estimating the amount of the variability included in the transaction price.


The following are descriptions of our laboratory services business portfolios:


Third party payers and Health Maintenance Organizations (HMO’s)


Reimbursements from third party payers, primarily healthcare insurers and HMO’s are based on negotiated fee-for-service schedules and on capitated payment rates. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, which considers historical collection and denial experience and the terms of the Company’s contractual arrangements. Adjustments to the allowances, based on actual receipts from the third-party payers, are recorded upon settlement.


Collection of the consideration the Company expects to receive is normally a function of providing complete and correct billing information to these third party payers within the various filing deadlines, and typically occurs within 30 to 90 days of billing. Provided the Company has billed healthcare insurers accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. If there has been a delay in billing, the Company determines if the amounts in question will likely go past the filing deadline, and if so, will reserve accordingly for the billing.


Third-party payers, including government programs, may decide to deny payment or recoup payments for testing that they contend was improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received. Our revenues may be subject to adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance and changes by government agencies and payers in interpretations, requirements, and “conditions of participation” in various programs.


Government Payer - Medicare


Reimbursements from Medicare are based on fee-for-service schedules set by Medicare, which is funded by the government. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from Medicare, which considers historical collection and denial experience and other factors. Adjustments to the allowances, based on actual receipts from the government payers, are recorded upon settlement.


Collection of consideration the Company expects to receive is normally a function of providing the complete and correct billing information within the various filing deadlines and typically occurs within 60 days of billing. Provided the Company has billed the government payer accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. If there has been a delay in billing, the Company determines if the amounts in question will likely go past the filing deadline, and, if so, it will reserve accordingly for the billing.


Patient self pay


Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Coinsurance and deductible responsibilities based on fees negotiated with healthcare insurers are also billed to insured patients and included in this portfolio. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients in accordance with the Company’s policies and implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement. Patient responsibility is invoiced and if it reaches 91 days outstanding, the account is sent to a collection agency for further processing. After the account has been with the collection agency for at least 105 days, and is determined to be uncollectable it is written off.


The following table represents clinical services net revenues and percentages by type of customer:


    Year ended July 31,
2020
    Year ended July 31,
2019
    Year ended July 31,
2018
 
Revenue category   Revenue     %     Revenue     %     Revenue     %  
Third-party payers   $ 24,893       52     $ 26,653       52     $ 41,370       58  
Medicare     10,825       23       10,898       21       12,111       17  
HMO’s     5,983       12       6,213       12       11,359       16  
Patient self-pay     6,263       13       7,351       15       6,237       9  
Total   $ 47,964       100 %   $ 51,115       100 %   $ 71,077       100 %

For fiscal years ended July 31, 2020, 2019, and 2018 all of the Company’s clinical services revenues were generated within the United States.


Grant income


Under the CARES Act, we were eligible for and received two income grants in April and June 2020 totaling $1,496 under the Department of Health and Human Services (HHS) Public Health and Social Services Emergency Fund for provider relief. The purpose of the payments is to reimburse the Company for health care related expenses or lost revenues attributable to COVID-19.


We have certified that the grant funds were accepted per the regulations and have recognized it as Grant income for the fiscal year ended July 31, 2020 in the Clinical Services segment.


Products Revenue and royalty income


Products revenues consist of the sale of single-use products used in the identification of genomic information and are recognized at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment. Payment terms for shipments to end-user and distributor customers may range from 30 to 90 days. Any claims for credit or return of goods may be made generally within 30 days of receipt. Revenues are reduced to reflect estimated credits and returns, although historically these adjustments have not been material. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related shipping and handling costs are reflected in cost of products.


Royalty income is based on net sales of the Company’s licensed products by a third party. We recognize royalty income in the period the sales occur based on third party evidence received. For fiscal years ended July 31, 2020, 2019 and 2018, royalty income was $0, $0 and $712, respectively.


Products and royalty revenue by geography is as follows:


    2020     2019     2018  
United States   $ 14,580     $ 16,966     $ 16,220  
Europe     7,484       8,551       9,050  
Rest of the world     4,497       4,538       4,666  
Products revenue   $ 26,561     $ 30,055     $ 29,936