PALMETTO GBA 2010 ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS
36
NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Palmetto GBA, LLC (the Company) is a single-member limited liability company organized on
January 1, 1998. The Company’s sole member is Blue Cross and Blue Shield of South Carolina
(BCBSSC). The Company is engaged in the business of providing Medicare Administrative
Contractor Services, Medicare Part A fiscal intermediary services and Medicare Part B
carrier services in various states. These services include health insurance claims processing
and payment, customer service for Medicare beneficiaries and health care providers, and
payment safeguard functions designed to detect and prevent fraud and abuse in the Medicare
program. The Company provides services to Medicare beneficiaries residing in various
states, Puerto Rico and the U.S. Virgin Islands. The Company’s major customer is the Centers
for Medicare and Medicaid Services (CMS), the federal agency with fiduciary responsibility for
the Medicare program.
In 2009, the Company was notified that it was the successful bidder on the CMS Jurisdiction
11 A/B MAC. This jurisdiction includes the states of North Carolina, South Carolina, Virginia
and West Virginia. Under this five year contract, Palmetto GBA would perform all the Medicare
Parts A and B administration for the jurisdiction. The contract also encompasses Regional
Home Health and Hospice Intermediary (RHHI) for 16 states. Although the award of this contract
was protested, the protest was resolved in the Company’s favor in 2010. This contract
will result in annual revenue of approximately $66,000,000 beginning in 2011.
The financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (GAAP). The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash equivalents
Cash equivalents represent certificates of deposit that have maturities of less than
three months at date of purchase and money market fund investments. Market risk for
cash and cash equivalents is limited to any one institution when deposits exceed federally
insured limits.
Financial instruments
The Company holds certain financial instruments including cash and accounts receivable.
Management believes that the carrying values of financial instruments approximate fair value
as required by Financial Accounting Standards Board (FASB) rules.
Subsequent events
Subsequent events have been evaluated through February 23, 2011, which is the date the
financial statements were available to be issued. The Company received a capital call from
Health Administration Association of America, LLC (HAAA) in February of an amount up to
$6,000,000. On February 18, 2011, the Company made an initial payment towards this
obligation of $2,000,000.
Asset valuation allowances
The Company recorded an allowance for uncollectible receivables in the amount of $3,000
and $3,000 at December 31, 2010 and 2009, respectively.
Fixed assets
Fixed assets are stated at amortized cost. Depreciation on new assets purchased is computed
using the straight-line method over the estimated useful lives of the respective assets:
four to eight years for furniture and fixtures, three to five years for data processing equipment
and software, and four years for automobiles. Leasehold improvements are depreciated over
the lesser of the remaining lease term or estimated useful life of the asset. Depreciation on
used assets purchased is computed by using the straight-line method over the estimated
remaining useful lives at the time of purchase of the respective assets.
Significant accounting policies and the methods of applying those policies are
summarized below.