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Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

  

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                  

  

Commission file number    001-13489

 

nhc20240331_10qimg001.jpg

 

(Exact name of registrant as specified in its Charter)

  

Delaware

52-2057472

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization

Identification No.)

  

100 E. Vine Street

Murfreesboro, TN

37130

(Address of principal executive offices)

(Zip Code)

  

(615) 8902020

Registrant's telephone number, including area code

  

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading

Symbols(s)

Name of each exchange on which

registered

Common, $0.01 par value

NHC

NYSE American

 

Indicate by check mark whether the registrant: (1) Has filed all reports required to be filed by Section 13 or 15(d), of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T (§ 232.405 of this chapter) during the preceding 12 months (or for such period that the registrant was required to submit such files).    Yes ☒      No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer

Accelerated filer ☐

  

Non–accelerated filer ☐

Smaller reporting company

  
 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as is defined in Rule 12b–2 of the Exchange Act). Yes    No ☒

 

15,399,724 shares of common stock of the registrant were outstanding as of May 1, 2024.

 



 

  

 
 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 
         

Revenues:

        

Net patient revenues

 $285,823  $258,007 

Other revenues

  11,353   11,556 

Net operating revenues

  297,176   269,563 
         

Cost and expenses:

        

Salaries, wages, and benefits

  183,138   167,824 

Other operating

  77,429   71,489 

Facility rent

  10,348   10,092 

Depreciation and amortization

  10,586   10,048 

Interest

  46   98 

Total costs and expenses

  281,547   259,551 
         

Income from operations

  15,629   10,012 
         

Other income:

        

Non–operating income

  5,685   4,323 

Unrealized gains on marketable equity securities

  14,399   1,386 
         

Income before income taxes

  35,713   15,721 

Income tax provision

  (9,462)  (4,436)

Net income

  26,251   11,285 

Net (income)/loss attributable to noncontrolling interest

  (38)  438 
         

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 
         

Earnings per share attributable to National HealthCare Corporation stockholders:

        

Basic

 $1.71  $0.76 

Diluted

 $1.69  $0.76 
         

Weighted average common shares outstanding:

     

Basic

  15,350,240   15,337,423 

Diluted

  15,505,096   15,356,335 
         

Dividends declared per common share

 $0.59  $0.57 

 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

 

 

 

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Comprehensive Income

(unaudited in thousands)

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 
         

Net income

 $26,251  $11,285 
         

Other comprehensive income/(loss):

        

Unrealized gains/(losses) on investments in marketable debt securities

  (472)  1,958 

Reclassification adjustment for realized gains on sales of marketable debt securities

  (10)   - 

Income tax (expense)/benefit related to items of other comprehensive income

  45   (279)

Other comprehensive income/(loss), net of tax

  (437)  1,679 
         

Net (income)/loss attributable to noncontrolling interest

  (38)  438 
         

Comprehensive income attributable to National HealthCare Corporation

 $25,776  $13,402 

 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

 

 

 

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Balance Sheets

(in thousands)

 

  

March 31,

2024

  

December 31,

2023

 
  

unaudited

     

Assets

        

Current Assets:

        

Cash and cash equivalents

 $93,982  $107,076 

Restricted cash and cash equivalents, current portion

  26,010   17,725 

Marketable equity securities

  123,040   111,117 

Marketable debt securities

  484   5,427 

Restricted marketable equity securities

  29,616   26,779 

Restricted marketable debt securities, current portion

  4,790   12,822 

Accounts receivable

  125,664   108,545 

Inventories

  6,763   7,386 

Prepaid expenses and other assets

  6,750   8,855 

Notes receivable

  487   503 

Total current assets

  417,586   406,235 
         

Property and Equipment:

        

Property and equipment, at cost

  1,065,543   1,101,681 

Accumulated depreciation and amortization

  (576,845)  (608,352)

Net property and equipment

  488,698   493,329 
         

Other Assets:

        

Restricted cash and cash equivalents, less current portion

  1,140   1,167 

Restricted marketable debt securities, less current portion

  119,042   109,478 

Deposits and other assets

  13,738   14,786 

Operating lease right-of-use assets

  87,356   94,201 

Goodwill

  168,295   168,295 

Intangible assets

  7,038   7,038 

Investments in unconsolidated companies

  16,747   16,267 

Total other assets

  413,356   411,232 

Total assets

 $1,319,640  $1,310,796 

 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

 

 

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Balance Sheets (continued)

(in thousands, except share and per share amounts)

 

  

March 31,

2024

  

December 31,

2023

 
  

unaudited

     

Liabilities and Stockholders Equity

        

Current Liabilities:

        

Trade accounts payable

 $20,697  $19,194 

Finance lease obligations, current portion

  -   860 

Operating lease liabilities, current portion

  29,733   29,352 

Accrued payroll

  64,156   84,110 

Amounts due to third party payors

  19,988   18,369 

Accrued risk reserves, current portion

  30,800   30,549 

Other current liabilities

  24,302   22,991 

Contract liabilities

  7,667   - 

Dividends payable

  9,086   9,051 

Total current liabilities

  206,429   214,476 
         

Operating lease liabilities, less current portion

  56,004   63,175 

Accrued risk reserves, less current portion

  77,437   72,710 

Refundable entrance fees

  5,708   6,376 

Deferred income taxes

  19,639   17,200 

Other noncurrent liabilities

  27,909   26,379 

Total liabilities

  393,126   400,316 
         

Equity:

        

Common stock, $.01 par value; 45,000,000 shares authorized; 15,399,724 and 15,350,661 shares, respectively, issued and outstanding

  154   153 

Capital in excess of par value

  226,909   227,604 

Retained earnings

  704,726   687,599 

Accumulated other comprehensive loss

  (7,041)  (6,604)

Total National HealthCare Corporation stockholders’ equity

  924,748   908,752 

Noncontrolling interest

  1,766   1,728 

Total equity

  926,514   910,480 

Total liabilities and equity

 $1,319,640  $1,310,796 

 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

 

 

 

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Cash Flows

(unaudited in thousands)  

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Cash Flows From Operating Activities:

        

Net income

 $26,251  $11,285 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

  10,586   10,048 

Equity in earnings of unconsolidated investments

  (67)  (1,535)

Unrealized gains on marketable equity securities

  (14,399)  (1,386)

(Gains)/losses on sale of marketable securities

  (344)  492 

Gain on sale of unconsolidated company

  (1,024)  - 

Deferred income taxes

  2,484   331 

Stock–based compensation

  793   639 

Changes in operating assets and liabilities:

        

Accounts receivable

  (17,119)  (3,148)

Inventories

  623   142 

Prepaid expenses and other assets

  3,153   1,957 

Operating lease obligations

  55   (316)

Trade accounts payable

  1,503   (4,018)

Accrued payroll

  (19,954)  (15,800)

Amounts due to third party payors

  1,619   48 

Accrued risk reserves

  4,978   3,157 

Contract liabilities

  7,667   - 

Other current liabilities

  1,311   5,407 

Other noncurrent liabilities

  1,530   6,554 

Net cash provided by operating activities

  9,646   13,857 

Cash Flows From Investing Activities:

        

Purchases of property and equipment

  (5,955)  (6,640)

Proceeds from sale of unconsolidated company

  2,100   - 

Investments in unconsolidated companies

  (1,488)  - 

Collections of notes receivable

  16   2 

Purchases of marketable securities

  (8,703)  (10,281)

Proceeds from sale of marketable securities

  11,615   15,492 

Net cash used in investing activities

  (2,415)  (1,427)

Cash Flows From Financing Activities:

        

Principal payments under finance lease obligations

  (860)  (1,218)

Dividends paid to common stockholders

  (9,051)  (8,748)

Issuance of common stock

  8,412   - 

Repurchase of common shares

  (9,900)  (2,482)

Entrance fee refunds

  (668)  (171)

Net cash used in financing activities

  (12,067)  (12,619)

Net Decrease in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

  (4,836)  (189)

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Beginning of Period

  125,968   74,865 

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, End of Period

 $121,132  $74,676 
         

Balance Sheet Classifications:

        

Cash and cash equivalents

 $93,982  $46,144 

Restricted cash and cash equivalents

  27,150   28,532 

Total Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

 $121,132  $74,676 

 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

 

 

 

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Stockholders Equity

(in thousands, except share and per share amounts)

(unaudited)

 

For the three months ended March 31, 2024:

 

  

Common Stock

  

Capital in

Excess of

  

Retained

  

Accumulated

Other

Comprehensive

  

Non-

controlling

  

Total

Stockholders’

 
  

Shares

  

Amount

  

Par Value

  

Earnings

  

Loss

  

Interest

  

Equity

 

Balance at January 1, 2024

  15,350,661  $153  $227,604  $687,599  $(6,604) $1,728  $910,480 

Net income

           26,213      38   26,251 

Other comprehensive loss

              (437)     (437)

Stock–based compensation

        793            793 

Shares sold – options exercised

  150,194   1   8,412            8,413 

Repurchase of common shares

  (101,131)     (9,900)           (9,900)

Dividends declared to common stockholders ($0.59 per share)

           (9,086)        (9,086)

Balance at March 31, 2024

  15,399,724  $154  $226,909  $704,726  $(7,041) $1,766   926,514 

 

 

For the three months ended March 31, 2023: 

 

  

Common Stock

  

Capital in

Excess of

  

Retained

  

Accumulated

Other

Comprehensive

  

Non-

controlling

  

Total

Stockholders’

 
  

Shares

  

Amount

  

Par Value

  

Earnings

  

Income (Loss)

  

Interest

  

Equity

 

Balance at January 1, 2023

  15,357,746  $153  $226,991  $656,664  $(9,532) $3,238  $877,514 

Net income/(loss)

           11,723      (438)  11,285 

Other comprehensive income

              1,679      1,679 

Stock–based compensation

        639            639 

Shares sold – options exercised

  7,046                   

Repurchase of common shares

  (44,349)     (2,482)           (2,482)

Dividends declared to common stockholders ($0.57 per share)

           (8,733)        (8,733)

Balance at March 31, 2023

  15,320,443  $153  $225,148  $659,654  $(7,853) $2,800   879,902 

 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

 

 

NATIONAL HEALTHCARE CORPORATION

Notes to Interim Condensed Consolidated Financial Statements

March 31, 2024

(unaudited) 

 

 

Note 1 Description of Business

 

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. As of March 31, 2024, we operate or manage, through certain affiliates, 65 skilled nursing facilities with a total of 8,421 licensed beds, 24 assisted living facilities with 1,365 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 8 states and are located primarily in the southeastern United States.  

  

 

Note 2 Summary of Significant Accounting Policies

 

The listing below is not intended to be a comprehensive list of all our significant accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. See our audited December 31, 2023 consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by U.S. GAAP. Our audited December 31, 2023 consolidated financial statements are available at our web site: www.nhccare.com.

 

Basis of Presentation

 

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

 

We assume that users of these interim financial statements have read or have access to the audited December 31, 2023 consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons.

 

Estimates and Assumptions

 

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 and could cause our reported net income to vary significantly from period to period.

 

Net Patient Revenues and Accounts Receivable

 

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, home health care services, hospice services, and behavioral health services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other third-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

 

The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that are not capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there may be ancillary services which are not included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.  Contract liabilities are recorded for payments the Company receives in which performance obligations have not been completed.

 

9

 

The Company determines the transaction price based on established billing rates reduced by explicit price concessions provided to third party payors. Explicit price concessions are based on contractual agreements and historical experience. The Company considers the patient's ability and intent to pay the amount of consideration upon admission. Credit losses are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations. Bad debt expense was $2,471,000 and $1,811,000 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, and December 31, 2023, the Company has recorded allowance for doubtful accounts of $9,174,000 and $8,054,000, respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

 

Other Revenues

 

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

 

We recognize rental income based on the terms of our operating leases. Under certain of our leases, we receive variable rent, which is based on the increase in revenues of a lessee over a base year. We recognize variable rent annually or monthly, as applicable, when, based on the actual revenue of the lessee is earned.

 

Segment Reporting

 

In accordance with the provisions of Accounting Standards Codification ("ASC") 280, Segment Reporting, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note 6 for further disclosure of the Company’s operating segments.

 

Other Operating Expenses

 

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

 

General and Administrative Costs

 

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $6,164,000 and $5,653,000 for the three months ended March 31, 2024 and 2023, respectively.

 

Long-Term Leases

 

The Company’s lease portfolio primarily consists of operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare and hospice offices, and pharmacy warehouses. The original terms of the leases typically range from two to fifteen years. Several of the real estate leases include renewal options which vary in length and may not include specific rent renewal amounts. We determine if an arrangement is a lease at inception of a contract. We determine the lease term by assuming exercise of renewal options that are reasonably certain.

 

The Company records right-of-use assets and liabilities for non-cancelable real estate operating leases with original or remaining lease terms in excess of one year. Leases with a lease term of 12 months or less at inception are not recorded and are expensed on a straight-line basis over the lease term. We recognize lease components and non-lease components together and not as separate parts of a lease for real estate leases.

 

10

 

Operating lease right-of-use assets and liabilities are recorded at the present value of the lease payments over the lease term. The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease. The variable components of the lease payment that fluctuate with the operations of a health facility are not included in determining the right-of-use assets and lease liabilities. Rather, these variable components are expensed as incurred.

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements, 20-40 years and equipment and furniture, 3-15 years. Leasehold improvements are amortized over periods that do not exceed the non-cancelable respective lease terms using the straight-line method.

 

Business Combinations

 

We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. In determining the fair value of identifiable assets, we use various valuation techniques. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, future growth, and discount rates.

 

Goodwill and Other Intangible Assets

 

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is not amortized but is subject to an annual impairment test. We perform our annual goodwill impairment assessment on the first day of the fourth quarter.  Tests are performed more frequently if events occur, or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

 

The Company’s indefinite-lived intangible assets consist of trade names and certificates of need and licenses. The Company reviews indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

 

Accrued Risk Reserves  

 

We are self–insured for risks related to workers’ compensation and general and professional liability insurance. We have two wholly–owned limited purpose insurance companies that insure these risks. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

 

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. A significant increase in the number of these claims, or an increase in the amounts due as a result of these claims could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

 

We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

 

11

 

Continuing Care Contracts

 

We have one continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center may enter into continuing care contracts with us. The contracts provide that 10% of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lesser of the price at which the apartment is re-assigned or 90% of the original entry fee, plus 40% of any appreciation if the apartment value exceeds the original resident’s entry fee.

 

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees are not included as part of the transaction price and are classified as noncurrent liabilities in our consolidated balance sheets. 

 

We also annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded with a corresponding charge to income. As of March 31, 2024, and December 31, 2023, we have recorded a future service obligation liability in the amount of $1,606,000. This obligation is reflected within other noncurrent liabilities in the interim condensed consolidated balance sheets.

 

 

Other Noncurrent Liabilities

 

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions, deferred revenue, and obligations to provide future services to our CCRC residents. Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”) and the non-refundable portion (10%) of CCRC entrance fees being amortized over the remaining life expectancies of the residents.

 

Other noncurrent liabilities also include funds received related to the Employee Retention Credit ("ERC"), a refundable tax credit for businesses that sustained a partial suspension of operations limiting commerce due to COVID-19 or had significant declines in gross receipts during 2020 and 2021.

 

Noncontrolling Interest

 

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of the subsidiary earnings, contributions, and distributions.

 

Variable Interest Entities

 

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses. We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation. To the extent that we own interests in a VIE and we (i) have the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

 

The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and may or may not be limited to its investment in the unconsolidated VIE. The investments in unconsolidated VIEs are classified as “investments in unconsolidated companies” in the interim condensed consolidated balance sheets.

 

Recently Issued Accounting Guidance

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07,Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures.” The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and contain other disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2023, which will be the Company's fiscal year 2024, and interim periods within fiscal years beginning after December 15, 2024.  We are currently evaluating the impact this standard will have on our disclosures.

 

12

  
 

Note 3 Net Patient Revenues

 

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

 

Revenue by Service Type

 

The Company’s net patient services can generally be classified into the following two categories: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services (in thousands).

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Net patient revenues:

        

Inpatient services

 $252,254  $226,169 

Homecare and hospice

  33,569   31,838 

Total net patient revenues

 $285,823  $258,007 

 

13

 

For inpatient and hospice services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation. For homecare, revenue is recognized when services are provided based on the number of days of service rendered in the period of care or on a per-visit basis. Typically, patients and third-party payors are billed monthly after services are performed or the patient is 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 is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients are typically under no obligation to remain admitted in our facilities or under our care.  As the period between the time of service and time of payment is typically one year or less, the Company did not adjust for the effects of a significant financing component.

 

Revenue by Payor

 

Certain groups of patients receive funds to pay the cost of their care from a common source. The following table sets forth sources of net patient revenues for the periods indicated:

 

  

Three Months Ended

March 31

 

Source

 

2024

  

2023

 

Medicare

  34%   36% 

Managed Care

  10%   11% 

Medicaid

  28%   27% 

Private Pay and Other

  28%   26% 

Total

  100%   100% 

 

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days. For each eligible day a Medicare beneficiary is in a skilled nursing facility, Medicare pays the facility a daily payment, subject to adjustment for certain factors such as a wage index in the geographic area. The payment covers all services provided by the skilled nursing facility for the beneficiary that day, including room and board, nursing, therapy and drugs, as well as an estimate of capital–related costs to deliver those services.

 

For homecare services, Medicare pays based on the acuity level of the patient and based on periods of care. A period of care is defined as a length of care up to 30 days with multiple continuous periods allowed. The services covered by the payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit.

 

For hospice services, Medicare pays a daily rate to cover the hospice’s costs for providing services included in the patient care plan. Medicare makes daily payments based on 1 of 4 levels of hospice care. All hospice care and services offered to patients and their families must follow an individualized written plan of care that meets the patient’s needs.

 

Our hospice service revenue is subject to certain limitations on payments from Medicare. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor these caps on a provider-by-provider basis and estimate amounts due back to Medicare if we estimate a cap has been exceeded. If applicable, we record these cap adjustments as a reduction to revenue.

 

Medicaid is operated by individual states with the financial participation of the federal government. The states in which we operate currently use prospective cost–based reimbursement systems. Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

 

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration. Private paying patients, private insurance carriers and the Veterans Administration generally pay based on the healthcare center's charges or specifically negotiated contracts. For private pay patients in skilled nursing, assisted living and independent living facilities, the Company bills for room and board charges, with the remittance being due on receipt of the statement and generally by the 10th day of the month the services are performed.

 

Certain managed care payors for homecare services pay on a per-visit basis. This revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.

 

14

 

State Relief Supplemental Funding

 

The Company received supplemental Medicaid payments from various states, including healthcare relief funding under the American Rescue Plan Act ("ARPA") and other state specific relief programs.  The funding generally incorporates specific use requirements primarily for direct patient care including labor related expenses or various patient care related expenses.  We have recorded $3,462,000 and $4,883,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2024 and 2023, respectively.  

 

Contract Liabilities

 

Included in the Company’s interim condensed consolidated balance sheets are contract liabilities, which represent payments the Company receives in advance of services provided. As of March 31, 2024 and December 31, 2023, the Company has recorded $7,667,000 and $0, respectively, in contract liabilities related to receipts during the first quarter of 2024 from the Change Healthcare/Optum Payment Disruption ("CHOPD") Accelerated and Advance Payment program.  These payments were issued to providers who experienced delays in the submission or processing of Medicare claims payments as a result of the Change Healthcare/Optum cyber incident, which began February 21, 2024. Recoupment of the accelerated payments began in the first quarter of 2024.

 

A summary of the activity related to contract liabilities follows (in thousands):

 

Balance at December 31, 2023

 $- 

Payments received

  9,881 

Payments recouped

  (2,214)

Balance at March 31, 2024

 $7,667 

 

 

Third Party Payors

 

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs. We believe that we are following all applicable laws and regulations.

 

Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews, and investigations. We believe that any differences between the net revenues recorded, and final determination will not materially affect the consolidated financial statements. We have made provisions of approximately $19,988,000 and $18,369,000 as of March 31, 2024 and December 31, 2023, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

  

 

Note 4 Other Revenues

 

Other revenues are outlined in the table below. Revenues from rental income include health care real estate properties owned by us and leased to third party operators. Revenues from management and accounting services include fees provided to manage and provide accounting services to other healthcare operators. Revenues from insurance services include premiums for workers’ compensation and professional liability insurance policies that our wholly owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services. "Other" revenues include miscellaneous health care related earnings (in thousands).

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Rental income

 $5,959  $6,043 

Management and accounting services fees

  4,438   4,097 

Insurance services

  872   1,048 

Other

  84   368 

Total other revenues

 $11,353  $11,556 

 

Rental Income

 

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities to third party operators. Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note 7 – Long Term Leases.

 

Management Fees from National Health Corporation

 

We manage five skilled nursing facilities owned by National Health Corporation (“National”). For the three months ended March 31, 2024 and 2023, we recognized management fees and interest on management fees of $1,320,000 and $1,190,000, respectively, for these centers.

 

15

 

Insurance Services

 

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 were $582,000 and $736,000, respectively. Associated losses and expenses including those for self-insurance are included in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

 

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 were $290,000 and $312,000, respectively. Associated losses and expenses including those for self–insurance are included in the interim condensed consolidated statements of operations as "Other operating costs and expenses".

  

 

Note 5 NonOperating Income

 

Non–operating income is comprised of the following (in thousands):

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Dividends and net realized gains and losses on sales of securities

 $2,056  $1,233 

Interest income

  2,538   1,555 

Equity in earnings of unconsolidated investments

  67   1,535 

Gain on sale of unconsolidated company

  1,024   - 

Total non-operating income

 $5,685  $4,323 

 

Gain on sale of unconsolidated company

 

In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency located in Nashville, Tennessee. The total consideration paid to the company was $2,100,000, which resulted in a gain of $1,024,000.

  

 

Note 6 Business Segments

 

The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals; and (2) homecare and hospice services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

 

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

 

16

 

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment (in thousands):

 

  

Three Months Ended March 31, 2024

 
  

Inpatient
Services

  

Homecare

and Hospice

  

All Other

  

Total

 

Revenues:

                

Net patient revenues

 $252,254  $33,569  $-  $285,823 

Other revenues

  15   -   11,338   11,353 

Net operating revenues

  252,269   33,569   11,338   297,176 
                 

Costs and expenses:

                

Salaries, wages, and benefits

  150,890   21,009   11,239   183,138 

Other operating

  68,683   5,972   2,774   77,429 

Rent

  8,112   566   1,670   10,348 

Depreciation and amortization

  9,630   187   769   10,586 

Interest

  46   -   -   46 

Total costs and expenses

  237,361   27,734   16,452   281,547 
                 

Income/(loss) from operations

  14,908   5,835   (5,114)  15,629 

Non-operating income

  -   -   5,685   5,685 

Unrealized gains on marketable equity securities

  -   -   14,399   14,399 
                 

Income before income taxes

 $14,908  $5,835  $14,970  $35,713 

 

 

  

Three Months Ended March 31, 2023

 
  

Inpatient
Services

  

Homecare

and Hospice

  

All Other

  

Total

 

Revenues:

                

Net patient revenues

 $226,169  $31,838  $-  $258,007 

Other revenues

  271   -   11,285   11,556 

Net operating revenues

  226,440   31,838   11,285   269,563 
                 

Costs and expenses:

                

Salaries, wages, and benefits

  138,939   20,244   8,641   167,824 

Other operating

  62,264   5,499   3,726   71,489 

Rent

  8,168   558   1,366   10,092 

Depreciation and amortization

  9,117   185   746   10,048 

Interest

  98   -   -   98 

Total costs and expenses

  218,586   26,486   14,479   259,551 
                 

Income/(loss) from operations

  7,854   5,352   (3,194)  10,012 

Non-operating income

  -   -   4,323   4,323 

Unrealized gains on marketable equity securities

  -   -   1,386   1,386 
                 

Income before income taxes

 $7,854  $5,352  $2,515  $15,721 

 

17

  
 

Note 7 Long-Term Leases

 

Operating Leases

 

At March 31, 2024, we lease from NHI the real property of 28 skilled nursing facilities, five assisted living centers and three independent living centers under one lease agreement. As part of the lease agreement, we sublease four Florida skilled nursing facilities to a third-party operator. The lease includes base rent plus a percentage rent. The annual base rent is $32,625,000 in 2024, $32,225,000 in 2025, and $31,975,000 in 2026 with the lease term expiring in December 2026. The percentage rent is based on a quarterly calculation of revenue increases and is payable on a quarterly basis. Total facility rent expense to NHI was $9,472,000 and $9,295,000 for the three months ended March 31, 2024 and 2023, respectively.

 

Minimum Lease Payments

 

The following table summarizes the maturity of our operating lease liabilities as of March 31, 2024 (in thousands):

 

  

Operating

Leases

 

2025

 $34,351 

2026

  33,590 

2027

  24,933 

2028

  493 

2029

  207 

Thereafter

  21 

Total minimum lease payments

  93,595 

Less: amounts representing interest

  (7,858)

Present value of future minimum lease payments

  85,737 

Less: current portion

  (29,733)

Noncurrent lease liabilities

 $56,004 

 

18

  
 

Note 8 Earnings per Share

 

Basic net income per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net income per share reflects the potential dilution that would have occurred if securities to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our earnings.

 

The following table summarizes the earnings and the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands, except for share and per share amounts):

 

  

Three Months Ended
March 31

 
  

2024

  

2023

 

Basic:

        

Weighted average common shares outstanding

  15,350,240   15,337,423 

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 

Earnings per common share, basic

 $1.71  $0.76 
         

Diluted:

        

Weighted average common shares outstanding

  15,350,240   15,337,423 

Effects of dilutive instruments

  154,856   18,912 

Weighted average common shares outstanding

  15,505,096   15,356,335 
         

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 

Earnings per common share, diluted

 $1.69  $0.76 

 

For the three months ended March 31, 2024, 245,726 stock options have been excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect. For the three months ended March 31, 2023, 691,580 stock options have been excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect.

  

 

Note 9 Investments in Marketable Securities

 

Our investments in marketable equity securities are carried at fair value with the changes in unrealized gains and losses recognized in our results of operations at each measurement date. Our investments in marketable debt securities are classified as available for sale securities and carried at fair value with the unrealized gains and losses recognized through accumulated other comprehensive income at each measurement date. Any credit-related decline in fair market values below the amortized cost of our available for sale debt securities are recorded in our results of operations through an allowance for credit losses. Realized gains and losses from securities sales are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note 10 for a description of the Company's methodology for determining the fair value of marketable securities. 

 

Marketable securities consist of the following (in thousands):

 

  

March 31, 2024

  

December 31, 2023

 
  

Amortized

Cost

  

Fair

Value

  

Amortized

Cost

  

Fair

Value

 

Investments available for sale:

                

Marketable equity securities

 $30,176  $123,040  $30,176  $111,117 

Corporate debt securities

  494   484   2,497   2,441 

U.S. Treasury securities

  -   -   2,990   2,986 

Restricted investments available for sale:

                

Marketable equity securities

  24,495   29,616   24,134   26,779 

Corporate debt securities

  61,488   59,398   59,586   57,731 

Asset-based securities

  19,026   17,438   19,388   17,659 

U.S. Treasury securities

  47,323   43,004   46,771   42,863 

State and municipal securities

  4,079   3,992   4,106   4,047 
  $187,081  $276,972  $189,648   265,623 

 

19

 

Included in the marketable equity securities are the following (in thousands, except share amounts):

 

  

March 31, 2024

  

December 31, 2023

 
  

Shares

  

Cost

  

Fair

Value

  

Shares

  

Cost

  

Fair

Value

 

NHI Common Stock

  1,630,642  $24,734  $102,453   1,630,642  $24,734  $91,071 

 

The amortized cost and estimated fair value of debt securities classified as available for sale, by contractual maturity, are as follows (in thousands):

 

  

March 31, 2024

  

December 31, 2023

 
  

Cost

  

Fair

Value

  

Cost

  

Fair

Value

 

Maturities:

                

Within 1 year

 $21,299  $20,785  $19,664  $19,328 

1 to 5 years

  77,738   73,370   81,517   77,118 

6 to 10 years

  32,012   28,925   33,515   30,802 

Over 10 years

  1,361   1,236   642   479 
  $132,410  $124,316  $135,338  $127,727 

 

Gross unrealized gains related to marketable equity securities are $98,459,000 and $84,514,000 as of March 31, 2024 and December 31, 2023, respectively. Gross unrealized losses related to marketable equity securities are $474,000 and $928,000 as of March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, the Company recognized net unrealized gains of $14,399,000 and $1,386,000, respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

 

Gross unrealized gains related to available for sale marketable debt securities are $179,000 and $326,000 as of March 31, 2024 and December 31, 2023, respectively. Gross unrealized losses related to available for sale marketable debt securities are $8,273,000 and $7,937,000 as of March 31, 2024 and December 31, 2023, respectively.

 

The Company’s unrealized losses in our available for sale marketable debt securities were determined to be non-credit related. The Company has not recognized any credit related impairments for the three months ended  March 31, 2024 and 2023.

 

For the marketable securities in gross unrealized loss positions, (a) it is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and (b) the Company expects that the contractual principal and interest will be received on the investment securities.

 

Proceeds from the sale of available for sale marketable securities during the three months ended March 31, 2024 and 2023 were $11,615,000 and $15,492,000, respectively. Investment gains of $344,000 and investment losses of $492,000 were realized on these sales during the three months ended March 31, 2024 and 2023, respectively.

  

 

Note 10 Fair Value Measurements

 

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs that may be used to measure fair value:

 

 

Level 1  – The valuation is based on quoted prices in active markets for identical instruments.

 

Level 2 – The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model–based valuation techniques for which all significant assumptions are observable in the market.

 

Level 3 – The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

 

20

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

The following table summarizes fair value measurements by level at March 31, 2024 and December 31, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands):

 

  

Fair Value Measurements Using

 

March 31, 2024

 

Fair

Value

  

Quoted

Prices in

Active
Markets

For Identical

Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 $93,982  $93,982  $  $ 

Restricted cash and cash equivalents

  27,150   27,150       

Marketable equity securities

  152,656   152,656       

Corporate debt securities

  59,882   42,611   17,271    

Asset–backed securities

  17,438      16,961   477 

U.S. Treasury securities

  43,004   43,004       

State and municipal securities

  3,992      3,992    

Total financial assets

 $398,104  $359,403  $38,224  $477 

 

 

  

Fair Value Measurements Using

 

December 31, 2023

 

Fair

Value

  

Quoted

Prices in

Active

Markets

For Identical

Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 $107,076  $107,076  $  $ 

Restricted cash and cash equivalents

  18,892   18,892       

Marketable equity securities

  137,896   137,896       

Corporate debt securities

  60,171   42,860   17,311    

Asset–backed securities

  17,659      17,210   449 

U.S. Treasury securities

  45,850   45,850       

State and municipal securities

  4,047      4,047    

Total financial assets

 $391,591  $352,574  $38,568  $449 

  

 

Note 11 Goodwill and Other Intangible Assets

 

At March 31, 2024, the Company reviewed the carrying value of goodwill for impairment indicators. As a result of the review, there were no impairment indicators regarding the Company’s goodwill that required a quantitative test to be performed. However, our accounting estimates could materially change from period to period due to changing market factors. We will continue to monitor future events, changes in circumstances, and the potential impact thereof. If actual results are not consistent with our assumptions and estimates, we may be exposed to future goodwill impairment losses.

 

At March 31, 2024, the following table represents the activity related to our goodwill by segment (in thousands):

 

  

Inpatient

Services

  

Homecare

and Hospice

  

All Other

  

Total

 

January 1, 2024

 $3,741  $164,554  $  $168,295 

Additions

            

March 31, 2024

 $3,741  $164,554  $  $168,295 

 

We also have recorded indefinite-lived intangible assets that consist of trade names ($4,340,000) and certificates of need and licenses ($2,698,000).

 

21

  
 

Note 12 - Stock Repurchase Program

 

During the three months ended March 31, 2024, the Company repurchased 101,131 shares of its common stock for a total cost of $9,900,000. During the three months ended March 31, 2023, the Company repurchased 44,349 shares of its common stock for a total cost of $2,482,000. The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued. 

  

 

Note 13 StockBased Compensation

 

NHC recognizes stock–based compensation expense for all stock options granted over the requisite service period using the fair value at the date of grant using the Black–Scholes pricing model. Stock–based compensation totaled $793,000 and $639,000 for the three months ended March 31, 2024 and 2023, respectively. Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of operations.

 

At March 31, 2024, the Company had $7,652,000 of unrecognized compensation cost related to unvested stock–based compensation awards. This unrecognized compensation cost will be amortized over an approximate three-year period.

 

Stock Options

 

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2024 and for the year ended December 31, 2023.

 

  

March 31,

2024

  

December 31,
2023

 

Risk–free interest rate

  4.33%   4.52% 

Expected volatility

  24.1%   29.3% 

Expected life, in years

  2.9   2.9 

Expected dividend yield

  2.64%   4.41% 

 

The following table summarizes our outstanding stock options for the three months ended March 31, 2024 and for the year ended December 31, 2023.

 

  

Number of

Shares

  

Weighted

Average

Exercise Price

  

Aggregate

Intrinsic

Value

 

Options outstanding at January 1, 2023

  445,144  $66.62  $ 

Options granted

  299,278   54.44    

Options exercised

  (103,481)  64.72    

Options cancelled

  (52,407)  60.58    

Options outstanding at December 31, 2023

  588,534   61.30    

Options granted

  245,726   94.07    

Options exercised

  (137,874)  60.95    

Options outstanding at March 31, 2024

  696,386  $72.93  $15,025,015 
             

Options exercisable at March 31, 2024

  174,105  $68.48  $4,531,876 

 

 

Options

Outstanding

March 31, 2024

  

Exercise Prices

 

Weighted Average

Exercise Price

  

Weighted Average

Remaining

Contractual

Life in Years

 

377,405

  

53.94

-

69.19

  

58.92

   

3.5

 

318,981

  

71.64

-

94.10

  

89.51

   

4.0

 

696,386

       

72.93

   

3.7

 

 

22

  
 

Note 14 Income Taxes

 

The Company's income tax provision as a percentage of our income before income taxes was 26.5% and 28.2% for the three months ended March 31, 2024 and 2023, respectively.

 

Typically, these percentages vary from the U.S. federal statutory income tax rate of 21% primarily due to state income taxes, excess tax benefits from stock-based compensation, benefits resulting from the lapsing of statute of limitations of items in our tax contingency reserve, and non-deductible expenses. For the three months ended March 31, 2024 and 2023, the accrual of state income tax was the most significant reconciling item.

 

Our quarterly income tax provision, and our estimate of our annual effective income tax rate, is subject to variation due to several factors, including volatility based on the amount of pre-tax income or loss.  

 

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2020 (with certain state exceptions).

  

 

Note 15 Credit Facility

 

In May 2023, we entered into an unsecured $50,000,000 credit facility that has a 364-day maturity date. Loans bear interest at the one-month secured overnight financing rate (“SOFR”) plus 1.25%. If we maintain certain aggregate deposit levels within the financial institution, the credit facility shall bear interest at one-month SOFR plus 1.10%. The credit facility is available for general corporate purposes, including working capital and acquisitions. The credit facility agreement contains customary representations and financial covenants, including covenants that restrict, among other things, asset dispositions, additional indebtedness, investments, sale-leasebacks, and certain contingent liabilities. The credit facility contains customary events of default and remedies.

 

As of March 31, 2024, the Company had no outstanding balance on the credit facility.  We do not expect to renew this credit facility upon its maturity date.

  

 

Note 16 Contingencies and Commitments

 

Accrued Risk Reserves

 

We have wholly-owned limited purpose insurance companies that insure risks related to workers’ compensation and professional liability insurance claims both for our owned and leased entities and certain of the entities to which we provide management or accounting services. The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $108,237,000 and $103,259,000 at March 31, 2024 and December 31, 2023, respectively. The liability is included in accrued risk reserves in the interim condensed consolidated balance sheets and is subject to adjustment for actual claims incurred. It is possible that these claims plus unasserted claims could exceed our insurance coverages and our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

 

As a result of the terms of our insurance policies and our use of wholly owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’ compensation and general and professional liability. We consider the professional services of independent actuaries to assist us in estimating our exposures for claims obligations (for both asserted and unasserted claims) related to deductibles and exposures in excess of coverage limits, and we maintain reserves for these obligations. Such estimates are based on many variables including historical and statistical information and other factors.

 

Workers Compensation

 

For workers’ compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers. Policies are written for a duration of twelve months and cover only risks related to workers’ compensation losses. All customers are companies which operate in the senior care industry. Business is written on a direct basis. 

 

General and Professional Liability Insurance and Lawsuits

 

The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. Additional insurance is purchased through third party providers that serve to supplement the coverage provided through our wholly owned captive insurance company.

 

There is certain additional litigation incidental to our business, none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows. In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.

 

23

 

Qui Tam Litigation

 

United States of America, ex rel. Jennifer Cook and Sally Gaither v. Integrated Behavioral Health, Inc., NHC HealthCare/Moulton, LLC, et al., Case No. 2:20-CV-00877-AMM (N.D. Ala.)  This is a qui tam case originally filed under seal on June 22, 2020. The United States declined intervention on March 1, 2021. Thereafter, the Plaintiffs filed an amended Complaint against Dr. Sanja Malhotra, Integrated Behavioral Health, Inc. and other entities that Dr. Malhotra was alleged to own or in which he allegedly had a financial interest. The Complaint also named multiple skilled nursing facilities as Defendants, including NHC Healthcare/Moulton, LLC, an affiliate of National HealthCare Corporation. The Complaint alleged that nurse practitioners affiliated with Dr. Malhotra provided free services to the facilities in exchange for referrals to entities owned by or in which Dr. Malhotra had a financial interest in violation of the False Claims Act and Anti-Kickback Statute. NHC Healthcare/Moulton, LLC denied the allegations and filed a motion to dismiss on November 4, 2021. On January 28, 2022, the district court stayed this matter and administratively terminated the motion to dismiss pending the U.S. Supreme Court's review of a petition for certiorari filed in an unrelated matter but involving one of the legal arguments raised in the motion to dismiss. Thereafter, the U.S. Supreme Court denied the petition for certiorari in the unrelated matter. As a result, NHC Healthcare/Moulton, LLC renewed its motion to dismiss. The District Court granted NHC Healthcare/Moulton’s Motion to Dismiss, along with other pending Motions to Dismiss, and entered an Order of Dismissal on March 23, 2023 and an Amended Order of Dismissal on April 4, 2023, which dismissed the case in its entirety with prejudice with respect to the claims asserted by the Plaintiffs. The Plaintiffs filed a Notice of Appeal on April 20, 2023 to appeal the dismissal to the United States Court of Appeals for the Eleventh Circuit. On December 21, 2023, the Eleventh Circuit entered an Order affirming the District Court’s dismissal of the claims.  The time period for the Plaintiffs to file a Petition for a Writ of Certiorari with the United States Supreme Court has expired making the Order affirming dismissal issued by the Eleventh Circuit final. 

 

Governmental Regulations

 

Laws and regulations governing Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid and other federal healthcare programs.

  

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

ForwardLooking Statements

 

References throughout this document to the Company include National HealthCare Corporation and its wholly owned subsidiaries. In accordance with the Securities and Exchange Commissions “Plain English” guidelines, this Quarterly Report on Form 10–Q has been written in the first person. In this document, the words “we”, “our”, “ours” and “us” refer only to National HealthCare Corporation and its wholly–owned subsidiaries and not any other person.

 

This Quarterly Report on Form 10–Q and other information we provide from time to time, contains certain “forward–looking” statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations or cash flows, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, ability to control our patient care liability costs, ability to respond to changes in government regulations, ability to execute our three–year strategic plan, and similar statements including, without limitations, those containing words such as “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans”, and other similar expressions are forward–looking statements.

 

 

Forward–looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward–looking statements as a result of, but not limited to, the following factors:

 

national and local economic conditions, including their effect on the availability and cost of labor, utilities and materials;

 

 

the effect of government regulations and changes in regulations governing the healthcare industry, including our compliance with such regulations;

 

 

changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries;

 

 

liabilities and other claims asserted against us, including patient care liabilities, as well as the resolution of current litigation (see Note 16: Contingencies and Commitments);

 

 

the ability to attract and retain qualified personnel;

 

 

the availability and terms of capital to fund acquisitions and capital improvements;

 

 

the competitive environment in which we operate;

 

our need to make investments continually in our processes and information systems to protect the privacy of patients, partners and other persons and reduce the risk of successful cybersecurity attacks;

   

damage to our reputation, regulatory penalties, legal claims and liability under state and federal laws that we could suffer upon any cybersecurity or privacy breaches;

   

the ability to maintain and increase census levels; and

   

demographic changes.

 

See the notes to the quarterly financial statements, and “Item 1. Business” in our 2023 Annual Report on Form 10–K for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them. This may be found on our web site at www.nhccare.com. You should carefully consider these risks before making any investment in the Company. These risks and uncertainties are not the only ones facing us. There may be additional risks that we do not presently know of or that we currently deem immaterial. If any of the risks occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our shares of stock could decline, and you may lose all or part of your investment. Given these risks and uncertainties, we can give no assurances that these forward–looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them.

 

Overview

 

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. As of March 31, 2024, we operate or manage, through certain affiliates, 65 skilled nursing facilities with a total of 8,421 licensed beds, 24 assisted living facilities with 1,365 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 8 states and are located primarily in the southeastern United States.

 

Centers for Medicare and Medicaid Services Minimum Staffing Standards

 

On April 22, 2024, the Centers for Medicare and Medicaid Services (“CMS”) issued the Minimum Staffing Standards for Long-Term Care (“LTC”) Facilities and Medicaid Institutional Payment Transparency Reporting final rule. Included in this final rule are new comprehensive minimum nurse staffing requirements, which aim to significantly reduce the risk of residents receiving unsafe and low-quality care within LTC facilities. CMS is finalizing a total nurse staffing standard of 3.48 hours per resident day (“HPRD”), which must include at least 0.55 HPRD of direct registered nurse (“RN”) care and 2.45 HPRD of direct nurse aide care. Facilities may use any combination of nurse staff (RN, licensed practical nurse and licensed vocational nurse, or nurse aide) to account for the additional 0.48 HPRD needed to comply with the total nurse staffing standard.

 

 

CMS is also finalizing enhanced facility assessment requirements and a requirement to have an RN onsite 24 hours a day, seven days a week (“24/7”), to provide skilled nursing care. The 24/7 RN onsite can be the Director of Nursing; however, they must be available to provide direct resident care.

 

This final rule provides a staggered implementation timeframe of the minimum nurse staffing standards and a 24/7 RN requirement based on geographic location, as well as possible exemptions for qualifying facilities for some parts of these requirements based on workforce unavailability and other factors.

 

Summary of Goals and Areas of Focus

 

Occupancy

 

A primary area of management focus continues to be the rates of occupancy within our skilled nursing facilities. The overall census in owned and leased skilled nursing facilities for the three months ending March 31, 2024 was 88.5% compared to 87.4% for the same period a year ago.  

 

Due to America’s healthcare labor shortage, the challenge of maintaining desirable patient census levels has been amplified. Management has undertaken a number of steps in order to best position our current and future health care facilities. This includes working internally to examine and improve systems to be most responsive to referral sources and payors, as well as find creative initiatives to retain and attract qualified healthcare professionals. Additionally, NHC is in various stages of partnerships with hospital systems, payors, and other post–acute alliances to better position ourselves so we are an active participant in the delivery of post-acute healthcare services.

 

 

Quality of Patient Care

 

CMS introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily. The Five-Star Quality Rating System gives each skilled nursing operation a rating ranging between one and five stars in various categories (five stars being the best). The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance.

 

The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of March 31, 2024:

 

   

NHC Ratings

   

Industry Ratings

 

Total number of skilled nursing facilities, end of period

    65          

Number of 4 and 5-star rated skilled nursing facilities

    40          

Percentage of 4 and 5-star rated skilled nursing facilities

    62%       36%  

Average rating for all skilled nursing facilities, end of period

    3.6       2.9  

 

Development and Growth

 

We are undertaking to expand our senior care operations while protecting our existing operations and markets. The following table lists our recent development activities.

 

Type of

Operation

   

Description

   

Size

   

Location

   

Placed in Service

Hospice

   

New Agency

   

1 agency

   

Cedar Bluff, VA

   

March 2023

Skilled Nursing

   

Acquisition

   

66 beds

   

Nashville, TN

   

May 2023

Homecare

   

New Agency

   

1 agency

   

Tallahassee, FL

   

May 2023

Assisted Living Facility

   

New Operations

   

135 units

   

Vero Beach, FL

   

July 2023

Assisted Living Facility

   

New Operations

   

95 units

   

Merritt Island, FL

   

July 2023

Assisted Living Facility

   

New Operations

   

100 units

   

Stuart, FL

   

July 2023

Hospice

   

New Agency

   

1 agency

   

Morristown, TN

   

April 2024

 

Accrued Risk Reserves

 

Our accrued professional liability and workers’ compensation reserves totaled $108,237,000 at March 31, 2024 and are a primary area of management focus. We have set aside restricted cash and cash equivalents and marketable securities to fund our estimated professional liability and workers’ compensation liabilities.

 

As to exposure for professional liability claims, we have developed performance certification criteria to measure and bring focus to the patient care issues most likely to produce professional liability exposure, including in–house acquired pressure ulcers, significant weight loss and numbers of falls. These programs for certification, which we regularly modify and improve, have produced measurable improvements in reducing these incidents. Our experience is that achieving goals in these patient care areas improves both patient and employee satisfaction.

 

 

Government Reimbursement Programs

 

Medicare Skilled Nursing Facilities

 

In July 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates and policy changes for skilled nursing facilities, which began on October 1, 2023. The fiscal year 2024 rule equates to a net increase of 4.0%, or approximately $1.4 billion, in Medicare Part A payments to SNFs in fiscal year 2024 compared to 2023 levels. The rule includes a 3.0% market basket rate increase, a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3%, or approximately $789 million, decrease in 2024 SNF Payment Prospective Systems rates as a result of the second phase of the Patient Driven Payment Model parity adjustment recalibration.

 

In March 2024, CMS released its proposed rule outlining fiscal year 2025 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2024. The fiscal year 2025 proposal equates to a net 4.1% increase in Medicare Part A payments to SNFs in fiscal year 2025 compared to 2024 levels. The rule includes a market basket increase of 2.8%, an increase of 1.7% to the market basket forecast error adjustment, and a negative 0.4% productivity adjustment. These figures do not incorporate the SNF Value Based Purchasing (“VBP”) reduction for certain SNFs subject to the net reduction in payments under the SNF VBP; those adjustments are estimated to total $196.5 million in fiscal year 2025.

 

For the first three months of 2024, our average Medicare per diem rate for skilled nursing facilities increased 4.7% as compared to the same period in 2023. 

 

 

Medicaid Skilled Nursing Facilities

 

Effective July 1, 2023 and for the fiscal year 2024, the state of Tennessee implemented specific individual nursing facility increases. We estimate the resulting increase in revenue for the 2024 fiscal year will be approximately $15,000,000 annually, or $3,750,000 per quarter.

 

Effective October 1, 2023 and for the fiscal year 2024, the state of South Carolina implemented specific individual nursing facility increases. We estimate the resulting increase in revenue for the 2024 fiscal year will be approximately $9,000,000 annually, or $2,250,000 per quarter.

 

Effective July 1, 2023 and for the fiscal year 2024, the state of Missouri implemented specific individual nursing facility increases. We estimate the resulting increase in revenue for the 2024 fiscal year will be approximately $5,000,000 annually, or $1,250,000 per quarter.

 

We have also received from many of the states in which we operate a supplemental Medicaid payment to help mitigate the inflationary labor and medical supplies costs resulting from the pandemic. We have recorded $3,462,000 and $4,883,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2024 and 2023, respectively.

 

For the first three months of 2024, our average Medicaid per diem increased 12.0% compared to the same period in 2023.

 

State Medicaid plans subject to budget constraints are of particular concern to us. Changes in federal funding coupled with state budget problems and Medicaid expansion under the Affordable Care Act have produced an uncertain environment. Some states will not keep pace with post-acute healthcare inflation. States are currently under pressure to pursue other alternatives to skilled nursing care such as community and home–based services. Medicaid programs are funded jointly by the federal government and the states and are administered by states under approved plans.  Most state Medicaid payments are made under a prospective payment system or under programs which negotiate payment levels with individual providers.  Some states use, or have applied to use, waivers granted by CMS to implement expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards.

 

Medicare Homecare Programs

 

In November 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates. CMS projects payments to home health agencies in fiscal year 2024 will increase in aggregate by 0.8%, or $140 million. The increase is the result of a 3.3% market basket update, reduced by a 0.3% productivity adjustment. The increase is offset by a behavioral adjustment that will cut payments by a net 2.6%. The behavioral adjustment was designed to achieve budget-neutral implementation of the PDPM. Finally, CMS also adjusted the fixed-dollar loss ratio for outlier payments, which will increase payments by 0.4%.

 

Medicare Hospice

 

In July 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates. CMS issued a rate increase of 3.1%, or $780 million, effective October 1, 2023. This increase is the result of a 3.3% market basket increase reduced by a 0.2% productivity adjustment. The FY2024 hospice payment update also includes an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually. The cap amount for FY2024 is $33,494. 

 

In March 2024, CMS released its proposed rule outlining fiscal year 2025 Medicare payment rates. CMS issued a rate increase of 2.6%, or $705 million, effective October 1, 2024. This increase is the result of a 3.0% market basket increase reduced by a 0.4% productivity adjustment. The FY2025 hospice payment update also includes an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually. The proposed cap amount for FY2025 is $34,365. 

 

 

Segment Reporting

 

The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals; and (2) homecare and hospice services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

 

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

 

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment (in thousands):

 

   

Three Months Ended March 31, 2024

 
   

Inpatient
Services

   

Homecare

and Hospice

   

All Other

   

Total

 

Revenues:

                               

Net patient revenues

  $ 252,254     $ 33,569     $ -     $ 285,823  

Other revenues

    15       -       11,338       11,353  

Net operating revenues

    252,269       33,569       11,338       297,176  
                                 

Costs and expenses:

                               

Salaries, wages, and benefits

    150,890       21,009       11,239       183,138  

Other operating

    68,683       5,972       2,774       77,429  

Rent

    8,112       566       1,670       10,348  

Depreciation and amortization

    9,630       187       769       10,586  

Interest

    46       -       -       46  

Total costs and expenses

    237,361       27,734       16,452       281,547  
                                 

Income/(loss) from operations

    14,908       5,835       (5,114 )     15,629  

Non-operating income

    -       -       5,685       5,685  

Unrealized gains on marketable equity securities

    -       -       14,399       14,399  
                                 

Income before income taxes

  $ 14,908     $ 5,835     $ 14,970     $ 35,713  

 

 

   

Three Months Ended March 31, 2023

 
   

Inpatient
Services

   

Homecare

and Hospice

   

All Other

   

Total

 

Revenues:

                               

Net patient revenues

  $ 226,169     $ 31,838     $ -     $ 258,007  

Other revenues

    271       -       11,285       11,556  

Net operating revenues

    226,440       31,838       11,285       269,563  
                                 

Costs and expenses:

                               

Salaries, wages, and benefits

    138,939       20,244       8,641       167,824  

Other operating

    62,264       5,499       3,726       71,489  

Rent

    8,168       558       1,366       10,092  

Depreciation and amortization

    9,117       185       746       10,048  

Interest

    98       -       -       98  

Total costs and expenses

    218,586       26,486       14,479       259,551  
                                 

Income/(loss) from operations

    7,854       5,352       (3,194 )     10,012  

Non-operating income

    -       -       4,323       4,323  

Unrealized gains on marketable equity securities

    -       -       1,386       1,386  
                                 

Income before income taxes

  $ 7,854     $ 5,352     $ 2,515     $ 15,721  

 

 

Non-GAAP Financial Presentation

 

The Company is providing certain non-GAAP financial measures as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company’s operations and measure the Company’s performance more consistently across periods. Therefore, the Company believes this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

 

Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities, operating results for start-up healthcare operations not at full capacity, gains on sale of unconsolidated companies, and share-based compensation expense is helpful in allowing investors to assess the Company’s operations more accurately.

 

The operating results for the newly constructed healthcare facilities not at full capacity for the three months ended March 31, 2024 include facilities that began operations from 2022 to 2024, which is two behavioral health hospitals, two homecare agencies, and two hospice agencies. For the three months ended March 31, 2023, included are facilities that began operations from 2021 to 2023, which is two behavioral health hospitals, one homecare agency, and two hospice agencies.

 

The tables below provide reconciliations of GAAP to non-GAAP items (dollars in thousands, except per share data):

 

   

Three Months Ended

March 31

 
   

2024

   

2023

 
                 

Net income attributable to National Healthcare Corporation

  $ 26,213     $ 11,723  

Non-GAAP adjustments

               

Unrealized gains on marketable equity securities

    (14,399 )     (1,386 )

Operating results for newly opened facilities or agencies not at full capacity

    (457 )     1,217  

Gain on sale of unconsolidated company

    (1,025 )     -  

Share-based compensation expense

    793       639  

Income tax provision/(benefit) on non-GAAP adjustments

    3,923       (122 )

Non-GAAP Net income

  $ 15,048     $ 12,071  
                 
                 

GAAP diluted earnings per share

  $ 1.69     $ 0.76  

Non-GAAP adjustments

               

Unrealized gains on marketable equity securities

    (0.69 )     (0.06 )

Operating results for newly opened facilities or agencies not at full capacity

    (0.02 )     0.06  

Gain on sale of unconsolidated company

    (0.05 )     -  

Share-based compensation expense

    0.04       0.03  

Non-GAAP diluted earnings per share

  $ 0.97     $ 0.79  

 

 

Results of Operations

 

The following table and discussion set forth items from the interim condensed consolidated statements of operations as a percentage of net operating revenues for the three months ended March 31, 2024 and 2023.

 

Percentage of Net Operating Revenues

 

   

Three Months Ended
March 31

 
   

2024

   

2023

 

Net operating revenues

    100.0 %     100.0 %

Costs and expenses:

               

Salaries, wages, and benefits

    61.6       62.3  

Other operating

    26.0       26.5  

Facility rent

    3.5       3.7  

Depreciation and amortization

    3.5       3.7  

Interest

    0.1       0.1  

Total costs and expenses

    94.7       96.3  

Income from operations

    5.3       3.7  

Non–operating income

    1.9       1.6  

Unrealized gains on marketable equity securities

    4.8       0.5  

Income before income taxes

    12.0       5.8  

Income tax provision

    (3.2 )     (1.6 )

Net income

    8.8       4.2  

Net (income)/loss attributable to noncontrolling interest

    (0.0 )     0.1  

Net income attributable to stockholders of NHC

    8.8 %     4.3 %

 

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

 

Results for the quarter ended March 31, 2024 compared to the first quarter of 2023 include a 10.2% increase in net operating revenues. For the quarter ended March 31, 2024, GAAP net income attributable to NHC was $26,213,000 compared to $11,723,000 for the same period in 2023. Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended March 31, 2024 was $15,048,000 compared to $12,071,000 for the same period in 2023.  The increase in adjusted net income for the first quarter of 2024 compared to the first quarter of 2023 was primarily due the continued occupancy increase in our skilled nursing and assisted living facilities, skilled nursing per diem increases from some of our governmental payors, and the continued reduction of nurse agency staffing expense within our operations.

 

Net operating revenues

 

Net patient revenues increased $27,816,000, or 10.8%, compared to the same period last year.

 

The total census at owned and leased skilled nursing facilities for the quarter averaged 88.5%, compared to an average of 87.4% for the same quarter a year ago. Overall, the composite skilled nursing facility per diem increased 8.8% compared to the same quarter a year ago. Our Medicare per diem rates increased 4.7% and managed care per diem rates increased 5.8% compared to the same quarter a year ago. Medicaid and private pay per diem rates increased 12.0% and 10.5%, respectively, compared to the same quarter a year ago. For the three months ended March 31, 2024 and 2023, respectively, $3,462,000 and $4,883,000 have been included in our net patient revenues for supplemental Medicaid payments that are in addition to our Medicaid skilled nursing per diems.

 

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $7,727,000 in net patient revenues for the quarter ended March 31, 2024 compared to the same quarter in the prior year.

 

On March 1, 2024, the Company exited a lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri. The exiting of these operations resulted in net patient revenues decreasing $1,972,000 for the quarter ended March 31, 2024 compared to the same quarter in the prior year. 

 

Other revenues decreased $203,000, or 1.8%, compared to the same quarter last year, as further detailed in Note 4 to our interim condensed consolidated financial statements.

 

 

Total costs and expenses

 

Total costs and expenses for the three months ended March 31, 2024 compared to the same period of 2023 increased $21,996,000, or 8.5% to $281,547,000 from $259,551,000.

 

Salaries, wages, and benefits as a percentage of net operating revenues was 61.6% compared to 62.3% for the three months ended March 31, 2024 and 2023, respectively. We continue to face workforce and labor shortages within all of our operations, which increases wage pressure in regards to retaining and attracting qualified healthcare partners (employees). We continue to work diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations. Our agency staffing expense decreased approximately 51% for the three months ended March 31, 2024 compared to the same period of 2023.

 

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $3,591,000 in salaries, wages, and benefits for the quarter ended March 31, 2024 compared to the same quarter in the prior year.

 

On March 1, 2024, the Company exited the lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri. The exiting of these operations resulted in salaries, wages, and benefits decreasing $1,799,000 for the quarter ended March 31, 2024 compared to the same quarter in the prior year. 

 

Other operating expenses as a percentage of net operating revenues was 26.1% and 26.5% for the three months ended March 31, 2024 and 2023, respectively. New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $2,176,000 in other operating expenses for the quarter ended March 31, 2024 compared to the same quarter in the prior year. We continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies.  

 

Other income

 

Non–operating income increased by $1,362,000 compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements. In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency located in Nashville, Tennessee. The total consideration paid to the company was $2,100,000, which resulted in a gain of $1,025,000.

 

Income taxes

 

The income tax provision for the three months ended March 31, 2024 is $9,462,000 (an effective income tax rate of 26.5%). 

 

Noncontrolling interest

 

The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of subsidiary earnings based on ownership interest.

 

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

 

Results for the quarter ended March 31, 2023 compared to the first quarter of 2022 include a 3.4% decrease in net operating revenues and grant income. The net operating revenues and grant income decrease was primarily driven by the reduction in government stimulus income of $10,620,000 during the first quarter of 2023 compared to the same period a year ago, as well as us exiting seven skilled nursing facilities in Massachusetts and New Hampshire during the third quarter of 2022. Excluding the government stimulus income and the seven skilled nursing facilities in Massachusetts and New Hampshire, same-facility net operating revenues increased 7.1% during the first quarter of 2023 compared to the same period a year ago. 

 

For the quarter ended March 31, 2023, GAAP net income attributable to NHC was $11,723,000 compared to net income of $15,318,000 for the same period in 2022. Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended March 31, 2023 was $12,071,000 compared to $14,081,000 for the same period in 2022.  The decrease in adjusted net income for the first quarter of 2023 compared to the first quarter of 2022 was primarily due to the $10,620,000 less in government stimulus income recorded during the current quarter.  

 

 

Net operating revenues and grant income

 

Net patient revenues increased $1,670,000, or 0.7%, compared to the same period last year.

 

The total census at owned and leased skilled nursing facilities for the quarter averaged 87.4%, compared to an average of 82.7% for the same quarter a year ago. Overall, the composite skilled nursing facility per diem increased 3.3% compared to the same quarter a year ago. Our Medicare per diem rates increased 2.1% and managed care per diem rates increased 2.7% compared to the same quarter a year ago. Medicaid and private pay per diem rates increased 3.6% and 3.1%, respectively, compared to the same quarter a year ago. For the three months ended March 31, 2023 and 2022, respectively, $4,883,000 and $5,538,000 have been included in our net patient revenues for supplemental COVID-19 Medicaid payments.

 

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire resulting in net patient revenues decreasing $16,603,000 for the three months ended March 31, 2023 compared to the same quarter last year. 

 

Other revenues decreased $470,000, or 3.9%, compared to the same quarter last year, as further detailed in Note 4 to our interim condensed consolidated financial statements.

 

During the three months ended March 31, 2023 and 2022, respectively, we recorded $0 and $10,620,000 in government stimulus income related to funds received from the CARES Act Provider Relief Fund.

 

 

Total costs and expenses

 

Total costs and expenses for the three months ended March 31, 2023 compared to the same period of 2022 decreased $5,215,000, or 2.0% to $259,551,000 from $264,766,000.

 

Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.3% compared to 61.2% for the three months ended March 31, 2023 and 2022, respectively. We continue to face workforce and labor shortages within all of our operations, which increases wage pressure in regards to retaining and attracting qualified healthcare partners (employees). The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies.  The agency nurse staffing companies charge inflated hourly rates; therefore, we are working diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations. For the quarter ended March 31, 2023, our agency nurse staffing expense decreased $4,941,000, or approximately 34%, compared to the same period a year ago.  

 

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire resulting in salaries, wages, and benefits decreasing $11,884,000 for the three months ended March 31, 2023 compared to the same quarter last year.

 

Other operating expenses as a percentage of net operating revenues and grant income was 26.5% and 26.6% for the three months ended March 31, 2023 and 2022, respectively. The transfer of the operations of the seven skilled nursing facilities located in Massachusetts and New Hampshire, as noted above, resulted in other operating expenses decreasing $5,206,000 for the three months ended March 31, 2023 compared to the same quarter last year. We continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies.  

 

Other income

 

Non–operating income increased by $1,124,000 compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

 

Income taxes

 

The income tax provision for the three months ended March 31, 2023 is $4,436,000 (an effective income tax rate of 28.2%). 

 

Noncontrolling interest

 

The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of subsidiary earnings based on ownership interest.

 

 

Liquidity, Capital Resources, and Financial Condition

 

Our primary sources of cash include revenues from the operations of our healthcare and senior living facilities, management and accounting services, rental income, and investment income. Our primary uses of cash include salaries, wages and other operating costs of our healthcare and senior living facilities, the cost of additions to and acquisitions of real property, facility rent expenses, and dividend distributions. These sources and uses of cash are reflected in our interim condensed consolidated statements of cash flows and are discussed in further detail below.

 

The following is a summary of our sources and uses of cash flows (dollars in thousands):

 

   

Three Months Ended

March 31

   

Three Month Change

 
   

2024

   

2023

   

$

   

%

 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, at beginning of period

  $ 125,968     $ 74,865     $ 51,103       68.3 %
                                 

Cash provided by operating activities

    9,646       13,857       (4,211 )     (30.4 )
                                 

Cash used in investing activities

    (2,415 )     (1,427 )     (988 )     (69.2 )
                                 

Cash used in financing activities

    (12,067 )     (12,619 )     552       4.4  
                                 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, at end of period

  $ 121,132     $ 74,676     $ 46,456       62.2 %

 

 

Operating Activities

 

Net cash provided by operating activities for the three months ended March 31, 2024 was $9,646,000 as compared to 13,857,000 in the same period last year. Cash provided by operating activities consisted of net income of $26,251,000 and decreases to operating cash flows related to adjustments for non–cash items of $1,627,000. There was cash used for working capital needs in the amount of $14,634,000 for the three months ended March 31, 2024 compared to $6,017,000 for the same period a year ago. 

 

On February 21, 2024, Change Healthcare was the target of a ransomware attack. The Company uses Change Healthcare as an intermediary to process and pay our governmental and insurance company healthcare claims. With Change Healthcare’s systems being down during the first quarter of 2024, we had to manually bill the majority of our skilled nursing claims for the months of February and March 2024. Although we manually billed our skilled nursing healthcare claims in February and March 2024, we were not paid as we typically would in the ordinary course of business. At March 31, 2024, our patient accounts receivable balances increased approximately $15 million from our December 31, 2023 accounts receivable balances. We believe this increase in accounts receivable is temporary and over the next several months we expect our accounts receivable balances and operating cash flow to be back to normal levels.

 

Included in the adjustments for non-cash items are depreciation expense, equity in earnings of unconsolidated investments, unrealized gains on our marketable equity securities, gain on sale of an unconsolidated company, deferred taxes, and stock compensation.

 

Investing Activities

 

Net cash used in investing activities totaled $2,415,000 for the three months ended March 31, 2024, compared to $1,427,000 for the three months ended March 31, 2023. Cash used for property and equipment additions was $5,955,000 and $6,640,000 for the three months ended March 31, 2024, and 2023, respectively. Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of $2,912,000 and $5,211,000 for the three months ended March 31, 2024 and 2023, respectively. In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency resulting in proceeds from the sale of $2,100,000.

 

Financing Activities 

 

Net cash used in financing activities totaled $12,067,000 for the three months ended March 31, 2024 compared to $12,619,000 for the three months ended March 31, 2023. We made principal payments under our finance lease obligations in the amount of $860,000 and $1,218,000 for the three months ended March 31, 2024 and 2023, respectively. Cash used for dividend payments to common stockholders totaled $9,051,000 in the current year period compared to $8,748,000 for the same period a year ago. Cash provided by the issuance of common stock totaled $8,412,000 for the quarter ended March 31, 2024. We repurchased common shares outstanding in the amount of $9,900,000 and $2,482,000 for the three months ended March 31, 2024 and 2023, respectively.

 

Shortterm liquidity

 

We expect to meet our short-term liquidity requirements primarily from our cash flows from operating activities. In addition to cash flows from operations, our current cash on hand of $93,982,000 and our marketable equity and debt securities of $123,524,000 are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months. We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.

 

Longterm liquidity

 

We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $93,982,000 and our marketable equity and debt securities of $123,524,000. We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.

 

Our ability to meet our long–term contractual obligations, and to finance our operating requirements and growth plans will depend upon our future performance. Our future performance will be affected by business, economic, financial and other factors, including potential changes in state and federal government payment rates for healthcare, customer demand, success of our marketing efforts, pressures from competitors, and the state of the economy, including the state of financial and credit markets, as well as many unforeseen factors.

 

 

Commitment and Contingencies

 

Governmental Regulations

 

Laws and regulations governing the Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid, and other federal healthcare programs.

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

Market risk represents the potential economic loss arising from adverse changes in the fair value of financial instruments. Currently, our exposure to market risk relates primarily to our fixed–income and equity portfolios. These investment portfolios are exposed primarily to, but not limited to, interest rate risk, credit risk, equity price risk, and concentration risk. We also have exposure to market risk that includes our cash and cash equivalents. The Company's senior management has established comprehensive risk management policies and procedures to manage these market risks.

 

Interest Rate Risk

 

The fair values of our fixed–income investments fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases, respectively, in the fair values of those instruments. Additionally, the fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, the liquidity of the instrument and other general market conditions. At March 31, 2024, we have available for sale marketable debt securities in the amount of $124,316,000. The fixed maturity portfolio is comprised of investments with primarily short–term and intermediate–term maturities. The fixed maturity portfolio allows our insurance company subsidiaries to achieve an adequate risk–adjusted return while maintaining sufficient liquidity to meet obligations.

 

Our cash and cash equivalents consist of highly liquid investments with a maturity of less than three months when purchased. As a result of the short–term nature of our cash instruments, a hypothetical 1% change in interest rates would have minimal impact on our future earnings and cash flows related to these instruments.

 

We do not currently use any derivative instruments to hedge our interest rate exposure. We have not used derivative instruments for trading purposes and the use of such instruments in the future would be subject to approvals by the Investment Committee of the Board of Directors.

 

Credit Risk

 

Credit risk is managed by diversifying the fixed maturity portfolio to avoid concentrations in any single industry group or issuer and by limiting investments in securities with lower credit ratings.

 

Equity Price and Concentration Risk

 

Our marketable equity securities are recorded at their fair market value based on quoted market prices. Thus, there is exposure to equity price risk, which is the potential change in fair value due to a change in quoted market prices. At March 31, 2024, the fair value of our marketable equity securities is approximately $152,656,000. Of the $152.7 million equity securities portfolio, our investment in NHI comprises approximately $102.5 million, or 67.1%, of the total fair value. We manage our exposure to NHI by closely monitoring the financial condition, performance, and outlook of the company. Hypothetically, a 10% change in quoted market prices would result in a related increase or decrease in the fair value of our equity investments of approximately $15.3 million. At March 31, 2024, our equity securities had net unrealized gains of $98.0 million. Of the $98.0 million of unrealized gains, $77.7 million is related to our investment in NHI.

 

Item 4.

Controls and Procedures.

 

As of March 31, 2024, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.

 

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

 

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings.

 

For a discussion of prior, current, and pending litigation of material significance to NHC, please see Note 16 of this Form 10–Q.

 

Item 1A.

Risk Factors.

 

During the three months ended March 31, 2024, there were no material changes to the risk factors that were disclosed in Item 1A of National HealthCare Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

Not applicable

 

Item 3.

Defaults Upon Senior Securities.

 

None

 

Item 4.

Mine Safety Disclosures.

 

Not applicable

 

 

Item 5.

Other Information.

 

None

 

37

  
 

Item 6.

Exhibits.

 

 

(a)        List of exhibits

 

EXHIBIT INDEX

 

Exhibit

No.

 

Description

     

3.1

 

Certificate of Incorporation of National HealthCare Corporation (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S-4 (File No. 333-37185) dated October 3, 1997.)

     

3.2

 

Certificate of Amendment to the Certificate of Incorporation of National HealthCare Corporation (Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10-Q filed on August 3, 2017.)

     

3.3

 

Certificate of Designation Series B Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form 8-A, dated August 3, 2007.)

     

3.4

 

Restated Bylaws as amended February 14, 2013 (Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10-Q filed on May 8, 2013.)

     

4.1

 

Form of Common Stock (Incorporated by reference to Exhibit 4.1 to the quarterly report on Form 10-Q filed on August 3, 2017.)

     

10.1

 

Amendment No. 9 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation (Incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q filed on November 3, 2022.)

     

10.2

 

Amendment No. 10 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation (Incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q filed on November 3, 2022.)

     

31.1

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

     

31.2

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

     

32

 

Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer and Chief Financial Officer

     

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

     

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

     

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

     

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

     

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

     

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

     

104

 

Cover Page Interactive File (embedded within the Inline XBRL document and include in Exhibit 101)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

NATIONAL HEALTHCARE CORPORATION

 

(Registrant)

     

Date: May 9, 2024

/s/ Stephen F. Flatt                   

 
 

Stephen F. Flatt

 
 

Chief Executive Officer

 
     
     

Date: May 9, 2024

/s/ Brian F. Kidd                     

 
 

Brian F. Kidd

 
 

Senior Vice President and Chief Financial

 
 

Officer

 

 

39

EXHIBIT 31.1

 

CERTIFICATION

 

I, Stephen F. Flatt, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of National HealthCare Corporation;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function);

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: May 9, 2024

 

 

 /s/ Stephen F. Flatt

 

Stephen F. Flatt

 

Chief Executive Officer

 

 

EXHIBIT 31.2

 

CERTIFICATION

 

I, Brian F. Kidd, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of National HealthCare Corporation;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: May 9, 2024

 

 /s/ Brian F. Kidd

 

Brian F. Kidd

 

Senior Vice President and Chief Financial Officer

 

 

Exhibit 32

 

Certification of Quarterly Report on Form 10-Q

of National HealthCare Corporation

For the Quarter Ended March 31, 2024

 

 

The undersigned hereby certify, pursuant to 18 U.S.C. Section 906 of the Sarbanes-Oxley Act of 2002, that, to the undersigned's best knowledge and belief, the Quarterly Report on Form 10-Q for National HealthCare Corporation ("Issuer") for the period ending March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"):

 

 

(a)

fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

(b)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

 

This Certification accompanies the Quarterly Report on Form 10-Q of the Issuer for the quarterly period ended March 31, 2024.

 

This Certification is executed as of May 9, 2024.

 

 

 

 

/s/Stephen F. Flatt

 

Stephen F. Flatt

 

Chief Executive Officer

 
 
 

 /s/ Brian F. Kidd

 

Brian F. Kidd

 

Senior Vice President and Chief Financial Officer

 

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 
v3.24.1.u1
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2024
May 01, 2024
Document Information [Line Items]    
Entity Central Index Key 0001047335  
Entity Registrant Name NATIONAL HEALTHCARE CORP  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2024  
Document Transition Report false  
Entity File Number 001-13489  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 52-2057472  
Entity Address, Address Line One 100 E. Vine Street  
Entity Address, City or Town Murfreesboro  
Entity Address, State or Province TN  
Entity Address, Postal Zip Code 37130  
City Area Code 615  
Local Phone Number 890–2020  
Title of 12(b) Security Common, $0.01 par value  
Trading Symbol NHC  
Security Exchange Name NYSEAMER  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   15,399,724
v3.24.1.u1
Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Revenues:    
Net patient revenues $ 285,823,000 $ 258,007,000
Other revenues 11,353,000 11,556,000
Net operating revenues 297,176,000 269,563,000
Costs and expenses:    
Salaries, wages, and benefits 183,138,000 167,824,000
Other operating 77,429,000 71,489,000
Facility rent 10,348,000 10,092,000
Depreciation and amortization 10,586,000 10,048,000
Interest 46,000 98,000
Total costs and expenses 281,547,000 259,551,000
Income from operations 15,629,000 10,012,000
Other income:    
Non–operating income 5,685,000 4,323,000
Unrealized gains on marketable equity securities 14,399,000 1,386,000
Income before income taxes 35,713,000 15,721,000
Income tax provision (9,462,000) (4,436,000)
Net income 26,251,000 11,285,000
Net (income)/loss attributable to noncontrolling interest (38,000) 438,000
Net income attributable to National HealthCare Corporation $ 26,213,000 $ 11,723,000
Earnings per share attributable to National HealthCare Corporation stockholders:    
Basic (in dollars per share) $ 1.71 $ 0.76
Diluted (in dollars per share) $ 1.69 $ 0.76
Basic (in shares) 15,350,240 15,337,423
Diluted (in shares) 15,505,096 15,356,335
Dividends declared per common share (in dollars per share) $ 0.59 $ 0.57
v3.24.1.u1
Interim Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Net income $ 26,251 $ 11,285
Other comprehensive income/(loss):    
Unrealized gains/(losses) on investments in marketable debt securities (472) 1,958
Reclassification adjustment for realized gains on sales of marketable debt securities (10) 0
Income tax (expense)/benefit related to items of other comprehensive income 45 (279)
Other comprehensive income/(loss), net of tax (437) 1,679
Net (income)/loss attributable to noncontrolling interest (38) 438
Comprehensive income attributable to National HealthCare Corporation $ 25,776 $ 13,402
v3.24.1.u1
Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Current Assets:    
Cash and cash equivalents $ 93,982,000 $ 107,076,000
Restricted cash and cash equivalents, current portion 26,010,000 17,725,000
Marketable equity securities 123,040,000 111,117,000
Marketable debt securities 484,000 5,427,000
Restricted marketable equity securities 29,616,000 26,779,000
Restricted marketable debt securities, current portion 4,790,000 12,822,000
Accounts receivable 125,664,000 108,545,000
Inventories 6,763,000 7,386,000
Prepaid expenses and other assets 6,750,000 8,855,000
Notes receivable 487,000 503,000
Total current assets 417,586,000 406,235,000
Property and Equipment:    
Property and equipment, at cost 1,065,543,000 1,101,681,000
Accumulated depreciation and amortization (576,845,000) (608,352,000)
Net property and equipment 488,698,000 493,329,000
Other Assets:    
Restricted cash and cash equivalents, less current portion 1,140,000 1,167,000
Restricted marketable debt securities, less current portion 119,042,000 109,478,000
Deposits and other assets 13,738,000 14,786,000
Operating lease right-of-use assets 87,356,000 94,201,000
Goodwill 168,295,000 168,295,000
Intangible assets 7,038,000 7,038,000
Investments in unconsolidated companies 16,747,000 16,267,000
Total other assets 413,356,000 411,232,000
Total assets 1,319,640,000 1,310,796,000
Current Liabilities:    
Trade accounts payable 20,697,000 19,194,000
Finance lease obligations, current portion 0 860,000
Operating lease liabilities, current portion 29,733,000 29,352,000
Accrued payroll 64,156,000 84,110,000
Amounts due to third party payors 19,988,000 18,369,000
Accrued risk reserves, current portion 30,800,000 30,549,000
Other current liabilities 24,302,000 22,991,000
Contract liabilities 7,667,000 0
Dividends payable 9,086,000 9,051,000
Total current liabilities 206,429,000 214,476,000
Operating lease liabilities, less current portion 56,004,000 63,175,000
Accrued risk reserves, less current portion 77,437,000 72,710,000
Refundable entrance fees 5,708,000 6,376,000
Deferred income taxes 19,639,000 17,200,000
Other noncurrent liabilities 27,909,000 26,379,000
Total liabilities 393,126,000 400,316,000
Equity:    
Common stock, $.01 par value; 45,000,000 shares authorized; 15,399,724 and 15,350,661 shares, respectively, issued and outstanding 154,000 153,000
Capital in excess of par value 226,909,000 227,604,000
Retained earnings 704,726,000 687,599,000
Accumulated other comprehensive loss (7,041,000) (6,604,000)
Total National HealthCare Corporation stockholders’ equity 924,748,000 908,752,000
Noncontrolling interest 1,766,000 1,728,000
Total equity 926,514,000 910,480,000
Total liabilities and equity $ 1,319,640,000 $ 1,310,796,000
v3.24.1.u1
Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
Mar. 31, 2024
Dec. 31, 2023
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 45,000,000 45,000,000
Common stock, shares issued (in shares) 15,399,724 15,350,661
Common stock, shares outstanding (in shares) 15,399,724 15,350,661
v3.24.1.u1
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Cash Flows From Operating Activities:    
Net income $ 26,251,000 $ 11,285,000
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 10,586,000 10,048,000
Equity in earnings of unconsolidated investments (67,000) (1,535,000)
Unrealized gains on marketable equity securities (14,399,000) (1,386,000)
(Gains)/losses on sale of marketable securities (344,000) 492,000
Gain on sale of unconsolidated company (1,024,000) 0
Deferred income taxes (2,484,000) (331,000)
Stock–based compensation 793,000 639,000
Changes in operating assets and liabilities:    
Accounts receivable (17,119,000) (3,148,000)
Inventories 623,000 142,000
Prepaid expenses and other assets 3,153,000 1,957,000
Operating lease obligations 55,000 (316,000)
Trade accounts payable 1,503,000 (4,018,000)
Accrued payroll (19,954,000) (15,800,000)
Amounts due to third party payors 1,619,000 48,000
Accrued risk reserves 4,978,000 3,157,000
Contract liabilities 7,667,000 0
Other current liabilities 1,311,000 5,407,000
Other noncurrent liabilities 1,530,000 6,554,000
Net cash provided by operating activities 9,646,000 13,857,000
Cash Flows From Investing Activities:    
Purchases of property and equipment (5,955,000) (6,640,000)
Proceeds from sale of unconsolidated company 2,100,000 0
Investments in unconsolidated companies (1,488,000) 0
Collections of notes receivable 16,000 2,000
Purchases of marketable securities (8,703,000) (10,281,000)
Proceeds from sale of marketable securities 11,615,000 15,492,000
Net cash used in investing activities (2,415,000) (1,427,000)
Cash Flows From Financing Activities:    
Principal payments under finance lease obligations (860,000) (1,218,000)
Dividends paid to common stockholders (9,051,000) (8,748,000)
Issuance of common stock 8,412,000 0
Repurchase of common shares (9,900,000) (2,482,000)
Entrance fee refunds (668,000) (171,000)
Net cash used in financing activities (12,067,000) (12,619,000)
Net Decrease in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents (4,836,000) (189,000)
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Beginning of Period 125,968,000 74,865,000
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, End of Period 121,132,000 74,676,000
Balance Sheet Classifications:    
Cash and cash equivalents 93,982,000 46,144,000
Restricted Cash and Cash Equivalents 27,150,000 28,532,000
Total Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents $ 121,132,000 $ 74,676,000
v3.24.1.u1
Interim Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Noncontrolling Interest [Member]
Total
Balance (in shares) at Dec. 31, 2022 15,357,746          
Balance at Dec. 31, 2022 $ 153 $ 226,991 $ 656,664 $ (9,532) $ 3,238 $ 877,514
Net income 0 0 11,723 0 (438) 11,285
Other comprehensive income (loss) 0 0 0 1,679 0 1,679
Stock–based compensation $ 0 639 0 0 0 639
Shares sold – options exercised (in shares) 7,046          
Shares sold – options exercised $ 0 0 0 0 0 0
Repurchase of common shares (in shares) (44,349)          
Repurchase of common shares $ 0 (2,482) 0 0 0 (2,482)
Dividends declared to common stockholders $ 0 0 (8,733) 0 0 (8,733)
Balance (in shares) at Mar. 31, 2023 15,320,443          
Balance at Mar. 31, 2023 $ 153 225,148 659,654 (7,853) 2,800 879,902
Balance (in shares) at Dec. 31, 2022 15,357,746          
Balance at Dec. 31, 2022 $ 153 226,991 656,664 (9,532) 3,238 $ 877,514
Shares sold – options exercised (in shares)           103,481
Balance (in shares) at Dec. 31, 2023 15,350,661          
Balance at Dec. 31, 2023 $ 153 227,604 687,599 (6,604) 1,728 $ 910,480
Net income 0 0 26,213 0 38 26,251
Other comprehensive income (loss) 0 0 0 (437) 0 (437)
Stock–based compensation $ 0 793 0 0 0 $ 793
Shares sold – options exercised (in shares) 150,194         137,874
Shares sold – options exercised $ 1 8,412 0 0 0 $ 8,413
Repurchase of common shares (in shares) (101,131)          
Repurchase of common shares $ 0 (9,900) 0 0 0 (9,900)
Dividends declared to common stockholders $ 0 0 (9,086) 0 0 (9,086)
Balance (in shares) at Mar. 31, 2024 15,399,724          
Balance at Mar. 31, 2024 $ 154 $ 226,909 $ 704,726 $ (7,041) $ 1,766 $ 926,514
v3.24.1.u1
Interim Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dividends declared to common stockholders, per share (in dollars per share) $ 0.59 $ 0.57
v3.24.1.u1
Note 1 - Description of Business
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 Description of Business

 

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. As of March 31, 2024, we operate or manage, through certain affiliates, 65 skilled nursing facilities with a total of 8,421 licensed beds, 24 assisted living facilities with 1,365 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 8 states and are located primarily in the southeastern United States.  

  

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Note 2 - Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Significant Accounting Policies [Text Block]

Note 2 Summary of Significant Accounting Policies

 

The listing below is not intended to be a comprehensive list of all our significant accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. See our audited December 31, 2023 consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by U.S. GAAP. Our audited December 31, 2023 consolidated financial statements are available at our web site: www.nhccare.com.

 

Basis of Presentation

 

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

 

We assume that users of these interim financial statements have read or have access to the audited December 31, 2023 consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons.

 

Estimates and Assumptions

 

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 and could cause our reported net income to vary significantly from period to period.

 

Net Patient Revenues and Accounts Receivable

 

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, home health care services, hospice services, and behavioral health services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other third-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

 

The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that are not capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there may be ancillary services which are not included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.  Contract liabilities are recorded for payments the Company receives in which performance obligations have not been completed.

 

The Company determines the transaction price based on established billing rates reduced by explicit price concessions provided to third party payors. Explicit price concessions are based on contractual agreements and historical experience. The Company considers the patient's ability and intent to pay the amount of consideration upon admission. Credit losses are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations. Bad debt expense was $2,471,000 and $1,811,000 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, and December 31, 2023, the Company has recorded allowance for doubtful accounts of $9,174,000 and $8,054,000, respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

 

Other Revenues

 

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

 

We recognize rental income based on the terms of our operating leases. Under certain of our leases, we receive variable rent, which is based on the increase in revenues of a lessee over a base year. We recognize variable rent annually or monthly, as applicable, when, based on the actual revenue of the lessee is earned.

 

Segment Reporting

 

In accordance with the provisions of Accounting Standards Codification ("ASC") 280, Segment Reporting, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note 6 for further disclosure of the Company’s operating segments.

 

Other Operating Expenses

 

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

 

General and Administrative Costs

 

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $6,164,000 and $5,653,000 for the three months ended March 31, 2024 and 2023, respectively.

 

Long-Term Leases

 

The Company’s lease portfolio primarily consists of operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare and hospice offices, and pharmacy warehouses. The original terms of the leases typically range from two to fifteen years. Several of the real estate leases include renewal options which vary in length and may not include specific rent renewal amounts. We determine if an arrangement is a lease at inception of a contract. We determine the lease term by assuming exercise of renewal options that are reasonably certain.

 

The Company records right-of-use assets and liabilities for non-cancelable real estate operating leases with original or remaining lease terms in excess of one year. Leases with a lease term of 12 months or less at inception are not recorded and are expensed on a straight-line basis over the lease term. We recognize lease components and non-lease components together and not as separate parts of a lease for real estate leases.

 

Operating lease right-of-use assets and liabilities are recorded at the present value of the lease payments over the lease term. The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease. The variable components of the lease payment that fluctuate with the operations of a health facility are not included in determining the right-of-use assets and lease liabilities. Rather, these variable components are expensed as incurred.

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements, 20-40 years and equipment and furniture, 3-15 years. Leasehold improvements are amortized over periods that do not exceed the non-cancelable respective lease terms using the straight-line method.

 

Business Combinations

 

We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. In determining the fair value of identifiable assets, we use various valuation techniques. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, future growth, and discount rates.

 

Goodwill and Other Intangible Assets

 

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is not amortized but is subject to an annual impairment test. We perform our annual goodwill impairment assessment on the first day of the fourth quarter.  Tests are performed more frequently if events occur, or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

 

The Company’s indefinite-lived intangible assets consist of trade names and certificates of need and licenses. The Company reviews indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

 

Accrued Risk Reserves  

 

We are self–insured for risks related to workers’ compensation and general and professional liability insurance. We have two wholly–owned limited purpose insurance companies that insure these risks. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

 

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. A significant increase in the number of these claims, or an increase in the amounts due as a result of these claims could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

 

We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

 

Continuing Care Contracts

 

We have one continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center may enter into continuing care contracts with us. The contracts provide that 10% of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lesser of the price at which the apartment is re-assigned or 90% of the original entry fee, plus 40% of any appreciation if the apartment value exceeds the original resident’s entry fee.

 

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees are not included as part of the transaction price and are classified as noncurrent liabilities in our consolidated balance sheets. 

 

We also annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded with a corresponding charge to income. As of March 31, 2024, and December 31, 2023, we have recorded a future service obligation liability in the amount of $1,606,000. This obligation is reflected within other noncurrent liabilities in the interim condensed consolidated balance sheets.

 

 

Other Noncurrent Liabilities

 

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions, deferred revenue, and obligations to provide future services to our CCRC residents. Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”) and the non-refundable portion (10%) of CCRC entrance fees being amortized over the remaining life expectancies of the residents.

 

Other noncurrent liabilities also include funds received related to the Employee Retention Credit ("ERC"), a refundable tax credit for businesses that sustained a partial suspension of operations limiting commerce due to COVID-19 or had significant declines in gross receipts during 2020 and 2021.

 

Noncontrolling Interest

 

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of the subsidiary earnings, contributions, and distributions.

 

Variable Interest Entities

 

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses. We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation. To the extent that we own interests in a VIE and we (i) have the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

 

The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and may or may not be limited to its investment in the unconsolidated VIE. The investments in unconsolidated VIEs are classified as “investments in unconsolidated companies” in the interim condensed consolidated balance sheets.

 

Recently Issued Accounting Guidance

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07,Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures.” The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and contain other disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2023, which will be the Company's fiscal year 2024, and interim periods within fiscal years beginning after December 15, 2024.  We are currently evaluating the impact this standard will have on our disclosures.

 

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Note 3 - Net Patient Revenues
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

Note 3 Net Patient Revenues

 

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

 

Revenue by Service Type

 

The Company’s net patient services can generally be classified into the following two categories: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services (in thousands).

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Net patient revenues:

        

Inpatient services

 $252,254  $226,169 

Homecare and hospice

  33,569   31,838 

Total net patient revenues

 $285,823  $258,007 

 

For inpatient and hospice services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation. For homecare, revenue is recognized when services are provided based on the number of days of service rendered in the period of care or on a per-visit basis. Typically, patients and third-party payors are billed monthly after services are performed or the patient is 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 is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients are typically under no obligation to remain admitted in our facilities or under our care.  As the period between the time of service and time of payment is typically one year or less, the Company did not adjust for the effects of a significant financing component.

 

Revenue by Payor

 

Certain groups of patients receive funds to pay the cost of their care from a common source. The following table sets forth sources of net patient revenues for the periods indicated:

 

  

Three Months Ended

March 31

 

Source

 

2024

  

2023

 

Medicare

  34%   36% 

Managed Care

  10%   11% 

Medicaid

  28%   27% 

Private Pay and Other

  28%   26% 

Total

  100%   100% 

 

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days. For each eligible day a Medicare beneficiary is in a skilled nursing facility, Medicare pays the facility a daily payment, subject to adjustment for certain factors such as a wage index in the geographic area. The payment covers all services provided by the skilled nursing facility for the beneficiary that day, including room and board, nursing, therapy and drugs, as well as an estimate of capital–related costs to deliver those services.

 

For homecare services, Medicare pays based on the acuity level of the patient and based on periods of care. A period of care is defined as a length of care up to 30 days with multiple continuous periods allowed. The services covered by the payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit.

 

For hospice services, Medicare pays a daily rate to cover the hospice’s costs for providing services included in the patient care plan. Medicare makes daily payments based on 1 of 4 levels of hospice care. All hospice care and services offered to patients and their families must follow an individualized written plan of care that meets the patient’s needs.

 

Our hospice service revenue is subject to certain limitations on payments from Medicare. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor these caps on a provider-by-provider basis and estimate amounts due back to Medicare if we estimate a cap has been exceeded. If applicable, we record these cap adjustments as a reduction to revenue.

 

Medicaid is operated by individual states with the financial participation of the federal government. The states in which we operate currently use prospective cost–based reimbursement systems. Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

 

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration. Private paying patients, private insurance carriers and the Veterans Administration generally pay based on the healthcare center's charges or specifically negotiated contracts. For private pay patients in skilled nursing, assisted living and independent living facilities, the Company bills for room and board charges, with the remittance being due on receipt of the statement and generally by the 10th day of the month the services are performed.

 

Certain managed care payors for homecare services pay on a per-visit basis. This revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.

 

State Relief Supplemental Funding

 

The Company received supplemental Medicaid payments from various states, including healthcare relief funding under the American Rescue Plan Act ("ARPA") and other state specific relief programs.  The funding generally incorporates specific use requirements primarily for direct patient care including labor related expenses or various patient care related expenses.  We have recorded $3,462,000 and $4,883,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2024 and 2023, respectively.  

 

Contract Liabilities

 

Included in the Company’s interim condensed consolidated balance sheets are contract liabilities, which represent payments the Company receives in advance of services provided. As of March 31, 2024 and December 31, 2023, the Company has recorded $7,667,000 and $0, respectively, in contract liabilities related to receipts during the first quarter of 2024 from the Change Healthcare/Optum Payment Disruption ("CHOPD") Accelerated and Advance Payment program.  These payments were issued to providers who experienced delays in the submission or processing of Medicare claims payments as a result of the Change Healthcare/Optum cyber incident, which began February 21, 2024. Recoupment of the accelerated payments began in the first quarter of 2024.

 

A summary of the activity related to contract liabilities follows (in thousands):

 

Balance at December 31, 2023

 $- 

Payments received

  9,881 

Payments recouped

  (2,214)

Balance at March 31, 2024

 $7,667 

 

 

Third Party Payors

 

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs. We believe that we are following all applicable laws and regulations.

 

Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews, and investigations. We believe that any differences between the net revenues recorded, and final determination will not materially affect the consolidated financial statements. We have made provisions of approximately $19,988,000 and $18,369,000 as of March 31, 2024 and December 31, 2023, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

  

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Note 4 - Other Revenues
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Other Revenues [Text Block]

Note 4 Other Revenues

 

Other revenues are outlined in the table below. Revenues from rental income include health care real estate properties owned by us and leased to third party operators. Revenues from management and accounting services include fees provided to manage and provide accounting services to other healthcare operators. Revenues from insurance services include premiums for workers’ compensation and professional liability insurance policies that our wholly owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services. "Other" revenues include miscellaneous health care related earnings (in thousands).

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Rental income

 $5,959  $6,043 

Management and accounting services fees

  4,438   4,097 

Insurance services

  872   1,048 

Other

  84   368 

Total other revenues

 $11,353  $11,556 

 

Rental Income

 

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities to third party operators. Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note 7 – Long Term Leases.

 

Management Fees from National Health Corporation

 

We manage five skilled nursing facilities owned by National Health Corporation (“National”). For the three months ended March 31, 2024 and 2023, we recognized management fees and interest on management fees of $1,320,000 and $1,190,000, respectively, for these centers.

 

Insurance Services

 

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 were $582,000 and $736,000, respectively. Associated losses and expenses including those for self-insurance are included in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

 

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 were $290,000 and $312,000, respectively. Associated losses and expenses including those for self–insurance are included in the interim condensed consolidated statements of operations as "Other operating costs and expenses".

  

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Note 5 - Non-operating Income
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Other Nonoperating Income and Expense [Text Block]

Note 5 NonOperating Income

 

Non–operating income is comprised of the following (in thousands):

 

  

Three Months Ended

March 31

 
  

2024

  

2023

 

Dividends and net realized gains and losses on sales of securities

 $2,056  $1,233 

Interest income

  2,538   1,555 

Equity in earnings of unconsolidated investments

  67   1,535 

Gain on sale of unconsolidated company

  1,024   - 

Total non-operating income

 $5,685  $4,323 

 

Gain on sale of unconsolidated company

 

In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency located in Nashville, Tennessee. The total consideration paid to the company was $2,100,000, which resulted in a gain of $1,024,000.

  

v3.24.1.u1
Note 6 - Business Segments
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

Note 6 Business Segments

 

The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals; and (2) homecare and hospice services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

 

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

 

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment (in thousands):

 

  

Three Months Ended March 31, 2024

 
  

Inpatient
Services

  

Homecare

and Hospice

  

All Other

  

Total

 

Revenues:

                

Net patient revenues

 $252,254  $33,569  $-  $285,823 

Other revenues

  15   -   11,338   11,353 

Net operating revenues

  252,269   33,569   11,338   297,176 
                 

Costs and expenses:

                

Salaries, wages, and benefits

  150,890   21,009   11,239   183,138 

Other operating

  68,683   5,972   2,774   77,429 

Rent

  8,112   566   1,670   10,348 

Depreciation and amortization

  9,630   187   769   10,586 

Interest

  46   -   -   46 

Total costs and expenses

  237,361   27,734   16,452   281,547 
                 

Income/(loss) from operations

  14,908   5,835   (5,114)  15,629 

Non-operating income

  -   -   5,685   5,685 

Unrealized gains on marketable equity securities

  -   -   14,399   14,399 
                 

Income before income taxes

 $14,908  $5,835  $14,970  $35,713 

 

 

  

Three Months Ended March 31, 2023

 
  

Inpatient
Services

  

Homecare

and Hospice

  

All Other

  

Total

 

Revenues:

                

Net patient revenues

 $226,169  $31,838  $-  $258,007 

Other revenues

  271   -   11,285   11,556 

Net operating revenues

  226,440   31,838   11,285   269,563 
                 

Costs and expenses:

                

Salaries, wages, and benefits

  138,939   20,244   8,641   167,824 

Other operating

  62,264   5,499   3,726   71,489 

Rent

  8,168   558   1,366   10,092 

Depreciation and amortization

  9,117   185   746   10,048 

Interest

  98   -   -   98 

Total costs and expenses

  218,586   26,486   14,479   259,551 
                 

Income/(loss) from operations

  7,854   5,352   (3,194)  10,012 

Non-operating income

  -   -   4,323   4,323 

Unrealized gains on marketable equity securities

  -   -   1,386   1,386 
                 

Income before income taxes

 $7,854  $5,352  $2,515  $15,721 

 

v3.24.1.u1
Note 7 - Long-term Leases
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Lessee, Operating and Finance Leases [Text Block]

Note 7 Long-Term Leases

 

Operating Leases

 

At March 31, 2024, we lease from NHI the real property of 28 skilled nursing facilities, five assisted living centers and three independent living centers under one lease agreement. As part of the lease agreement, we sublease four Florida skilled nursing facilities to a third-party operator. The lease includes base rent plus a percentage rent. The annual base rent is $32,625,000 in 2024, $32,225,000 in 2025, and $31,975,000 in 2026 with the lease term expiring in December 2026. The percentage rent is based on a quarterly calculation of revenue increases and is payable on a quarterly basis. Total facility rent expense to NHI was $9,472,000 and $9,295,000 for the three months ended March 31, 2024 and 2023, respectively.

 

Minimum Lease Payments

 

The following table summarizes the maturity of our operating lease liabilities as of March 31, 2024 (in thousands):

 

  

Operating

Leases

 

2025

 $34,351 

2026

  33,590 

2027

  24,933 

2028

  493 

2029

  207 

Thereafter

  21 

Total minimum lease payments

  93,595 

Less: amounts representing interest

  (7,858)

Present value of future minimum lease payments

  85,737 

Less: current portion

  (29,733)

Noncurrent lease liabilities

 $56,004 

 

v3.24.1.u1
Note 8 - Earnings Per Share
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Earnings Per Share [Text Block]

Note 8 Earnings per Share

 

Basic net income per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net income per share reflects the potential dilution that would have occurred if securities to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our earnings.

 

The following table summarizes the earnings and the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands, except for share and per share amounts):

 

  

Three Months Ended
March 31

 
  

2024

  

2023

 

Basic:

        

Weighted average common shares outstanding

  15,350,240   15,337,423 

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 

Earnings per common share, basic

 $1.71  $0.76 
         

Diluted:

        

Weighted average common shares outstanding

  15,350,240   15,337,423 

Effects of dilutive instruments

  154,856   18,912 

Weighted average common shares outstanding

  15,505,096   15,356,335 
         

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 

Earnings per common share, diluted

 $1.69  $0.76 

 

For the three months ended March 31, 2024, 245,726 stock options have been excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect. For the three months ended March 31, 2023, 691,580 stock options have been excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect.

  

v3.24.1.u1
Note 9 - Investments in Marketable Securities
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 9 Investments in Marketable Securities

 

Our investments in marketable equity securities are carried at fair value with the changes in unrealized gains and losses recognized in our results of operations at each measurement date. Our investments in marketable debt securities are classified as available for sale securities and carried at fair value with the unrealized gains and losses recognized through accumulated other comprehensive income at each measurement date. Any credit-related decline in fair market values below the amortized cost of our available for sale debt securities are recorded in our results of operations through an allowance for credit losses. Realized gains and losses from securities sales are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note 10 for a description of the Company's methodology for determining the fair value of marketable securities. 

 

Marketable securities consist of the following (in thousands):

 

  

March 31, 2024

  

December 31, 2023

 
  

Amortized

Cost

  

Fair

Value

  

Amortized

Cost

  

Fair

Value

 

Investments available for sale:

                

Marketable equity securities

 $30,176  $123,040  $30,176  $111,117 

Corporate debt securities

  494   484   2,497   2,441 

U.S. Treasury securities

  -   -   2,990   2,986 

Restricted investments available for sale:

                

Marketable equity securities

  24,495   29,616   24,134   26,779 

Corporate debt securities

  61,488   59,398   59,586   57,731 

Asset-based securities

  19,026   17,438   19,388   17,659 

U.S. Treasury securities

  47,323   43,004   46,771   42,863 

State and municipal securities

  4,079   3,992   4,106   4,047 
  $187,081  $276,972  $189,648   265,623 

 

Included in the marketable equity securities are the following (in thousands, except share amounts):

 

  

March 31, 2024

  

December 31, 2023

 
  

Shares

  

Cost

  

Fair

Value

  

Shares

  

Cost

  

Fair

Value

 

NHI Common Stock

  1,630,642  $24,734  $102,453   1,630,642  $24,734  $91,071 

 

The amortized cost and estimated fair value of debt securities classified as available for sale, by contractual maturity, are as follows (in thousands):

 

  

March 31, 2024

  

December 31, 2023

 
  

Cost

  

Fair

Value

  

Cost

  

Fair

Value

 

Maturities:

                

Within 1 year

 $21,299  $20,785  $19,664  $19,328 

1 to 5 years

  77,738   73,370   81,517   77,118 

6 to 10 years

  32,012   28,925   33,515   30,802 

Over 10 years

  1,361   1,236   642   479 
  $132,410  $124,316  $135,338  $127,727 

 

Gross unrealized gains related to marketable equity securities are $98,459,000 and $84,514,000 as of March 31, 2024 and December 31, 2023, respectively. Gross unrealized losses related to marketable equity securities are $474,000 and $928,000 as of March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, the Company recognized net unrealized gains of $14,399,000 and $1,386,000, respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

 

Gross unrealized gains related to available for sale marketable debt securities are $179,000 and $326,000 as of March 31, 2024 and December 31, 2023, respectively. Gross unrealized losses related to available for sale marketable debt securities are $8,273,000 and $7,937,000 as of March 31, 2024 and December 31, 2023, respectively.

 

The Company’s unrealized losses in our available for sale marketable debt securities were determined to be non-credit related. The Company has not recognized any credit related impairments for the three months ended  March 31, 2024 and 2023.

 

For the marketable securities in gross unrealized loss positions, (a) it is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and (b) the Company expects that the contractual principal and interest will be received on the investment securities.

 

Proceeds from the sale of available for sale marketable securities during the three months ended March 31, 2024 and 2023 were $11,615,000 and $15,492,000, respectively. Investment gains of $344,000 and investment losses of $492,000 were realized on these sales during the three months ended March 31, 2024 and 2023, respectively.

  

v3.24.1.u1
Note 10 - Fair Value Measurements
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

Note 10 Fair Value Measurements

 

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs that may be used to measure fair value:

 

 

Level 1  – The valuation is based on quoted prices in active markets for identical instruments.

 

Level 2 – The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model–based valuation techniques for which all significant assumptions are observable in the market.

 

Level 3 – The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

The following table summarizes fair value measurements by level at March 31, 2024 and December 31, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands):

 

  

Fair Value Measurements Using

 

March 31, 2024

 

Fair

Value

  

Quoted

Prices in

Active
Markets

For Identical

Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 $93,982  $93,982  $  $ 

Restricted cash and cash equivalents

  27,150   27,150       

Marketable equity securities

  152,656   152,656       

Corporate debt securities

  59,882   42,611   17,271    

Asset–backed securities

  17,438      16,961   477 

U.S. Treasury securities

  43,004   43,004       

State and municipal securities

  3,992      3,992    

Total financial assets

 $398,104  $359,403  $38,224  $477 

 

 

  

Fair Value Measurements Using

 

December 31, 2023

 

Fair

Value

  

Quoted

Prices in

Active

Markets

For Identical

Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 $107,076  $107,076  $  $ 

Restricted cash and cash equivalents

  18,892   18,892       

Marketable equity securities

  137,896   137,896       

Corporate debt securities

  60,171   42,860   17,311    

Asset–backed securities

  17,659      17,210   449 

U.S. Treasury securities

  45,850   45,850       

State and municipal securities

  4,047      4,047    

Total financial assets

 $391,591  $352,574  $38,568  $449 

  

v3.24.1.u1
Note 11 - Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

Note 11 Goodwill and Other Intangible Assets

 

At March 31, 2024, the Company reviewed the carrying value of goodwill for impairment indicators. As a result of the review, there were no impairment indicators regarding the Company’s goodwill that required a quantitative test to be performed. However, our accounting estimates could materially change from period to period due to changing market factors. We will continue to monitor future events, changes in circumstances, and the potential impact thereof. If actual results are not consistent with our assumptions and estimates, we may be exposed to future goodwill impairment losses.

 

At March 31, 2024, the following table represents the activity related to our goodwill by segment (in thousands):

 

  

Inpatient

Services

  

Homecare

and Hospice

  

All Other

  

Total

 

January 1, 2024

 $3,741  $164,554  $  $168,295 

Additions

            

March 31, 2024

 $3,741  $164,554  $  $168,295 

 

We also have recorded indefinite-lived intangible assets that consist of trade names ($4,340,000) and certificates of need and licenses ($2,698,000).

 

v3.24.1.u1
Note 12 - Stock Repurchase Program
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Treasury Stock [Text Block]

Note 12 - Stock Repurchase Program

 

During the three months ended March 31, 2024, the Company repurchased 101,131 shares of its common stock for a total cost of $9,900,000. During the three months ended March 31, 2023, the Company repurchased 44,349 shares of its common stock for a total cost of $2,482,000. The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued. 

  

v3.24.1.u1
Note 13 - Stock-based Compensation
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Share-Based Payment Arrangement [Text Block]

Note 13 StockBased Compensation

 

NHC recognizes stock–based compensation expense for all stock options granted over the requisite service period using the fair value at the date of grant using the Black–Scholes pricing model. Stock–based compensation totaled $793,000 and $639,000 for the three months ended March 31, 2024 and 2023, respectively. Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of operations.

 

At March 31, 2024, the Company had $7,652,000 of unrecognized compensation cost related to unvested stock–based compensation awards. This unrecognized compensation cost will be amortized over an approximate three-year period.

 

Stock Options

 

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2024 and for the year ended December 31, 2023.

 

  

March 31,

2024

  

December 31,
2023

 

Risk–free interest rate

  4.33%   4.52% 

Expected volatility

  24.1%   29.3% 

Expected life, in years

  2.9   2.9 

Expected dividend yield

  2.64%   4.41% 

 

The following table summarizes our outstanding stock options for the three months ended March 31, 2024 and for the year ended December 31, 2023.

 

  

Number of

Shares

  

Weighted

Average

Exercise Price

  

Aggregate

Intrinsic

Value

 

Options outstanding at January 1, 2023

  445,144  $66.62  $ 

Options granted

  299,278   54.44    

Options exercised

  (103,481)  64.72    

Options cancelled

  (52,407)  60.58    

Options outstanding at December 31, 2023

  588,534   61.30    

Options granted

  245,726   94.07    

Options exercised

  (137,874)  60.95    

Options outstanding at March 31, 2024

  696,386  $72.93  $15,025,015 
             

Options exercisable at March 31, 2024

  174,105  $68.48  $4,531,876 

 

 

Options

Outstanding

March 31, 2024

  

Exercise Prices

 

Weighted Average

Exercise Price

  

Weighted Average

Remaining

Contractual

Life in Years

 

377,405

  

53.94

-

69.19

  

58.92

   

3.5

 

318,981

  

71.64

-

94.10

  

89.51

   

4.0

 

696,386

       

72.93

   

3.7

 

 

v3.24.1.u1
Note 14 - Income Taxes
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 14 Income Taxes

 

The Company's income tax provision as a percentage of our income before income taxes was 26.5% and 28.2% for the three months ended March 31, 2024 and 2023, respectively.

 

Typically, these percentages vary from the U.S. federal statutory income tax rate of 21% primarily due to state income taxes, excess tax benefits from stock-based compensation, benefits resulting from the lapsing of statute of limitations of items in our tax contingency reserve, and non-deductible expenses. For the three months ended March 31, 2024 and 2023, the accrual of state income tax was the most significant reconciling item.

 

Our quarterly income tax provision, and our estimate of our annual effective income tax rate, is subject to variation due to several factors, including volatility based on the amount of pre-tax income or loss.  

 

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2020 (with certain state exceptions).

  

v3.24.1.u1
Note 15 - Credit Facility - Schedule of Long-Term Debt Instruments
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Schedule of Long-Term Debt Instruments [Table Text Block]

Note 15 Credit Facility

 

In May 2023, we entered into an unsecured $50,000,000 credit facility that has a 364-day maturity date. Loans bear interest at the one-month secured overnight financing rate (“SOFR”) plus 1.25%. If we maintain certain aggregate deposit levels within the financial institution, the credit facility shall bear interest at one-month SOFR plus 1.10%. The credit facility is available for general corporate purposes, including working capital and acquisitions. The credit facility agreement contains customary representations and financial covenants, including covenants that restrict, among other things, asset dispositions, additional indebtedness, investments, sale-leasebacks, and certain contingent liabilities. The credit facility contains customary events of default and remedies.

 

As of March 31, 2024, the Company had no outstanding balance on the credit facility.  We do not expect to renew this credit facility upon its maturity date.

  

v3.24.1.u1
Note 16 - Contingencies and Commitments
3 Months Ended
Mar. 31, 2024
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

Note 16 Contingencies and Commitments

 

Accrued Risk Reserves

 

We have wholly-owned limited purpose insurance companies that insure risks related to workers’ compensation and professional liability insurance claims both for our owned and leased entities and certain of the entities to which we provide management or accounting services. The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $108,237,000 and $103,259,000 at March 31, 2024 and December 31, 2023, respectively. The liability is included in accrued risk reserves in the interim condensed consolidated balance sheets and is subject to adjustment for actual claims incurred. It is possible that these claims plus unasserted claims could exceed our insurance coverages and our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

 

As a result of the terms of our insurance policies and our use of wholly owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’ compensation and general and professional liability. We consider the professional services of independent actuaries to assist us in estimating our exposures for claims obligations (for both asserted and unasserted claims) related to deductibles and exposures in excess of coverage limits, and we maintain reserves for these obligations. Such estimates are based on many variables including historical and statistical information and other factors.

 

Workers Compensation

 

For workers’ compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers. Policies are written for a duration of twelve months and cover only risks related to workers’ compensation losses. All customers are companies which operate in the senior care industry. Business is written on a direct basis. 

 

General and Professional Liability Insurance and Lawsuits

 

The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. Additional insurance is purchased through third party providers that serve to supplement the coverage provided through our wholly owned captive insurance company.

 

There is certain additional litigation incidental to our business, none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows. In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.

 

Qui Tam Litigation

 

United States of America, ex rel. Jennifer Cook and Sally Gaither v. Integrated Behavioral Health, Inc., NHC HealthCare/Moulton, LLC, et al., Case No. 2:20-CV-00877-AMM (N.D. Ala.)  This is a qui tam case originally filed under seal on June 22, 2020. The United States declined intervention on March 1, 2021. Thereafter, the Plaintiffs filed an amended Complaint against Dr. Sanja Malhotra, Integrated Behavioral Health, Inc. and other entities that Dr. Malhotra was alleged to own or in which he allegedly had a financial interest. The Complaint also named multiple skilled nursing facilities as Defendants, including NHC Healthcare/Moulton, LLC, an affiliate of National HealthCare Corporation. The Complaint alleged that nurse practitioners affiliated with Dr. Malhotra provided free services to the facilities in exchange for referrals to entities owned by or in which Dr. Malhotra had a financial interest in violation of the False Claims Act and Anti-Kickback Statute. NHC Healthcare/Moulton, LLC denied the allegations and filed a motion to dismiss on November 4, 2021. On January 28, 2022, the district court stayed this matter and administratively terminated the motion to dismiss pending the U.S. Supreme Court's review of a petition for certiorari filed in an unrelated matter but involving one of the legal arguments raised in the motion to dismiss. Thereafter, the U.S. Supreme Court denied the petition for certiorari in the unrelated matter. As a result, NHC Healthcare/Moulton, LLC renewed its motion to dismiss. The District Court granted NHC Healthcare/Moulton’s Motion to Dismiss, along with other pending Motions to Dismiss, and entered an Order of Dismissal on March 23, 2023 and an Amended Order of Dismissal on April 4, 2023, which dismissed the case in its entirety with prejudice with respect to the claims asserted by the Plaintiffs. The Plaintiffs filed a Notice of Appeal on April 20, 2023 to appeal the dismissal to the United States Court of Appeals for the Eleventh Circuit. On December 21, 2023, the Eleventh Circuit entered an Order affirming the District Court’s dismissal of the claims.  The time period for the Plaintiffs to file a Petition for a Writ of Certiorari with the United States Supreme Court has expired making the Order affirming dismissal issued by the Eleventh Circuit final. 

 

Governmental Regulations

 

Laws and regulations governing Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid and other federal healthcare programs.

  

v3.24.1.u1
Insider Trading Arrangements
3 Months Ended
Mar. 31, 2024
Insider Trading Arr Line Items  
Material Terms of Trading Arrangement [Text Block]

Item 5.

Other Information.

 

None

 

Rule 10b5-1 Arrangement Adopted [Flag] false
Non-Rule 10b5-1 Arrangement Adopted [Flag] false
Rule 10b5-1 Arrangement Terminated [Flag] false
Non-Rule 10b5-1 Arrangement Terminated [Flag] false
v3.24.1.u1
Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

 

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

 

We assume that users of these interim financial statements have read or have access to the audited December 31, 2023 consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons.

Use of Estimates, Policy [Policy Text Block]

Estimates and Assumptions

 

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 and could cause our reported net income to vary significantly from period to period.

Revenue [Policy Text Block]

Net Patient Revenues and Accounts Receivable

 

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, home health care services, hospice services, and behavioral health services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other third-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

 

The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that are not capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there may be ancillary services which are not included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.  Contract liabilities are recorded for payments the Company receives in which performance obligations have not been completed.

 

The Company determines the transaction price based on established billing rates reduced by explicit price concessions provided to third party payors. Explicit price concessions are based on contractual agreements and historical experience. The Company considers the patient's ability and intent to pay the amount of consideration upon admission. Credit losses are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations. Bad debt expense was $2,471,000 and $1,811,000 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, and December 31, 2023, the Company has recorded allowance for doubtful accounts of $9,174,000 and $8,054,000, respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Revenue Recognition for Alternative Revenue Programs, Policy [Policy Text Block]

Other Revenues

 

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

 

We recognize rental income based on the terms of our operating leases. Under certain of our leases, we receive variable rent, which is based on the increase in revenues of a lessee over a base year. We recognize variable rent annually or monthly, as applicable, when, based on the actual revenue of the lessee is earned.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

 

In accordance with the provisions of Accounting Standards Codification ("ASC") 280, Segment Reporting, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note 6 for further disclosure of the Company’s operating segments.

Other Operating Expenses Policy [Policy Text Block]

Other Operating Expenses

 

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

General and Administrative Costs

 

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $6,164,000 and $5,653,000 for the three months ended March 31, 2024 and 2023, respectively.

Lessee, Leases [Policy Text Block]

Long-Term Leases

 

The Company’s lease portfolio primarily consists of operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare and hospice offices, and pharmacy warehouses. The original terms of the leases typically range from two to fifteen years. Several of the real estate leases include renewal options which vary in length and may not include specific rent renewal amounts. We determine if an arrangement is a lease at inception of a contract. We determine the lease term by assuming exercise of renewal options that are reasonably certain.

 

The Company records right-of-use assets and liabilities for non-cancelable real estate operating leases with original or remaining lease terms in excess of one year. Leases with a lease term of 12 months or less at inception are not recorded and are expensed on a straight-line basis over the lease term. We recognize lease components and non-lease components together and not as separate parts of a lease for real estate leases.

 

Operating lease right-of-use assets and liabilities are recorded at the present value of the lease payments over the lease term. The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease. The variable components of the lease payment that fluctuate with the operations of a health facility are not included in determining the right-of-use assets and lease liabilities. Rather, these variable components are expensed as incurred.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements, 20-40 years and equipment and furniture, 3-15 years. Leasehold improvements are amortized over periods that do not exceed the non-cancelable respective lease terms using the straight-line method.

Business Combinations Policy [Policy Text Block]

Business Combinations

 

We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. In determining the fair value of identifiable assets, we use various valuation techniques. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, future growth, and discount rates.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill and Other Intangible Assets

 

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is not amortized but is subject to an annual impairment test. We perform our annual goodwill impairment assessment on the first day of the fourth quarter.  Tests are performed more frequently if events occur, or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

 

The Company’s indefinite-lived intangible assets consist of trade names and certificates of need and licenses. The Company reviews indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

Liability Reserve Estimate, Policy [Policy Text Block]

Accrued Risk Reserves  

 

We are self–insured for risks related to workers’ compensation and general and professional liability insurance. We have two wholly–owned limited purpose insurance companies that insure these risks. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

 

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. A significant increase in the number of these claims, or an increase in the amounts due as a result of these claims could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

 

We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

Continuing Care Contracts and Refundable Entrance Fees, Policy [Policy Text Block]

Continuing Care Contracts

 

We have one continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center may enter into continuing care contracts with us. The contracts provide that 10% of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lesser of the price at which the apartment is re-assigned or 90% of the original entry fee, plus 40% of any appreciation if the apartment value exceeds the original resident’s entry fee.

 

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees are not included as part of the transaction price and are classified as noncurrent liabilities in our consolidated balance sheets. 

 

We also annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded with a corresponding charge to income. As of March 31, 2024, and December 31, 2023, we have recorded a future service obligation liability in the amount of $1,606,000. This obligation is reflected within other noncurrent liabilities in the interim condensed consolidated balance sheets.

Other Noncurrent Liabilities [Policy Text Block]

Other Noncurrent Liabilities

 

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions, deferred revenue, and obligations to provide future services to our CCRC residents. Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”) and the non-refundable portion (10%) of CCRC entrance fees being amortized over the remaining life expectancies of the residents.

 

Other noncurrent liabilities also include funds received related to the Employee Retention Credit ("ERC"), a refundable tax credit for businesses that sustained a partial suspension of operations limiting commerce due to COVID-19 or had significant declines in gross receipts during 2020 and 2021.

Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block]

Noncontrolling Interest

 

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of the subsidiary earnings, contributions, and distributions.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities

 

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses. We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation. To the extent that we own interests in a VIE and we (i) have the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

 

The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and may or may not be limited to its investment in the unconsolidated VIE. The investments in unconsolidated VIEs are classified as “investments in unconsolidated companies” in the interim condensed consolidated balance sheets.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Guidance

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07,Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures.” The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and contain other disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2023, which will be the Company's fiscal year 2024, and interim periods within fiscal years beginning after December 15, 2024.  We are currently evaluating the impact this standard will have on our disclosures.

v3.24.1.u1
Note 3 - Net Patient Revenues (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Disaggregation of Revenue [Table Text Block]
  

Three Months Ended

March 31

 
  

2024

  

2023

 

Net patient revenues:

        

Inpatient services

 $252,254  $226,169 

Homecare and hospice

  33,569   31,838 

Total net patient revenues

 $285,823  $258,007 
  

Three Months Ended

March 31

 

Source

 

2024

  

2023

 

Medicare

  34%   36% 

Managed Care

  10%   11% 

Medicaid

  28%   27% 

Private Pay and Other

  28%   26% 

Total

  100%   100% 
Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

Balance at December 31, 2023

 $- 

Payments received

  9,881 

Payments recouped

  (2,214)

Balance at March 31, 2024

 $7,667 
v3.24.1.u1
Note 4 - Other Revenues (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Other Revenues [Table Text Block]
  

Three Months Ended

March 31

 
  

2024

  

2023

 

Rental income

 $5,959  $6,043 

Management and accounting services fees

  4,438   4,097 

Insurance services

  872   1,048 

Other

  84   368 

Total other revenues

 $11,353  $11,556 
v3.24.1.u1
Note 5 - Non-operating Income (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Other Nonoperating Income, by Component [Table Text Block]
  

Three Months Ended

March 31

 
  

2024

  

2023

 

Dividends and net realized gains and losses on sales of securities

 $2,056  $1,233 

Interest income

  2,538   1,555 

Equity in earnings of unconsolidated investments

  67   1,535 

Gain on sale of unconsolidated company

  1,024   - 

Total non-operating income

 $5,685  $4,323 
v3.24.1.u1
Note 6 - Business Segments (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Segment Reporting Information, by Segment [Table Text Block]
  

Three Months Ended March 31, 2024

 
  

Inpatient
Services

  

Homecare

and Hospice

  

All Other

  

Total

 

Revenues:

                

Net patient revenues

 $252,254  $33,569  $-  $285,823 

Other revenues

  15   -   11,338   11,353 

Net operating revenues

  252,269   33,569   11,338   297,176 
                 

Costs and expenses:

                

Salaries, wages, and benefits

  150,890   21,009   11,239   183,138 

Other operating

  68,683   5,972   2,774   77,429 

Rent

  8,112   566   1,670   10,348 

Depreciation and amortization

  9,630   187   769   10,586 

Interest

  46   -   -   46 

Total costs and expenses

  237,361   27,734   16,452   281,547 
                 

Income/(loss) from operations

  14,908   5,835   (5,114)  15,629 

Non-operating income

  -   -   5,685   5,685 

Unrealized gains on marketable equity securities

  -   -   14,399   14,399 
                 

Income before income taxes

 $14,908  $5,835  $14,970  $35,713 
  

Three Months Ended March 31, 2023

 
  

Inpatient
Services

  

Homecare

and Hospice

  

All Other

  

Total

 

Revenues:

                

Net patient revenues

 $226,169  $31,838  $-  $258,007 

Other revenues

  271   -   11,285   11,556 

Net operating revenues

  226,440   31,838   11,285   269,563 
                 

Costs and expenses:

                

Salaries, wages, and benefits

  138,939   20,244   8,641   167,824 

Other operating

  62,264   5,499   3,726   71,489 

Rent

  8,168   558   1,366   10,092 

Depreciation and amortization

  9,117   185   746   10,048 

Interest

  98   -   -   98 

Total costs and expenses

  218,586   26,486   14,479   259,551 
                 

Income/(loss) from operations

  7,854   5,352   (3,194)  10,012 

Non-operating income

  -   -   4,323   4,323 

Unrealized gains on marketable equity securities

  -   -   1,386   1,386 
                 

Income before income taxes

 $7,854  $5,352  $2,515  $15,721 
v3.24.1.u1
Note 7 - Long-term Leases (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Lessee, Lease, Liability, Maturity [Table Text Block]
  

Operating

Leases

 

2025

 $34,351 

2026

  33,590 

2027

  24,933 

2028

  493 

2029

  207 

Thereafter

  21 

Total minimum lease payments

  93,595 

Less: amounts representing interest

  (7,858)

Present value of future minimum lease payments

  85,737 

Less: current portion

  (29,733)

Noncurrent lease liabilities

 $56,004 
v3.24.1.u1
Note 8 - Earnings Per Share (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
  

Three Months Ended
March 31

 
  

2024

  

2023

 

Basic:

        

Weighted average common shares outstanding

  15,350,240   15,337,423 

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 

Earnings per common share, basic

 $1.71  $0.76 
         

Diluted:

        

Weighted average common shares outstanding

  15,350,240   15,337,423 

Effects of dilutive instruments

  154,856   18,912 

Weighted average common shares outstanding

  15,505,096   15,356,335 
         

Net income attributable to National HealthCare Corporation

 $26,213  $11,723 

Earnings per common share, diluted

 $1.69  $0.76 
v3.24.1.u1
Note 9 - Investments in Marketable Securities (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Marketable Securities [Table Text Block]
  

March 31, 2024

  

December 31, 2023

 
  

Amortized

Cost

  

Fair

Value

  

Amortized

Cost

  

Fair

Value

 

Investments available for sale:

                

Marketable equity securities

 $30,176  $123,040  $30,176  $111,117 

Corporate debt securities

  494   484   2,497   2,441 

U.S. Treasury securities

  -   -   2,990   2,986 

Restricted investments available for sale:

                

Marketable equity securities

  24,495   29,616   24,134   26,779 

Corporate debt securities

  61,488   59,398   59,586   57,731 

Asset-based securities

  19,026   17,438   19,388   17,659 

U.S. Treasury securities

  47,323   43,004   46,771   42,863 

State and municipal securities

  4,079   3,992   4,106   4,047 
  $187,081  $276,972  $189,648   265,623 
Schedule of Available-for-Sale Securities Reconciliation [Table Text Block]
  

March 31, 2024

  

December 31, 2023

 
  

Shares

  

Cost

  

Fair

Value

  

Shares

  

Cost

  

Fair

Value

 

NHI Common Stock

  1,630,642  $24,734  $102,453   1,630,642  $24,734  $91,071 
Investments Classified by Contractual Maturity Date [Table Text Block]
  

March 31, 2024

  

December 31, 2023

 
  

Cost

  

Fair

Value

  

Cost

  

Fair

Value

 

Maturities:

                

Within 1 year

 $21,299  $20,785  $19,664  $19,328 

1 to 5 years

  77,738   73,370   81,517   77,118 

6 to 10 years

  32,012   28,925   33,515   30,802 

Over 10 years

  1,361   1,236   642   479 
  $132,410  $124,316  $135,338  $127,727 
v3.24.1.u1
Note 10 - Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
  

Fair Value Measurements Using

 

March 31, 2024

 

Fair

Value

  

Quoted

Prices in

Active
Markets

For Identical

Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 $93,982  $93,982  $  $ 

Restricted cash and cash equivalents

  27,150   27,150       

Marketable equity securities

  152,656   152,656       

Corporate debt securities

  59,882   42,611   17,271    

Asset–backed securities

  17,438      16,961   477 

U.S. Treasury securities

  43,004   43,004       

State and municipal securities

  3,992      3,992    

Total financial assets

 $398,104  $359,403  $38,224  $477 
  

Fair Value Measurements Using

 

December 31, 2023

 

Fair

Value

  

Quoted

Prices in

Active

Markets

For Identical

Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 $107,076  $107,076  $  $ 

Restricted cash and cash equivalents

  18,892   18,892       

Marketable equity securities

  137,896   137,896       

Corporate debt securities

  60,171   42,860   17,311    

Asset–backed securities

  17,659      17,210   449 

U.S. Treasury securities

  45,850   45,850       

State and municipal securities

  4,047      4,047    

Total financial assets

 $391,591  $352,574  $38,568  $449 
v3.24.1.u1
Note 11 - Goodwill and Other Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Goodwill [Table Text Block]
  

Inpatient

Services

  

Homecare

and Hospice

  

All Other

  

Total

 

January 1, 2024

 $3,741  $164,554  $  $168,295 

Additions

            

March 31, 2024

 $3,741  $164,554  $  $168,295 
v3.24.1.u1
Note 13 - Stock-based Compensation (Tables)
3 Months Ended
Mar. 31, 2024
Notes Tables  
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
  

March 31,

2024

  

December 31,
2023

 

Risk–free interest rate

  4.33%   4.52% 

Expected volatility

  24.1%   29.3% 

Expected life, in years

  2.9   2.9 

Expected dividend yield

  2.64%   4.41% 
Share-Based Payment Arrangement, Option, Activity [Table Text Block]
  

Number of

Shares

  

Weighted

Average

Exercise Price

  

Aggregate

Intrinsic

Value

 

Options outstanding at January 1, 2023

  445,144  $66.62  $ 

Options granted

  299,278   54.44    

Options exercised

  (103,481)  64.72    

Options cancelled

  (52,407)  60.58    

Options outstanding at December 31, 2023

  588,534   61.30    

Options granted

  245,726   94.07    

Options exercised

  (137,874)  60.95    

Options outstanding at March 31, 2024

  696,386  $72.93  $15,025,015 
             

Options exercisable at March 31, 2024

  174,105  $68.48  $4,531,876 
Share-Based Payment Arrangement, Option, Exercise Price Range [Table Text Block]

Options

Outstanding

March 31, 2024

  

Exercise Prices

 

Weighted Average

Exercise Price

  

Weighted Average

Remaining

Contractual

Life in Years

 

377,405

  

53.94

-

69.19

  

58.92

   

3.5

 

318,981

  

71.64

-

94.10

  

89.51

   

4.0

 

696,386

       

72.93

   

3.7

 
v3.24.1.u1
Note 1 - Description of Business (Details Textual)
Mar. 31, 2024
Number of Skilled Nursing Centers 65
Number of Beds 8,421
Number of Assisted Living Facilities 24
Number of Independent Living Facilities 5
Number of Behavioral Health Hospitals 3
Number of Homecare Programs 35
Number of Hospice Agencies 30
Number of States in which Entity Operates 8
v3.24.1.u1
Note 2 - Summary of Significant Accounting Policies (Details Textual)
3 Months Ended
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Dec. 31, 2023
USD ($)
Accounts Receivable, Credit Loss Expense (Reversal) $ 2,471,000 $ 1,811,000  
Accounts Receivable, Allowance for Credit Loss $ 9,174,000   $ 8,054,000
Number of Reportable Segments 2    
General and Administrative Expense $ 6,164,000 $ 5,653,000  
Continuing Care Retirement Communities, Refund Obligation $ 1,606,000   $ 1,606,000
Refundable Advance Fees [Member]      
Nonrefundable Resident Entry Fee Percentage 10.00%    
Original Entry Fee [Member]      
Refundable Resident Entry Fee Percentage 90.00%    
Appreciation [Member]      
Appreciation of Apartment Over Original Residents Entry Fee Percentage 40.00%    
Minimum [Member]      
Lessee, Operating Lease, Term of Contract (Year) 2 years    
Minimum [Member] | Building and Building Improvements [Member]      
Property, Plant and Equipment, Useful Life (Year) 20 years    
Minimum [Member] | Equipment and Furniture [Member]      
Property, Plant and Equipment, Useful Life (Year) 3 years    
Maximum [Member]      
Lessee, Operating Lease, Term of Contract (Year) 15 years    
Maximum [Member] | Building and Building Improvements [Member]      
Property, Plant and Equipment, Useful Life (Year) 40 years    
Maximum [Member] | Equipment and Furniture [Member]      
Property, Plant and Equipment, Useful Life (Year) 15 years    
v3.24.1.u1
Note 3 - Net Patient Revenues (Details Textual) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Revenue from Contract with Customer, Including Assessed Tax $ 285,823,000 $ 258,007,000  
Contract with Customer, Liability, Current 7,667,000   $ 0
Accounts Receivable, Allowance for Credit Loss 9,174,000   8,054,000
Medicare and Medicaid [Member]      
Accounts Receivable, Allowance for Credit Loss 19,988,000   $ 18,369,000
Medicaid [Member]      
Revenue from Contract with Customer, Including Assessed Tax $ 3,462,000 $ 4,883,000  
v3.24.1.u1
Note 3 - Net Patient Revenues - Revenue Disaggregation (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Net patient revenues $ 285,823 $ 258,007
Revenue, concentration percentage 100.00% 100.00%
Medicare [Member]    
Revenue, concentration percentage 34.00% 36.00%
Inpatient Services [Member]    
Net patient revenues $ 252,254 $ 226,169
Managed Care [Member]    
Revenue, concentration percentage 10.00% 11.00%
Homecare and Hospice [Member]    
Net patient revenues $ 33,569 $ 31,838
Medicaid [Member]    
Revenue, concentration percentage 28.00% 27.00%
Private Pay and Other [Member]    
Revenue, concentration percentage 28.00% 26.00%
v3.24.1.u1
Note 3 - Net Patient Revenues - Contract Liabilities (Details)
3 Months Ended
Mar. 31, 2024
USD ($)
Balance $ 0
Payments received 9,881,000
Payments recouped (2,214,000)
Balance $ 7,667,000
v3.24.1.u1
Note 4 - Other Revenues (Details Textual)
3 Months Ended
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Number of Skilled Nursing Centers 65  
Insurance Services Revenue $ 872,000 $ 1,048,000
Workers Compensation Revenue [Member]    
Insurance Services Revenue 582,000 736,000
Professional Liability Insurance [Member]    
Insurance Services Revenue $ 290,000 312,000
National [Member]    
Number of Skilled Nursing Centers 5  
Property Management Fee Revenue $ 1,320,000 $ 1,190,000
FLORIDA    
Number of Skilled Nursing Centers 4  
v3.24.1.u1
Note 4 - Other Revenues - Summary of Other Revenues (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Rental income $ 5,959 $ 6,043
Management and accounting services fees 4,438 4,097
Insurance services 872 1,048
Other 84 368
Total other revenues $ 11,353 $ 11,556
v3.24.1.u1
Note 5 - Non-operating Income (Details Textual) - USD ($)
1 Months Ended 3 Months Ended
Jan. 31, 2024
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Proceeds from Sale of Unconsolidated Company $ 2,100,000 $ 2,100,000 $ 0  
Gain (Loss) on Sale of Unconsolidated Company $ 1,024,000 $ 1,024,000 $ (0)  
Homecare Agency in Nashville, Tennessee [Member]        
Equity Method Investment, Ownership Percentage       50.00%
v3.24.1.u1
Note 5 - Non-operating Income - Summary of Non-operating Income (Details) - USD ($)
1 Months Ended 3 Months Ended
Jan. 31, 2024
Mar. 31, 2024
Mar. 31, 2023
Dividends and net realized gains and losses on sales of securities   $ 2,056,000 $ 1,233,000
Interest income   2,538,000 1,555,000
Equity in earnings of unconsolidated investments   67,000 1,535,000
Gain on sale of unconsolidated company $ 1,024,000 1,024,000 (0)
Total non-operating income   $ 5,685,000 $ 4,323,000
v3.24.1.u1
Note 6 - Business Segments (Details Textual)
3 Months Ended
Mar. 31, 2024
Number of Operating Segments 2
v3.24.1.u1
Note 6 - Business Segments - Summary of Financial Information by Reporting Segment (Details) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Revenues:    
Net patient revenues $ 285,823,000 $ 258,007,000
Other revenues 11,353,000 11,556,000
Net operating revenues 297,176,000 269,563,000
Costs and expenses:    
Salaries, wages, and benefits 183,138,000 167,824,000
Other operating 77,429,000 71,489,000
Rent 10,348,000 10,092,000
Depreciation and amortization 10,586,000 10,048,000
Interest 46,000 98,000
Total costs and expenses 281,547,000 259,551,000
Income/(loss) from operations 15,629,000 10,012,000
Non-operating income (loss) 5,685,000 4,323,000
Unrealized gains on marketable equity securities 14,399,000 1,386,000
Income before income taxes 35,713,000 15,721,000
Inpatient Services Segment [Member]    
Revenues:    
Net patient revenues 252,254,000 226,169,000
Other revenues 15,000 271,000
Net operating revenues 252,269,000 226,440,000
Costs and expenses:    
Salaries, wages, and benefits 150,890,000 138,939,000
Other operating 68,683,000 62,264,000
Rent 8,112,000 8,168,000
Depreciation and amortization 9,630,000 9,117,000
Interest 46,000 98,000
Total costs and expenses 237,361,000 218,586,000
Income/(loss) from operations 14,908,000 7,854,000
Non-operating income (loss) 0 0
Unrealized gains on marketable equity securities 0 0
Income before income taxes 14,908,000 7,854,000
Homecare Services Segment [Member]    
Revenues:    
Net patient revenues 33,569,000 31,838,000
Other revenues 0 0
Net operating revenues 33,569,000 31,838,000
Costs and expenses:    
Salaries, wages, and benefits 21,009,000 20,244,000
Other operating 5,972,000 5,499,000
Rent 566,000 558,000
Depreciation and amortization 187,000 185,000
Interest 0 0
Total costs and expenses 27,734,000 26,486,000
Income/(loss) from operations 5,835,000 5,352,000
Non-operating income (loss) 0 0
Unrealized gains on marketable equity securities 0 0
Income before income taxes 5,835,000 5,352,000
Other Operating Segment [Member]    
Revenues:    
Net patient revenues 0 0
Other revenues 11,338,000 11,285,000
Net operating revenues 11,338,000 11,285,000
Costs and expenses:    
Salaries, wages, and benefits 11,239,000 8,641,000
Other operating 2,774,000 3,726,000
Rent 1,670,000 1,366,000
Depreciation and amortization 769,000 746,000
Interest 0 0
Total costs and expenses 16,452,000 14,479,000
Income/(loss) from operations (5,114,000) (3,194,000)
Non-operating income (loss) 5,685,000 4,323,000
Unrealized gains on marketable equity securities 14,399,000 1,386,000
Income before income taxes $ 14,970,000 $ 2,515,000
v3.24.1.u1
Note 7 - Long-term Leases (Details Textual)
3 Months Ended
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Lessee, Operating Lease, Liability, to be Paid, Year One $ 34,351,000  
Lessee, Operating Lease, Liability, to be Paid, Year Two 33,590,000  
Lessee, Operating Lease, Liability, to be Paid, Year Three 24,933,000  
Operating Lease, Expense $ 10,348,000 $ 10,092,000
Two Leases with NHI [Member]    
Number of Skilled Nursing Centers Leased from NHI 28  
Number of Assisted Living Centers Leased from NHI 5  
Number of Independent Living Centers Leased from NHI 3  
Lease One With NHI [Member]    
Number of Skilled Nursing Facilities Subleased 4  
NHI Lease Agreement [Member]    
Lessee, Operating Lease, Liability, to be Paid, Year One $ 32,625,000  
Lessee, Operating Lease, Liability, to be Paid, Year Two 32,225,000  
Lessee, Operating Lease, Liability, to be Paid, Year Three 31,975,000  
Both NHI Lease Agreements [Member]    
Operating Lease, Expense $ 9,472,000 $ 9,295,000
v3.24.1.u1
Note 7 - Long-term Leases - Maturity of Lease Liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
2025 $ 34,351  
2026 33,590  
2027 24,933  
2028 493  
2029 207  
Thereafter 21  
Total minimum lease payments 93,595  
Less: amounts representing interest (7,858)  
Present value of future minimum lease payments 85,737  
Less: current portion (29,733) $ (29,352)
Noncurrent lease liabilities $ 56,004 $ 63,175
v3.24.1.u1
Note 8 - Earnings Per Share (Details Textual) - shares
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Share-Based Payment Arrangement, Option [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) 245,726 691,580
v3.24.1.u1
Note 8 - Earnings Per Share - Summary of Earnings and Weighted Average Number of Common Shares Used in Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Basic:    
Weighted average common shares outstanding (in shares) 15,350,240 15,337,423
Net income attributable to National HealthCare Corporation $ 26,213 $ 11,723
Earnings per common share, basic (in dollars per share) $ 1.71 $ 0.76
Diluted:    
Weighted average common shares outstanding (in shares) 15,350,240 15,337,423
Effects of dilutive instruments (in shares) 154,856 18,912
Weighted average common shares outstanding (in shares) 15,505,096 15,356,335
Net income attributable to National HealthCare Corporation $ 26,213 $ 11,723
Earnings per common share, diluted (in dollars per share) $ 1.69 $ 0.76
v3.24.1.u1
Note 9 - Investments in Marketable Securities (Details Textual) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Equity Securities Fv Ni Gross Unrealized Gain $ 98,459,000   $ 84,514,000
Equity Securities Fv Ni Gross Unrealized Loss 474,000   928,000
Equity Securities, FV-NI, Unrealized Gain (Loss) 14,399,000 $ 1,386,000  
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax 179,000   326,000
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax 8,273,000   $ 7,937,000
Proceeds from Sale and Maturity of Marketable Securities 11,615,000 15,492,000  
Debt Securities, Realized Gain (Loss) $ 344,000 $ (492,000)  
v3.24.1.u1
Note 9 - Investments in Marketable Securities - Marketable Securities and Restricted Marketable Securities (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Unrestricted investments available for sale, equity, amortized cost $ 24,734 $ 24,734
Marketable equity securities 123,040 111,117
Unrestricted investments available for sale, debt, amortized cost 132,410 135,338
Unrestricted investments available for sale, debt, fair value 124,316 127,727
Restricted marketable equity securities 29,616 26,779
Investments available for sale, amortized cost 187,081 189,648
Marketable Securities 276,972 265,623
Equity Securities [Member]    
Unrestricted investments available for sale, equity, amortized cost 30,176 30,176
Marketable equity securities 123,040 111,117
Restricted investments available for sale, equity, amortized cost 24,495 24,134
Restricted marketable equity securities 29,616 26,779
Corporate Debt Securities [Member]    
Unrestricted investments available for sale, debt, amortized cost 494 2,497
Unrestricted investments available for sale, debt, fair value 484 2,441
Restricted investments available for sale, debt, amortized cost 61,488 59,586
Restricted investments available for sale, debt, fair value 59,398 57,731
US Government Corporations and Agencies Securities [Member]    
Unrestricted investments available for sale, debt, amortized cost 0 2,990
Unrestricted investments available for sale, debt, fair value 0 2,986
Restricted investments available for sale, debt, amortized cost 47,323 46,771
Restricted investments available for sale, debt, fair value 43,004 42,863
Asset-Backed Securities [Member]    
Restricted investments available for sale, debt, amortized cost 19,026 19,388
Restricted investments available for sale, debt, fair value 17,438 17,659
US States and Political Subdivisions Debt Securities [Member]    
Restricted investments available for sale, debt, amortized cost 4,079 4,106
Restricted investments available for sale, debt, fair value $ 3,992 $ 4,047
v3.24.1.u1
Note 9 - Investments in Marketable Securities - Available for Sale Marketable Equity Securities (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
NHI Common Stock, Shares (in shares) 1,630,642 1,630,642
NHI Common Stock, Cost $ 24,734 $ 24,734
NHI Common Stock, fair value 123,040 111,117
NHI Common Stock [Member]    
NHI Common Stock, fair value $ 102,453 $ 91,071
v3.24.1.u1
Note 9 - Investments in Marketable Securities - Amortized Cost and Estimated Fair Value of Debt Securities as Available for Sale (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Within 1 year, cost $ 21,299 $ 19,664
Within 1 year, fair value 20,785 19,328
1 to 5 years, cost 77,738 81,517
1 to 5 years, fair value 73,370 77,118
6 to 10 years, cost 32,012 33,515
6 to 10 years, fair value 28,925 30,802
Over 10 years, cost 1,361 642
Over 10 years, fair value 1,236 479
Cost 132,410 135,338
Fair Value $ 124,316 $ 127,727
v3.24.1.u1
Note 10 - Fair Value Measurements - Summary of Fair Value Measurements by Level (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Mar. 31, 2023
Restricted cash and cash equivalents $ 27,150   $ 28,532
Available-for-sale securities (USD) 124,316 $ 127,727  
Total financial assets 398,104    
Corporate Debt Securities [Member]      
Available-for-sale securities (USD) 484 2,441  
Fair Value, Inputs, Level 1 [Member]      
Total financial assets 359,403    
Fair Value, Inputs, Level 2 [Member]      
Total financial assets 38,224    
Fair Value, Inputs, Level 3 [Member]      
Total financial assets 477    
Fair Value, Recurring [Member]      
Cash and cash equivalents 93,982 107,076  
Restricted cash and cash equivalents 27,150 18,892  
Total financial assets   391,591  
Fair Value, Recurring [Member] | Equity Securities [Member]      
Marketable equity securities 152,656 137,896  
Fair Value, Recurring [Member] | Corporate Debt Securities [Member]      
Available-for-sale securities (USD) 59,882 60,171  
Fair Value, Recurring [Member] | Asset-Backed Securities [Member]      
Available-for-sale securities (USD) 17,438 17,659  
Fair Value, Recurring [Member] | US Treasury Securities [Member]      
Available-for-sale securities (USD) 43,004 45,850  
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]      
Available-for-sale securities (USD) 3,992 4,047  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]      
Cash and cash equivalents 93,982 107,076  
Restricted cash and cash equivalents 27,150 18,892  
Total financial assets   352,574  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]      
Marketable equity securities 152,656 137,896  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]      
Available-for-sale securities (USD) 42,611 42,860  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US Treasury Securities [Member]      
Available-for-sale securities (USD) 43,004 45,850  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]      
Total financial assets   38,568  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]      
Available-for-sale securities (USD) 17,271 17,311  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Asset-Backed Securities [Member]      
Available-for-sale securities (USD) 16,961 17,210  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]      
Available-for-sale securities (USD) 3,992 4,047  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]      
Total financial assets   449  
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Asset-Backed Securities [Member]      
Available-for-sale securities (USD) $ 477 $ 449  
v3.24.1.u1
Note 11 - Goodwill and Other Intangible Assets (Details Textual)
3 Months Ended
Mar. 31, 2024
USD ($)
Goodwill and Intangible Asset Impairment, Total $ 0
Acquisition of Caris [Member] | Trade Names [Member]  
Indefinite-lived Intangible Assets Acquired 4,340,000
Acquisition of Caris [Member] | Certificates of Need and Licenses [Member]  
Indefinite-lived Intangible Assets Acquired $ 2,698,000
v3.24.1.u1
Note 11 - Goodwill and Other Intangible Assets - Activity Related to Goodwill By Segment (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2024
USD ($)
Goodwill, balance $ 168,295
Goodwill, additions 0
Goodwill, balance 168,295
Inpatient Services Segment [Member]  
Goodwill, balance 3,741
Goodwill, additions 0
Goodwill, balance 3,741
Homecare and Hospice Segment [Member]  
Goodwill, balance 164,554
Goodwill, additions 0
Goodwill, balance $ 164,554
v3.24.1.u1
Note 12 - Stock Repurchase Program (Details Textual) - Common Stock [Member] - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Stock Repurchased and Retired During Period, Shares (in shares) 101,131 44,349
Stock Repurchased and Retired During Period, Value $ 9,900,000 $ 2,482,000
v3.24.1.u1
Note 13 - Stock-based Compensation (Details Textual) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount $ 7,652,000  
Salaries, Wages, and Benefits [Member]    
Share-Based Payment Arrangement, Expense $ 793,000 $ 639,000
v3.24.1.u1
Note 13 - Stock-based Compensation - Summary of Assumptions Used to Value Options Granted (Details)
3 Months Ended 12 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Risk–free interest rate 4.33% 4.52%
Expected volatility 24.10% 29.30%
Expected life (Year) 2 years 10 months 24 days 2 years 10 months 24 days
Expected dividend yield 2.64% 4.41%
v3.24.1.u1
Note 13 - Stock-based Compensation - Summary of Options Outstanding (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Options outstanding, shares (in shares) 588,534 445,144
Options outstanding, weighted average exercise price (in dollars per share) $ 61.3 $ 66.62
Options granted, shares (in shares) 245,726 299,278
Options granted, weighted average exercise price (in dollars per share) $ 94.07 $ 54.44
Options exercised, shares (in shares) (137,874) (103,481)
Options exercised, weighted average exercise price (in dollars per share) $ 60.95 $ 64.72
Options cancelled, shares (in shares)   (52,407)
Options cancelled, weighted average exercise price (in dollars per share)   $ 60.58
Options outstanding, shares (in shares) 696,386 588,534
Options outstanding, weighted average exercise price (in dollars per share) $ 72.93 $ 61.3
Options outstanding, aggregate intrinsic value $ 15,025,015  
Options exercisable, shares (in shares) 174,105  
Options exercisable, weighted average exercise price (in dollars per share) $ 68.48  
Options exercisable, aggregate intrinsic value $ 4,531,876  
v3.24.1.u1
Note 13 - Stock-based Compensation - Options Outstanding by Exercise Price Range (Details) - $ / shares
3 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Dec. 31, 2022
Options outstanding (in shares) 696,386 588,534 445,144
Options outstanding, weighted average exercise price (in dollars per share) $ 72.93    
Options outstanding, weighted average remaining contractual life (Year) 3 years 8 months 12 days    
Exercise Price Range 1 [Member]      
Options outstanding (in shares) 377,405    
Options outstanding, exercise price, lower range (in dollars per share) $ 53.94    
Options outstanding, exercise price, upper range (in dollars per share) 69.19    
Options outstanding, weighted average exercise price (in dollars per share) $ 58.92    
Options outstanding, weighted average remaining contractual life (Year) 3 years 6 months    
Exercise Price Range 2 [Member]      
Options outstanding (in shares) 318,981    
Options outstanding, exercise price, lower range (in dollars per share) $ 71.64    
Options outstanding, exercise price, upper range (in dollars per share) 94.1    
Options outstanding, weighted average exercise price (in dollars per share) $ 89.51    
Options outstanding, weighted average remaining contractual life (Year) 4 years    
v3.24.1.u1
Note 14 - Income Taxes (Details Textual)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Effective Income Tax Rate Reconciliation, Percent 26.50% 28.20%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 21.00%  
v3.24.1.u1
Note 15 - Credit Facility - Schedule of Long-Term Debt Instruments (Details Textual) - USD ($)
1 Months Ended
May 31, 2023
Mar. 31, 2024
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration] Secured Overnight Financing Rate (SOFR) [Member]  
Credit Facility [Member]    
Debt Instrument, Face Amount $ 50,000,000  
Debt Instrument, Basis Spread on Variable Rate 1.25%  
Debt Instrument, Basis Spread on Variable Rate, With Maintained Levels of Deposits 1.10%  
Long-Term Debt, Gross   $ 0
v3.24.1.u1
Note 16 - Contingencies and Commitments (Details Textual) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Self Insurance Reserve $ 108,237,000 $ 103,259,000

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