What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-19 · 314 added, 404 removed, 1319 unchanged (35% of the section changed)

23 unchanged sentences

Estimation of Professional Liability Claims Reserves

Description of the Matter

Description of the

The Company’s accrued risk reserves totaled $98,048,000 as of December 31, 2021.

As described in Note 17 to the consolidated financial statements, the accrued risk reserves include professional liability claims reserves for unpaid reported professional liability claims and estimates for incurred but unreported claims.

The Company’s policy with respect to the professional liability claims reserves is to use an actuary to assist management in estimating the exposure for claims obligations (for both asserted and unasserted claims).

Auditing management’s professional liability claims reserves was complex and highly judgmental due to the significant estimation required in determining the reserves, particularly the assumptions of the severity of asserted claims and the quantity and severity of unknown claims. 

As described in Note 18 to the consolidated financial statements, the accrued risk reserves include professional liability claims reserves for unpaid reported professional liability claims and estimates for incurred but unreported claims.

The Company’s policy with respect to the professional liability claims reserves is to use an actuary to assist management in estimating the exposure for claims obligations (for both asserted and unasserted claims).

How We Addressed the Matter in Our Audit

13 unchanged sentences

Net patient revenues

$ 931,795  

$ 947,872  

$ 932,774  

Other revenues

48,917  

48,511  

47,575  

Government stimulus income

47,505  

Net operating revenues and grant income

1,028,217  

996,383  

980,349  

Costs and expenses:

Salaries, wages and benefits

609,306  

592,831  

582,721  

Other operating

286,845  

268,442  

254,038  

Facility rent

40,494  

40,518  

40,923  

Depreciation and amortization

42,018  

42,419  

41,894  

Impairment of assets

Total costs and expenses

980,062  

947,345  

924,273  

Income from operations

48,155  

49,038  

56,076  

Other income:

Non-operating income

28,234  

26,747  

17,670  

Gain on acquisitions of equity method investments

Unrealized gains (losses) on marketable equity securities

12,230  

Income before income taxes

52,423  

88,015  

74,884  

Income tax provision

41,990  

67,976  

58,699  

Net (income) loss attributable to noncontrolling interest

Net income attributable to National HealthCare Corporation

$ 41,871  

$ 68,211  

$ 58,964  

Earnings per share attributable to National HealthCare Corporation stockholders:

$ 2.74  

$ 4.47  

$ 3.87  

$ 2.72  

$ 4.44  

$ 3.87  

Weighted average common shares outstanding:

15,306,174  

15,270,154  

15,224,886  

15,369,523  

15,360,046  

15,236,826  

Dividends declared per common share

$ 2.08  

$ 2.06  

$ 1.98  

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

3 unchanged sentences

Year Ended December 31,

$ 41,990  

$ 67,976  

$ 58,699  

Other comprehensive income (loss):

1 unchanged sentence

Reclassification adjustment for realized gains on sale of marketable debt securities

( 195 )  

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

( 660 )  

( 1,410 )  

Other comprehensive income (loss), net of tax

1 unchanged sentence

Comprehensive income attributable to National HealthCare Corporation

$ 44,368  

$ 73,516  

$ 56,916  

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

4 unchanged sentences

Cash and cash equivalents

$ 147,093  

$ 50,334  

Restricted cash and cash equivalents, current portion

Marketable equity securities

128,590  

152,453  

Marketable debt securities

47,762  

Restricted marketable equity securities

Restricted marketable debt securities, current portion

16,601  

20,576  

Accounts receivable

89,670  

92,975  

Prepaid expenses and other assets

1 unchanged sentence

Total current assets

456,755  

341,053  

Property and Equipment:

Property and equipment, at cost

1,030,426  

1,017,204  

Accumulated depreciation and amortization

Net property and equipment

520,318  

535,430  

Other Assets:

1 unchanged sentence

Restricted marketable debt securities, less current portion

125,472  

126,830  

Deposits and other assets

1 unchanged sentence

right-of-use assets

179,055  

202,909  

21,341  

20,995  

Intangible assets

Notes receivable, less current portion

12,093  

13,384  

Investments in unconsolidated companies

40,782  

39,191  

Total other assets

385,059  

410,165  

$ 1,362,132  

$ 1,286,648  

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

27 unchanged sentences

15,022  

Dividends payable

Current maturities of long-term debt

51,253  

Dividends payable

Total current liabilities

3 unchanged sentences

10,540  

14,963  

Operating lease liabilities, less current portion

7 unchanged sentences

14,079  

24,012  

Other noncurrent liabilities

6 unchanged sentences

45,000,000 shares authorized;

15,369,745 and 15,332,206 shares, respectively, issued and outstanding

15,452,033 and 15,369,745 shares, respectively, issued and outstanding  

Capital in excess of par value

20 unchanged sentences

Cash Flows From Operating Activities:

$ 41,990  

$ 67,976  

$ 58,699  

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

Depreciation and amortization

42,018  

42,419  

41,894  

Equity in earnings of unconsolidated investments

Distributions from unconsolidated investments

10,050  

Unrealized losses (gains) on marketable equity securities

23,966  

Gains on sale of marketable debt securities

Gain on acquisition of equity method investment

Gains on sale of marketable securities

Gains on acquisitions of equity method investments

Gain on sale of skilled nursing facility

Deferred income taxes

Impairment of assets

Stock–based compensation

5 unchanged sentences

Accrued payroll

15,948  

Amounts due to third party payors

1 unchanged sentence

Provider relief funds

16,068  

Contract liabilities

51,253  

Other current liabilities

1 unchanged sentence

Net cash provided by operating activities

203,259  

100,103  

98,435  

Cash Flows From Investing Activities:

2 unchanged sentences

Investments in unconsolidated companies

Acquisition of equity method investment

Acquisitions of equity method investments

Investments in notes receivable

2 unchanged sentences

Sale of marketable securities

40,994  

44,500  

Net cash used in investing activities

1 unchanged sentence

Borrowings under credit facility

40,000  

Principal payments under credit facility

7 unchanged sentences

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

97,492  

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

61,010  

54,920  

67,421  

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

$ 158,502  

$ 61,010  

$ 54,920  

Balance Sheet Classifications:

Cash and cash equivalents

$ 147,093  

$ 50,334  

$ 43,247  

Restricted cash and cash equivalents

11,409  

10,676  

11,673  

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

$ 158,502  

$ 61,010  

$ 54,920  

NATIONAL HEALTHCARE CORPORATION

6 unchanged sentences

$ 3,118  

$ 4,899  

Cash payments for income taxes

1 unchanged sentence

16,524  

20,889  

Non-cash activities include:

 Noncontrolling interest contribution of land  

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

10 unchanged sentences

$ 734,457  

Reclassification due to new accounting standards

68,211  

1 unchanged sentence

67,976  

58,699  

Equity contributed by noncontrolling interest

Other comprehensive loss

Distributions attributable to noncontrolling interest

Other comprehensive income

Stock–based compensation

12 unchanged sentences

41,990  

67,976  

Distributions attributable to noncontrolling interest

Contributions attributable to noncontrolling interest

Other comprehensive income

5 unchanged sentences

Dividends declared to common stockholders ($ 2.08 per share)

Balance at December 31, 2019

Balance at January 1, 2021

15,369,745  

5 unchanged sentences

138,590  

139,087  

Contributions attributable to noncontrolling interest

Other comprehensive income

Other comprehensive loss

Stock–based compensation

11 unchanged sentences

$ 908,460  

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

Notes to Consolidated Financial Statements

2 unchanged sentences

Nature of Operations

National HealthCare Corporation ("NHC" or "the Company") operates, manages or provides services to skilled nursing facilities, assisted living facilities, independent living facilities, home health care programs, and a behavioral health hospital located in 10 Southeastern, Northeastern and Midwestern states in the United States.

The most significant part of our business relates to skilled and intermediate nursing care in which setting we also provide assisted living and retirement services, rehabilitative therapy services, memory and Alzheimer's care services, and home health care.

We also have a non–controlling ownership interest in a hospice care business that services NHC owned health care centers and others.

National HealthCare Corporation ("NHC" or "the Company") operates, manages or provides services to skilled nursing facilities, assisted living facilities, independent living facilities, home health care agencies, hospice agencies, and a behavioral health hospital located in 10 Southeastern, Northeastern and Midwestern states in the United States.

In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities.

9 unchanged sentences

Equity method investments are initially recorded at cost and subsequently are adjusted for our share of the venture’s earnings or losses and cash distributions.

Our most significant equity method investment is a 75.1 % noncontrolling ownership interest in Caris, a business that specializes in hospice care services.

Investments in entities in which we lack the ability to exercise significant influence are included in the consolidated financial statements at cost unless there has been a decline in the market value of our investment.

Use of Estimates

1 unchanged sentence

GAAP requires management 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, including but not limited to, the potential future effects of the novel coronavirus (“COVID- 19”

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, and home health care services.

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.

10 unchanged sentences

Bad debt expense was $ 3,886,000 , $ 3,339,000 , and $ 2,403,000 for years ended December 31, 2021, 2020, and 2019, respectively. 

As of December 31, 2020, and 2019, the Company has recorded allowance for doubtful accounts of $ 5,672,000 and $ 4,451,000 , respectively, as our best estimate of probable losses inherent in the accounts receivable balance.

As of December 31, 2021, and 2020, the Company has recorded an allowance for doubtful accounts of $ 6,411,000 and $ 5,672,000 , respectively, as our best estimate of probable losses inherent in the accounts receivable balance.

Other Revenues

8 unchanged sentences

Government Grants

Given the absence of specific guidance to account for government grants under U.S.

In the absence of specific guidance to account for government grants under U.S.

GAAP, we have concluded to account for government grants in accordance with International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance, and as such, we recognize grant income on a systematic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate.

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.

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 one behavioral health hospital, and ( 2 ) homecare services.

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and one behavioral health hospital, and ( 2 ) homecare and hospice services.

The Company also reports an “all other”

13 unchanged sentences

Investments in Marketable Securities and Restricted Marketable Securities

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No.

2016 - 01 using the modified retrospective method as required in the standard.

2016 - 01 revised the classification and measurement of investments in certain equity investments and required the change in fair value of many equity investments to be recognized in net income.

The adoption of ASU No.

2016 - 01 resulted in a $ 68,073,000 reclassification of net unrealized gains from accumulated other comprehensive income to the opening balance sheet of retained earnings.

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.

5 unchanged sentences

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Inventories consist generally of food and supplies and are valued at the lower of cost or net realizable value, with cost determined on a first–in, first–out (FIFO) basis.

Inventories consist generally of food and supplies and are valued at the lower of cost or market, with cost determined on a first–in, first–out (FIFO) basis.

Mortgage and Other Notes Receivable

15 unchanged sentences

If recognition of impairment is necessary, it is measured as the amount by which the carrying amount of the property exceeds the estimated fair value of the property.

Management has evaluated long-lived assets and determined there were impairment charges of $ 4,497,000 , $ 0 , and $ 0 during the years ended December 31, 2021, 2020, and 2019, respectively.

The impairment charges are recorded in the consolidated statements of operations under the line item “impairment of assets”.

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 tangible and identifiable intangible assets.

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.

Long-Term Leases

11 unchanged sentences

Rather, these variable components are expensed as incurred.

Goodwill and Other Intangible Assets

The Company accounts for goodwill under ASC Topic 350, Intangibles –

Goodwill and Other .

Under the provisions of this guidance, goodwill and intangible assets with indefinite useful lives are not amortized but are subject to impairment tests based on their estimated fair value.

Unamortized goodwill is continually reviewed for impairment in accordance with ASC Topic 350.

The Company performs its annual impairment assessment on the first day of the fourth quarter.

The following table represents activity in goodwill by segment ( in thousands ):

Year Ended December 31, 2020

January 1, 2018

$ 17,600  

December 31, 2018

17,600  

20,995  

December 31, 2019

17,600  

20,995  

December 31, 2020

$ 3,741  

$ 17,600  

$ 21,341  

Goodwill represents the excess of 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, 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

37 unchanged sentences

The carrying amount of the noncontrolling interest is adjusted based on an allocation of subsidiary earnings based on ownership interest.

Stock–Based Compensation

Stock –

Based Compensation

Stock–based awards granted include stock options, restricted stock units, and stock purchased under our employee stock purchase plan.

23 unchanged sentences

Recently Adopted Accounting Guidance

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU Update No.

2016 - 13 , Financial Instruments –

Credit Losses:

Measurement of Credit Losses on Financial Instruments .

2016 - 13 adds to U.S.

GAAP an impairment model that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The ASU is also intended to reduce the complexity of U.S.

GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments.

This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those annual periods.

The Company adopted the standard as of January 1, 2020.

This standard did not have a material impact on our consolidated financial statements;

however, we did update our processes specifically in how we monitor credit related declines in market value for our available for sale marketable debt securities.

On December 18, 2019, the FASB issued ASU No.

2019 - 12 , Income Taxes (Topic 740 ):

Simplifying the Accounting for Income Taxes .

This ASU is part of the FASB’s overall simplification initiative to reduce the costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements.

This ASU removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

On November 17, 2021, the FASB issued ASU No.

2021 - 10, Government Assistance (Topic 832 ):

Disclosures by Business Entities about Government Assistance, which aims to provide increased transparency by requiring businesses to disclose information about certain types of government assistance they receive in the notes to the financial statements.

2021 - 10 requires business entities to provide these disclosures when they have ( 1 ) have received government assistance and ( 2 ) use a grant or contribution accounting model by analogy to other accounting guidance.

2021 - 10 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted.

On January 1, 2020, the Company early adopted the provisions of ASU No.

This standard did not have a material impact on our consolidated financial statements.

The Company adopted the standard as of January 1, 2021 and has included the appropriate disclosures in our notes to the financial statements.

Note 2 –

1 unchanged sentence

In early March 2020, COVID- 19, a disease caused by the novel strain of the coronavirus, was characterized as a pandemic by the World Health Organization.

The COVID- 19 virus has spread rapidly, with every state in the United States (“U.S.”) being impacted.

The rapid spread has resulted in authorities around the U.S.

implementing various measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns.

The pandemic and these containment measures have had an adverse impact on the Company's results of operations in 2020.

The financial results for the second, third, and fourth quarters of 2020 have been significantly impacted by COVID- 19 with census in our skilled nursing facilities dropping to 83.6 % for the year, while we also incurred significantly increased operating expenses.

government enacted several laws beginning in March 2020 designed to help the nation respond to the COVID- 19 pandemic.

The new laws impact healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective is the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). 

The CARES Act provided $2.2 trillion of economy-wide financial stimulus in the form of financial aid to individuals, businesses, nonprofits, states and municipalities.

The CARES Act originally appropriated $100 billion to establish the Public Health and Social Services Emergency Fund, which is referred to as the Provider Relief Fund.

The new laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective is the CARES Act. Through the CARES Act, as well as the Paycheck Protection Program and Health Care Enhancement Act ("PPPCHE"), the federal government has allocated $178 billion to the Public Health and Social Services Emergency Fund , which is referred to as the Provider Relief Fund.

The Provider Relief Fund is administered through grants and other mechanisms to skilled nursing providers, home health providers, hospitals, and other Medicare and Medicaid enrolled providers to cover any unreimbursed health care related expenses or lost revenue attributable to the public health emergency resulting from COVID- 19.

On April 24, 2020, another $75 billion was added to the Provider Relief Fund by the Paycheck Protection Program and Health Care Enactment Act, bringing the total amount appropriated in the fund to $175 billion. 

During the second, third, and fourth quarters of 2020, we received disbursements from the Provider Relief Fund which totaled $ 63,573,000 .

These funds come with terms and condition certifications in which all providers are required to submit documents to ensure the funds will be used for healthcare-related expenses or lost revenue attributable to COVID- 19.

Of the $63,573,000  of funds received, the Company recorded $ 47,505,000  of government stimulus income for the year ended December 31, 2020 

determined on a systematic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate. 

The Company’s assessment of whether the terms and conditions for amounts received have been met for income recognition and the Company’s related income calculation considered all frequently asked questions and other interpretive guidance issued to date by the US.

Department of Health and Human Services (“HHS”), but are subject to audit by the HHS.

As of December 31, 2020, amounts not recognized as income are $ 16,068,000  and are reflected in the current liability section of our consolidated balance sheet (provider relief funds).

The Provider Relief Fund grants come with terms and condition certifications in which all providers are required to submit documents to ensure the funds will be used for healthcare-related expenses or lost revenue attributable to COVID- 19.

The Company recorded $ 63,360,000  and $ 47,505,000 of government stimulus income from the Provider Relief Funds for the years ended December 31, 2021 and 2020, respectively. 

The grant income was determined on a systemic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate.

Department of Health and Human Services (“HHS”).

As of December 31, 2021 and 2020, amounts not recognized as income are $ 9,443,000 and $ 16,068,000 , respectively, and are reflected in the current liability section of our consolidated balance sheet (provider relief funds).

We anticipate incurring additional COVID- 19 related expenses or lost revenues in the future;

therefore, at this time, we believe we will fully utilize the remaining $16,068,000  of provider relief funds before the reporting requirement deadline that is required by the U.S.

HHS.  

therefore, at this time, we believe we will fully utilize the remaining $9,443,000 of provider relief funds before the reporting requirement deadline that is required by the U.S.

Additionally, as part of the CARES Act, the legislation included an expansion of the Medicare Accelerated and Advance Payment Program.

1 unchanged sentence

We received approximately $ 51,253,000  as part of this program.

On October 8, 2020 as part of the Continuing Appropriations Act, 2021 and Other Extensions Act, CMS amended the repayment terms for the accelerated and advance payments.

These funds will begin to be applied against claims for services provided to Medicare patients after approximately one year from the date we received the funds.

These funds are applied against claims for services provided to Medicare patients after approximately one year from the date we received the funds.

During the first eleven months after repayment begins, repayment will occur through an automatic recoupment of twenty-five percent of Medicare payments.

During the succeeding six months, repayment will occur through an automatic recoupment of fifty percent of Medicare payments.

During the succeeding nine months, repayment will occur through an automatic recoupment of fifty percent of Medicare payments.

Any remaining balance that was not paid through the recoupment process within twenty-nine months of receipt of the funds will be required to be paid on-demand, subject to an interest rate of four percent.

As of December 31, 2020, the accelerated payments are reflected within contract liabilities in the consolidated balance sheets as the related performance obligations have not been completed.

The CARES Act temporarily suspended Medicare sequestration beginning May 1, 2020 through December 31, 2020.

Recoupment of the accelerated payments began in the second quarter of 2021.

As of December 31, 2021, $ 15,022,000 of the accelerated payments remain and is reflected within contract liabilities in the consolidated balance sheet.

The CARES Act and subsequent related legislation temporarily suspended Medicare sequestration beginning May 1, 2020 through March 

The Medicare sequestration policy reduces fee-for-service Medicare payments by 2 percent.

The CARES Act extends the sequestration policy through 2030 in exchange for this temporary suspension.

Our net patient revenues increased by approximately $ 2,900,000 in 2020 ( 2nd, 3rd, and 4th quarter impact) due to sequestration being temporarily suspended for the eight -month period.

Beginning April 1, 2022, the sequestration reductions will then be 1% from April 1, 2022 through June 30, 2022. 

The full 

2% reduction is scheduled to go back into effect July 1, 2022.  

The CARES Act extends the sequestration policy through 2030 in exchange for this temporary suspension, which the sequestration reduction for 2030 has been increased up to 3%.

The CARES Act also temporarily permitted employers to defer the deposit and payment of the employer’s portion of the social security taxes ( 6.2% of employee wages) that otherwise would be due between March 27, 2020 and December 31, 2020.

The provision requires that the deferred taxes be paid over a two -year period with half the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.

At December 31, 2020, we have deferred $ 21,158,000 of the Company’s share of the social security taxes. 

At December 31, 2020, half of the payroll tax deferral is included in accrued payroll in the current liabilities section of the consolidated balance sheet and the other half of the payroll tax deferral is included in other noncurrent liabilities within our consolidated balance sheet. 

We have also received from many of the states in which we operate a supplemental Medicaid payment to help mitigate the incremental costs resulting from the COVID- 19 public health emergency.

For the year ended December 31, 2020, we have recorded $ 26,179,000 in net patient revenues in our consolidated statements of operations for these supplemental Medicaid payments.

At December 31, 2021, we have deferred $ 10,545,000 of the Company’s share of the social security taxes included in the current liabilities section of the consolidated balance sheet.

We have also received supplemental Medicaid payments from many of the states in which we operate to help mitigate the incremental costs resulting from the COVID- 19 public health emergency.

We have recorded $ 20,482,000 and $ 26,179,000 in net patient revenues for these supplemental Medicaid payments for the years ended December 31, 2021 and 2020, respectively.

Note 3 –

Acquisition of Caris HealthCare, L.P.

On June 11, 2021, the Company acquired the remaining 24.9 % equity interest in Caris HealthCare, L.P.

(“Caris”) for a purchase price of approximately $ 28,713,000 , net of cash acquired.

Caris specializes in providing hospice and palliative care to over 1,200 patients per day in 28 locations in Georgia, Missouri, South Carolina, Tennessee, and Virginia.

As a leading senior care provider, this acquisition is a strategic advancement of our growth that will provide a continuum of post-acute health care to seniors in our operational footprint.

Prior to the June 11, 2021 acquisition date, the Company held a 75.1 % non-controlling equity interest in Caris, which was accounted for as an equity method investment.

The Company accounted for the acquisition of the remaining 24.9 % equity interest of Caris as a step acquisition, which required remeasurement of the Company’s previous 75.1 % ownership interest to fair value.

Using acquisition accounting, the Company increased the value of its previously held equity method investment to its fair value of approximately $ 133.1 million, which resulted in a gain of $ 95.2 million.

This gain is recorded in the consolidated statements of operations under the line item “gains on acquisitions of equity method investments”.

The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the fair market valuation analysis and determine the fair value of the previously held equity method investment.

The Company has performed a valuation analysis of the fair market value of Caris’

assets to be acquired and liabilities to be assumed.

The following table summarizes the assets acquired and liabilities assumed as of the transaction’s closing date ( in thousands ):

Cash and cash equivalents

$ 15,515  

Restricted cash and cash equivalents

Accounts receivable

10,544  

Prepaid expenses and other assets

Property and equipment

Operating lease –

right-of-use assets

Intangible assets

Total assets acquired

39,891  

Trade accounts payable

Accrued payroll

Other current liabilities

Operating lease liabilities

Other noncurrent liabilities

Total liabilities assumed

Net identifiable assets acquired

30,442  

146,954  

Total estimated fair value of the acquisition

$ 177,396  

The indefinite-lived intangible assets acquired include the trade name of Caris and the certificates of need and licenses.

The goodwill is recorded in the homecare and hospice segment and is attributed to the workforce acquired and reputation of the business as part of the transaction.

We expect approximately 35 %- 40 % of the goodwill to be deductible for income tax purposes.

For the year ended December 31, 2021, Caris contributed net patient revenues of $ 39,746,000 and income before income taxes of $ 10,085,000 that are included in the Company’s consolidated statements of operations.

The following table contains unaudited pro forma consolidated statements of operations information for the years ended December 31, 2021, 2020, and 2019, assuming that the Caris acquisition closed on January 1, 2019 ( in thousands ). 

Net patient revenues

$ 993,498  

$ 994,559  

$ 1,008,920  

Other revenue

45,419  

48,978  

48,617  

Government stimulus income

63,373  

51,441  

Net operating revenues and grant income

1,102,290  

1,094,978  

1,057,537  

Total costs and expenses

1,044,583  

1,030,074  

994,764  

Income from operations

57,707  

64,904  

62,773  

Non-operating income

12,885  

14,446  

14,905  

Gain on acquisition of equity method investments

Unrealized gains (losses) on marketable equity securities

12,230  

Income before income taxes

56,729  

57,091  

91,883  

Income tax provision

45,286  

45,444  

70,838  

Net income (loss) attributable to noncontrolling interest

Net income attributable to NHC

$ 44,789  

$ 45,325  

$ 71,073  

Note 4 –

Net Patient Revenues

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

1 unchanged sentence

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 a behavioral health hospital, and ( 2 ) homecare services.

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and a behavioral health hospital, and ( 2 ) homecare and hospice services (in thousands) .

Year Ended December 31,

(in thousands)

Inpatient services

2 unchanged sentences

$ 893,201  

Homecare services

Homecare and hospice services

96,855  

5 unchanged sentences

$ 947,872  

For inpatient services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation.

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.

14 unchanged sentences

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 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.

8 unchanged sentences

Included in the Company’s consolidated balance sheets are contract liabilities, which represent payments the Company receives in advance of services provided.

As of December 31, 2020, the Company has recorded $ 51,253,000 in contract liabilities related to receipts from the Medicare Accelerated and Advance Payment Program.

These funds will begin to be applied against claims for services provided to Medicare patients after approximately one year from the date we received the funds. 

As of December 31, 2021 and 2020, the Company has recorded $ 15,022,000 and $ 51,253,000 , respectively, in contract liabilities related to receipts from the Medicare Accelerated and Advance Payment Program.

These funds began being applied against claims for services provided to Medicare patients after approximately one year from the date we received the funds.

During the first eleven months after repayment begins, repayment occurs through an automatic recoupment of twenty-five percent of Medicare payments.

During the succeeding six months, repayment will occur through an automatic recoupment of fifty percent of Medicare payments.

Recoupment of the accelerated payments began in April 2021.

A summary of the contract liabilities are follows ( in thousands ):

5 unchanged sentences

51,253  

Payments received

Payments recognized

Balance, December 31, 2021

$ 15,022  

Third Party Payors

10 unchanged sentences

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.

2 unchanged sentences

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.

Year Ended December 31,

Other revenues include miscellaneous health care related earnings. 

Other revenues are outlined in the table below 

(in thousands):

Year Ended December 31,

Rental income

14 unchanged sentences

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 –

Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note 8  –

Long Term Leases.

Rental income reflected in the consolidated statements of operations consisted of the following:

Rental income reflected in the consolidated statements of operations consisted of the following (in thousands) :

Year Ended December 31,

(in thousands)

Operating lease payments

12 unchanged sentences

22,730  

Total future minimum lease payments

11 unchanged sentences

Management Fees and Financial and Accounting Services for Other Healthcare Centers

During 2020, 2019 and 2018, we provided management services to certain healthcare facilities (in addition to the five National centers) operated by third party owners. 

For the years ended December 31, 2020, 2019 and 2018, we recognized management fees of $ 2,973,000 , $ 2,952,000 and $ 2,532,000 from these centers, respectively.

During 2021, 2020 and 2019, we provided management services and financial and accounting services to certain healthcare facilities (in addition to the five National centers) operated by third party owners. 

For the years ended December 31, 2021, 2020 and 2019, we recognized management fees and financial and accounting fees of $ 13,224,000 , $ 12,418,000 , and $ 11,906,000 from these centers, respectively.

Insurance Services

7 unchanged sentences

The total consideration paid to the Company was $ 6,750,000 , which resulted in a gain of $ 2,784,000 .

In October 

2018, the Company sold a skilled nursing facility located in Madisonville, Kentucky. 

The total consideration paid to the Company was $ 4,300,000 , which resulted in a gain of $ 1,668,000 .

Note 6 –

Non–Operating Income

Non–operating income includes equity in earnings of unconsolidated investments, dividends and other realized gains and losses on marketable securities, and interest income.

Operating Income

Non–operating income includes equity in earnings of unconsolidated investments, dividends and other realized gains and losses on marketable securities, and interest income (in thousands) .

Year Ended December 31,

(in thousands)

Equity in earnings of unconsolidated investments

4 unchanged sentences

Interest income

Gain on acquisitions of equity method investments

Total non-operating income

3 unchanged sentences

Caris HealthCare, L.P.

(“Caris”)

Our most significant equity method investment is a 75.1 % non–controlling ownership interest in Caris, a business that specializes in hospice care services.

The carrying value of our investment is $ 38,916,000 and $ 36,673,000 at December 31, 2020 and 2019, respectively.

The carrying amounts are included in investments in unconsolidated companies in the consolidated balance sheets.

Gain on acquisition s of equity method investment s

On February 27, 2020, the Company expanded its controlled operations through an acquisition of the remaining ownership interest of a 166 -bed skilled nursing facility in Knoxville, Tennessee.

We previously held a 25 % noncontrolling interest in the facility and accounted for the investment as an equity method investment.

The operating results of the business have been included in the accompanying consolidated financial statements since the remaining ownership interest acquisition date.

Upon acquiring the remaining ownership interest, the Company recorded and increased its previously held equity interest up to fair value as of the acquisition date.

This remeasurement of our equity interest at fair value resulted in a gain of $ 1,707,000 .

Additionally, the excess of the fair value over the amounts assigned to the assets and liabilities of the investee resulted in recording goodwill in the amount of $ 346,000 on the acquisition date.

In June 2019, the Company expanded its controlled operations through an acquisition of the remaining ownership interest of a 60 -bed memory care facility in St.

Peters, Missouri.

We previously held a noncontrolling interest in the facility and accounted for the investment as an equity method investment.

This remeasurement of our equity interest at fair value resulted in a gain of $ 1,975,000 . The operating results of the business have been included in the accompanying consolidated financial statements since the June 2019 

acquisition date.

In July 2018, the Company expanded its controlled operations through an acquisition of additional ownership resulting in a controlling financial interest of a 16 -bed geriatric psychiatric hospital in Osage Beach, Missouri. 

We previously held a noncontrolling interest and accounted for the hospital as an equity method investment. 

This remeasurement of our equity interest at fair value resulted in a gain of $ 2,050,000 . The operating results of the business have been included in the accompanying consolidated financial statements since the July 2018 

acquisition date.

Caris ”

On June 11, 2021, the Company acquired the remaining 24.9 % equity interest in Caris.

See Note 3 –

“Acquisition of Caris Healthcare, L.P.”

for further detail describing the acquisition.

Prior to the June 11 acquisition date, Caris was our most significant equity method investment with a 75.1 % non-controlling ownership interest.

From the respective acquisition date, Caris’

financial information is now included in the Company’s consolidated financial statements and is longer be accounted for as an equity method investment.

Note 7 –

1 unchanged sentence

The Company has two reportable operating segments:

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital, and ( 2 ) homecare services.

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital, 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 make (“CODM”), to assess performance and allocate resources.

7 unchanged sentences

Year Ended December 31, 2021

Homecare and Hospice

Net patient revenues

30 unchanged sentences

40,672  

Impairment of assets

Total costs and expenses

6 unchanged sentences

19,069  

50,925  

Non-operating income

1 unchanged sentence

17,774  

Gain on acquisition of equity method investment

95,202  

Unrealized losses on marketable equity securities

Income (loss) before income taxes

Income before income taxes

$ 61,424  

1 unchanged sentence

$ 69,545  

$ 150,038  

Year Ended December 31, 2020

Homecare and Hospice

Net patient revenues

5 unchanged sentences

48,917  

Net operating revenues

Government stimulus income

47,505  

Net operating revenues and grant income

930,601  

52,102  

45,514  

1,028,217  

Costs and Expenses:

8 unchanged sentences

10,513  

286,845  

Facility rent

12 unchanged sentences

48,155  

49,038  

Non-operating income

1 unchanged sentence

26,527  

Unrealized gains on marketable equity securities

12,230  

Income before income taxes

$ 52,189  

Gain on acquisition of equity method investment

Unrealized losses on marketable equity securities

Income (loss) before income taxes

$ 57,502  

38 unchanged sentences

( 5,678 )  

49,038  

Non-operating income

1 unchanged sentence

24,772  

Unrealized gains on marketable securities

Gain on acquisition of equity method investment

Unrealized gains on marketable equity securities

12,230  

Income before income taxes

4 unchanged sentences

Note 8 –

Long–Term Leases

Long –

As of December 31, 2021, we leased from NHI the real property of 35 skilled nursing facilities, seven assisted living centers and three independent living centers under two separate lease agreements.

51 unchanged sentences

10,540  

14,963  

Operating lease liabilities

13 unchanged sentences

$ 3,906  

$ 3,889  

Interest of lease liabilities

4 unchanged sentences

35,656  

35,881  

Variable lease costs

3 unchanged sentences

40,494  

40,518  

Total lease costs

1 unchanged sentence

$ 45,464  

$ 45,713  

Minimum Lease Payments

6 unchanged sentences

34,381  

39,950  

Total minimum lease payments

14 unchanged sentences

$ 35,656  

$ 35,881  

Operating cash flows for finance leases

56 unchanged sentences

18,843  

25,812  

25,778  

Asset-backed securities

2 unchanged sentences

14,998  

19,519  

19,504  

Restricted investments available for sale:

Marketable equity securities

25,442  

26,958  

Corporate debt securities

20 unchanged sentences

$ 323,105  

$ 174,342  

$ 299,859  

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

8 unchanged sentences

$ 112,792  

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

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

December 31, 2021

December 31, 2020

(in thousands)

Within 1 year

19 unchanged sentences

Gross unrealized losses related to marketable equity securities are $ 946,000 and $ 134,000 as of December 31, 2021 and 2020, respectively.

For the years ended December 31, 2020 and 2019, the Company recognized net unrealized losses of $ 23,966,000 and net unrealized gains of $ 12,230,000 , respectively, in the consolidated statements of operations.

For the years ended December 31, 2021, 2020, and 2019 the Company recognized net unrealized losses of $ 13,863,000 , $ 23,966,000 , and a net unrealized gain of $ 12,230,000 , respectively, in the consolidated statements of operations.

Gross unrealized gains related to available for sale marketable debt securities are $ 3,189,000 and $ 6,759,000 as of December 31, 2021 and 2020, respectively.

2 unchanged sentences

For the marketable debt 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 debt securities during the years ended December 31, 2020, 2019, and 2018 were $ 40,994,000 , $ 44,500,000 , and $ 4,539,000 , respectively.

Proceeds from the sale of available for sale marketable securities during the years ended December 31, 2021, 2020, and 2019 were $ 101,920,000 , $ 40,994,000 , and $ 44,500,000 , respectively.

Net investment gains of $ 1,042,000 , $ 195,000 , and $ 127,000 were realized on these sales during the years ended December 31, 2021, 2020, and 2019, respectively.

No sales were reported for the marketable equity securities for the years ended December 31, 2020, 2019, and 2018.

Note 11 –

12 unchanged sentences

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 Company's non-financial assets, which includes goodwill, intangible assets, property and equipment and right-of-use assets, are not required to be measured at fair value on a recurring basis.

However, on a periodic basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, the Company assesses its long-lived assets for impairment.

When impairment has occurred, such long-lived assets are written down to fair value.

Valuation of Marketable Securities

13 unchanged sentences

December 31, 2021

For Identical

Cash and cash equivalents

18 unchanged sentences

State and municipal securities

12,898  

Total financial assets

56 unchanged sentences

The Company estimates the cost to complete construction in progress is approximately $ 5,360,000 at December 31, 2021.

Note 1 2 –

Notes Receivable

At December 31, 2020 and 2019, we have notes receivable from healthcare facilities totaling $ 13,021,000 and $ 15,079,000 , respectively, reflected in the accompanying consolidated balance sheets.

The notes include a working capital loan and a first mortgage, both with 8 % fixed interest rates and periodic payments required prior to maturity.

The notes mature in 2022 and 2025.

The Company evaluated its long-lived assets and recorded an impairment charge of $ 4,497,000 , $ 0 , and $ 0 for the years ended 2021, 2020, and 2019.

The impairment charges are recorded in the consolidated statements of operations under the line item “impairment of assets”.

Note 13 –

Long–Term Debt

Long–term debt consists of the following (dollars in thousands) :

Credit Facility, interest payable monthly

Goodwill and Other Intangible Assets

As of December 31, 2021, we evaluated potential triggering events that might be indicators that our goodwill and indefinite lived intangibles were impaired.

The Company performs its goodwill impairment analysis for each reporting unit that constitutes a component for which ( 1 ) discrete financial information is available and ( 2 ) segment management regularly reviews the operating results of that component, in accordance with the provisions of ASC Topic 350, Intangibles - Goodwill and Other .

No goodwill or intangible asset impairments were recorded during the years ended December, 31 2021, 2020, and 2019.

See Note 3 –

Acquisition of Caris HealthCare, L.P.

for further detail describing the goodwill addition in 2021.

The following table represents activity in goodwill by segment as of and for the year ended December 31, 2021 ( in thousands ):

Year Ended December 31, 2020

Homecare and Hospice

January 1, 2019

$ 3,395  

Less current portion

$ 17,600  

On August 13, 2020, NHC terminated the credit facility.

At December 31, 2020, the Company does not have a credit facility in place.

$ 20,995  

December 31, 2019

17,600  

20,995  

December 31, 2020

17,600  

21,341  

146,954  

December 31, 2021

$ 3,741  

$ 164,554  

$ 168,295  

As part of the Caris acquisition, we also recorded indefinite-lived intangible assets that consisted of the trade name ($ 4,340,000 ) and certificates of need and licenses ($ 2,698,000 ).

Note 14 –

Notes Receivable

At December 31, 2021 and 2020, we have notes receivable from healthcare facilities totaling $ 453,000 and $ 13,021,000 , respectively, reflected in the accompanying consolidated balance sheets.

The note is a working capital loan with an 8 % fixed interest rate and periodic payments required prior to maturity.

The note matures in 2025.

The Company evaluated its notes receivable and recorded a credit loss provision of $ 3,728,000 , $ 0 , and $ 0 for the years ended 2021, 2020, and 2019.

The credit loss provision is recorded in the consolidated statements of operations under the line item “impairment of assets”.

Note 15 –

The provision for income taxes is comprised of the following components (in thousands) :

17 unchanged sentences

Accrued risk reserves

$ 1,764  

Accrued expenses

11,803  

Financial reporting depreciation in excess of tax depreciation

2 unchanged sentences

Operating lease liabilities

45,486  

52,870  

Total gross deferred tax assets

69,154  

71,143  

valuation allowance

Deferred tax assets less valuation allowance

$ 69,154  

$ 71,143  

Deferred tax liabilities:

10 unchanged sentences

Tax provision at federal statutory rate

$ 11,009  

$ 18,483  

$ 15,726  

Increase (decrease) in income taxes resulting from:

State, net of federal benefit

Nontaxable revaluation gain

Return to provision

3 unchanged sentences

Effective income tax expense

$ 10,433  

$ 20,039  

$ 16,185  

Our deferred tax assets have been evaluated for realization based on historical taxable income, tax planning strategies, the expected timing of reversals of existing temporary differences and future taxable income anticipated.

9 unchanged sentences

Balance, January 1, 2019

$ 5,048  

$ 12,520  

$ 3,275  

$ 15,795  

Additions based on tax positions related to the current year

2 unchanged sentences

Balance, December 31, 2019

11,933  

15,204  

Additions based on tax positions related to the current year

Additions for tax positions of prior years

Additions (reductions) for tax positions of prior years

Reductions for statute of limitation expirations

Balance, December 31, 2020

12,749  

16,058  

Additions based on tax positions related to the current year

2 unchanged sentences

Balance, December 31, 2021

$ 5,666  

$ 9,893  

$ 2,614  

$ 12,507  

During the year ended December 31, 2021, we have recognized a $ 1,469,000 decrease in unrecognized tax benefits and an accompanying $ 867,000 decrease of related interest and penalties due to the effect of statute of limitations lapse.

The favorable impact on our tax provision was $1,901,000.

We have also recognized a $ 2,273,000 decrease in unrecognized tax benefits primarily as a result of the CARES Act.

During the years ended December 31, 2020 and 2019, the favorable impact on our tax provision due to the effect of statute of limitations lapsing was $ 2,366,000 and $2,064,000, respectively.

7 unchanged sentences

Note 16 –

Stock Repurchase Program

The stock repurchase plan began on September 1, 2019 

and expired on August 31, 2020.

Stock Repurchases

During 2021, the Company purchased 8,437 shares of its common stock for a total cost of $ 836,000 .

During 2020, the Company purchased 797 shares of its common stock for a total cost of $ 53,000 .

During 2018, the Company repurchased 14,506 shares of its common stock for a total cost of $ 867,000 .

The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

During 2019, the Company purchased 10,396 shares of its common stock for a total cost of $ 872,000 .

The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued. 

Note 17 –

Stock–Based Compensation

Stock –

Based Compensation

NHC recognizes stock–based compensation for all stock options and restricted stock granted over the requisite service period using the fair value for these grants as estimated at the date of grant either using the Black–Scholes pricing model for stock options or the quoted market price for restricted stock.

17 unchanged sentences

At December 31, 2021, the Company had $ 1,041,000 of unrecognized compensation cost related to unvested stock-based compensation awards.

This unrecognized compensation cost will be amortized over an approximate two -year period.

This unrecognized compensation cost will be amortized over an approximate one -year period.

Stock Options

10 unchanged sentences

Risk–free interest rate

0.87 %  

2.30 %  

Expected volatility

20.1 %  

17.4 %  

Expected life, in years

Expected dividend yield

2.91 %  

2.73 %  

The following table summarizes option activity:

2 unchanged sentences

1,163,381  

$ 71.16  

Options granted

7 unchanged sentences

Options exercised

( 43,630 )  

Options cancelled

( 3,000 )  

Options outstanding at December 31, 2020

9 unchanged sentences

377,899  

$ 572,790  

Options exercisable at December 31, 2021

7 unchanged sentences

291,946  

$ 84.30  

71.64 –

374,926  

5 unchanged sentences

compensation and general and professional liability insurance claims both for our owned or 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 $ 99,537,000 and $ 96,011,000 at December 31, 2020 and 2019, respectively.

The liability we have recognized for reported claims and estimates for incurred but unreported claims total $ 98,048,000 and $ 99,537,000 at December 31, 2021 and 2020, respectively.

The liability is included in accrued risk reserves in the consolidated balance sheets.

22 unchanged sentences

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.

Nutritional Support Services, L.P., Qui Tam Litigation

 On June 19, 2018, a First Amended Complaint was filed naming Nutritional Support Services, L.P.

(“NSS”), a wholly owned subsidiary of the Company, as a defendant in the action captioned U.S.

Nutritional Support Services, L.P., No.

6:17 -cv- 2608 -AMQ (D.S.C.), which was filed in the United States District Court for the District of South Carolina (the "Court").

The action alleges that NSS violated the False Claims Act by reporting a National Drug Code (“NDC”) number that did not correspond to the NDC for dispensed prescriptions.

The plaintiffs were seeking unspecified damages.

On April 16, 2018, the United States filed a Notice of Election to Decline Intervention with respect to the allegations asserted in this action.

On March 14, 2020, the Court entered an Order granting the Defendant’s Motion to Dismiss. 

On May 6, 2020, the Court entered a Final Judgment dismissing the case.

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.

2:20 -CV- 00877 -AMM (N.D.

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 Plaintiff filed an amended Complaint against Dr.

Sanja Malhotra, Integrated Behavioral Health, Inc.

and other entities that Dr.

Malhotra is alleged to own or in which he has 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 alleges 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 denies the allegations and is vigorously defending the claim.

A motion to dismiss was filed 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. 

We expect that motion to dismiss will be renewed once the stay is lifted. 

There is no expected timeline for the lifting of the stay.  

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.

5 unchanged sentences

Note 19 –

Equity Method Investment in Caris HealthCare, L.P.

As of December 31, 2020, we have a 75.1 % non–controlling ownership interest in Caris, a business that specializes in hospice care services in NHC owned health care centers and in other settings.

The carrying value of our investment is $ 38,916,000 and $ 36,673,000 at December 31, 2020 and 2019, respectively.

The carrying amounts are included in investments in unconsolidated companies in the consolidated balance sheets.

The difference between the carrying value of our investment and our capital account balance in Caris is due to the additional limited partner ownership interest the Company acquired from current and former partners.

Summarized financial information of Caris for the years ended December 31, 2020, 2019, and 2018 is provided below (in thousands) .

Current assets

$ 27,737  

$ 25,664  

$ 17,539  

Noncurrent assets

12,083  

12,336  

10,266  

10,784  

Partners’

29,995  

27,216  

19,148  

68,649  

62,034  

56,410  

52,522  

48,803  

55,507  

16,127  

13,231  

We have included separate audited financial statements for Caris as an exhibit to this filing.

Consolidation Considerations

Due to our ownership percentage in Caris, we have considered whether Caris should be consolidated by NHC under the guidance provided in ASC Topic 810, Consolidation .

We do not consolidate Caris because ( 1 ) Caris’

equity at risk is sufficient to finance its activities without additional subordinated financial support, ( 2 ) the general partner of the Partnership has the power to direct the activities that most significantly impact the economic performance of Caris, and ( 3 ) the equity holders of Caris possess the characteristics of a controlling financial interest, including voting rights that are proportional to their economic interests.

Supporting the assertions above is the following:

( 1 ) the ownership percentage of the general partner remains equally divided between NHC and another party, ( 2 ) the general partner manages and controls the Partnership with full and complete discretion, and ( 3 ) the limited partners have no right or power to take part in the control of the business of the Partnership, which is the position of the majority of our ownership interest.

Note 1 9 –

Relationship with National Health Corporation

17 unchanged sentences

The administrative fee paid to National for the years ended December 31, 2021, 2020, and 2019 was $ 5,112,000 , $ 5,026,000 , and $ 5,131,000 , respectively.

At December 31, 2020 and 2019, the Company has recorded $ 0 and $ 1,653,000 , respectively, in accounts receivable and $ 3,140,000 and $ 79,000 , respectively, in accounts payable in the consolidated balance sheets as a result of the timing differences between interim payments for payroll and employee benefits services costs.

National’s Ownership of Our Stock

At December 31, 2021 and 2020, the Company has recorded $ 2,684,000 and $ 3,140,000 , respectively, in accounts payable in the consolidated balance sheets as a result of the timing differences between interim payments for payroll and employee benefits services costs.

National ’

s Ownership of Our Stock

At December 31, 2021, National owns 1,084,763 shares, or approximately 7.0 % of our outstanding common stock. 

20 unchanged sentences

A mortgage note receivable from the third -party owners of $ 11,047,000 at December 31, 2021 and 2020 is eliminated in our consolidated financial statements.

Land and buildings and improvements of $ 11,047,000 at December 31, 2020 and 2019 have been recorded in our consolidated financial statements, as well as the operations of the facility because we are the primary beneficiary in the relationship.

Land and buildings and improvements of $ 11,047,000 at December 31, 2021 and 2020 have been recorded in our consolidated financial statements, as well as the operations of the facility because we are the primary beneficiary in the relationship. 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data