What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 86 added, 88 removed, 303 unchanged (36% of the section changed)

36 unchanged sentences

or the “Company”) is a leading provider of senior health care services.

As of June 30, 2023, we operate or manage, through certain affiliates, 68 skilled nursing facilities with a total of 8,732 licensed beds, 23 assisted living facilities with 1,181 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies.

As of September 30, 2023, we operate or manage, through certain affiliates, 68 skilled nursing facilities with a total of 8,732 licensed beds, 26 assisted living facilities with 1,501 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.

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

The Company recorded $0 and $320,000 of government stimulus income from the Provider Relief Funds for the three months ended June 30, 2023 and 2022, respectively.

The Company recorded $0 and $10,940,000 of government stimulus income from the Provider Relief Funds for the six months ended June 30, 2023 and 2022, respectively.

The Company recorded $0 of government stimulus income from the Provider Relief Funds for the three months ended September 30, 2023 and 2022.

The Company recorded $0 and $10,940,000 of government stimulus income from the Provider Relief Funds for the nine months ended September 30, 2023 and 2022, respectively.

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

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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 $6,247,000 and $5,001,000 in net patient revenues for these supplemental Medicaid payments for the three months ended June 30, 2023 and 2022, respectively.

We have recorded $11,130,000 and $10,539,000 in net patient revenues for these supplemental Medicaid payments for the six months ended June 30, 2023 and 2022, respectively.

We have recorded $4,232,000 and $4,773,000 in net patient revenues for these supplemental Medicaid payments for the three months ended September 30, 2023 and 2022, respectively. We have recorded $15,362,000 and $15,312,000 in net patient revenues for these supplemental Medicaid payments for the nine months ended September 30, 2023 and 2022, respectively.

Summary of Goals and Areas of Focus

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 June 30, 2023 was 87.9% compared to 84.0% for the same period a year ago.  For the six months ended June 30, 2023, overall census in our owned and leased skilled nursing facilities was 87.7% compared to 83.3% for the same period a year ago.

The overall census in owned and leased skilled nursing facilities for the three months ending September 30, 2023 was 88.1% compared to 83.7% for the same period a year ago.  For the nine months ended September 30, 2023, overall census in our owned and leased skilled nursing facilities was 87.8% compared to 83.4% 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.

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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 June 30, 2023:

The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of September 30, 2023:

Industry Ratings

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Our accrued professional liability and workers’

compensation reserves totaled $106,220,000 at June 30, 2023 and are a primary area of management focus.

compensation reserves totaled $108,125,000 at September 30, 2023 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’

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The recalibrated parity adjustment is a total of 4.6% and is being phased in over the next two years (2.3% annually).

In July 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2023.

In July 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates and policy changes for skilled nursing facilities, which begins 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.

For the first six months of 2023, our average Medicare per diem rate for skilled nursing facilities increased 1.8% as compared to the same period in 2022. 

For the first nine months of 2023, our average Medicare per diem rate for skilled nursing facilities increased 2.2% as compared to the same period in 2022. 

Medicaid –

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

We have recorded $6,247,000 and $5,001,000 in net patient revenues for these supplemental Medicaid payments for the three months ended June 30, 2023 and 2022, respectively.

We have recorded $11,130,000 and $10,539,000 in net patient revenues for these supplemental Medicaid payments for the six months ended June 30, 2023 and 2022, respectively.

For the first six months of 2023, our average Medicaid per diem increased 7.8% compared to the same period in 2022.

This funding includes healthcare relief funding under the American Rescue Plan Act (“ARPA”) and increases in the Federal Medical Assistance Percentage (“FMAP”) under the Families First Coronavirus Response Act (“FFCRA”).

We have recorded $4,232,000 and $4,773,000 in net patient revenues for these supplemental Medicaid payments for the three months ended September 30, 2023 and 2022, respectively.

We have recorded $15,362,000 and $15,312,000 in net patient revenues for these supplemental Medicaid payments for the nine months ended September 30, 2023 and 2022, respectively.

The end of the public health emergency created a gradual phase down of the temporary increase in FMAP funding until it is completely phased out at the end of 2023.

For the first nine months of 2023, our average Medicaid per diem increased 7.9% compared to the same period in 2022.

State Medicaid plans subject to budget constraints are of particular concern to us.

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In October 2022, CMS released its final rule outlining fiscal year 2023 Medicare payment rates.

CMS projects payments to home health agencies in fiscal year 2023 will increase in aggregate by 0.7%, or $125 million.

CMS issued a rate increase of 0.7%, or $125 million, effective January 1, 2023.

The increase reflects the effects of the home health payment update percentage of 4.0%, a permanent behavioral assumption adjustment resulting in a decrease of 3.5%, and an estimated 0.2% increase that reflects the effects of an update to the fixed-dollar loss ratio used in determining outlier payments.

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

Three Months Ended June 30, 2023

Revenues and grant income:

Three Months Ended September 30, 2023

Net patient revenues

Other revenues

Net operating revenues and grant income

Net operating revenues

Costs and expenses:

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Non-operating income

Unrealized gains on marketable equity securities

Income before income taxes

Three Months Ended June 30, 2022

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Three Months Ended September 30, 2022

Net patient revenues

Other revenues

Government stimulus income

Net operating revenues and grant income

Net operating revenues

Costs and expenses:

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Income/(loss) before income taxes

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Net patient revenues

Other revenues

Net operating revenues and grant income

Net operating revenues

Costs and expenses:

7 unchanged sentences

Income before income taxes

Six Months Ended June, 2022

Nine Months Ended September, 2022

Revenues and grant income:

11 unchanged sentences

Unrealized losses on marketable equity securities

Income before income taxes

Income/(loss) before income taxes

Non-GAAP Financial Presentation

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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 the newly constructed healthcare facilities or start-up operations not at full capacity, 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 or agencies not at full capacity for the three and six months ended June 30, 2023 include facilities or agencies that began operations from 2021 to 2023, which is two behavioral health hospitals, two homecare agencies, and two hospice agencies.

For the three months and six months ended June 30, 2022, included are facilities or agencies that began operations from 2020 to 2022, which is two behavioral health hospitals, one homecare agency, and one hospice agency.

The operating results for the newly constructed healthcare facilities or agencies not at full capacity for the three and nine months ended September 30, 2023 include facilities or agencies that began operations from 2021 to 2023, which is two behavioral health hospitals, two homecare agencies, and two hospice agencies.

For the three months and nine months ended September 30, 2022, included are facilities or agencies that began operations from 2020 to 2022, which is two behavioral health hospitals, one homecare agency, and one hospice agency.

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

Three Months Ended

Six Months Ended

Net income attributable to National Healthcare Corporation

Nine Months Ended

Net income/(loss) attributable to National Healthcare Corporation

Non-GAAP adjustments:

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Share-based compensation expense

Income tax/(benefit) of income taxes on non-GAAP adjustments

Income tax provision on non-GAAP adjustments

Non-GAAP Net income

GAAP diluted earnings per share

GAAP diluted earnings/(loss) per share

Non-GAAP adjustments:

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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 and grant income for the three and six months ended June 30, 2023 and 2022.

Percentage of Net Operating Revenues and Grant Income

Three Months Ended

Six Months Ended

Nine Months Ended

Net operating revenues and grant income

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Unrealized gains/(losses) on marketable equity securities

Income before income taxes

Income tax provision

Income/(loss) before income taxes

Income tax (provision)/benefit

Net income/(loss)

Net loss attributable to noncontrolling interest

Net income attributable to stockholders of NHC

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Results for the quarter ended June 30, 2023 compared to the second quarter of 2022 include a 4.1% increase in net operating revenues and grant income. The net operating revenues and grant income increase was primarily driven by the continued occupancy increase in our skilled nursing facilities, as well as increases in skilled nursing per diems from some of our government payors.

Excluding the government stimulus income and the seven skilled nursing facilities in Massachusetts and New Hampshire in which we ceased operations in September 2022, same-facility net operating revenues increased 11.5% during the second quarter of 2023 compared to the same period a year ago.  

For the quarter ended June 30, 2023, GAAP net income attributable to NHC was $16,281,000 compared to net income of $3,203,000 for the same period in 2022.

Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended June 30, 2023 was $13,658,000 compared to $7,172,000 for the same period in 2022. The increase in non-GAAP earnings for the quarter ended June 30, 2023 compared to the second quarter of 2022 was primarily due to the continued occupancy increase in our skilled nursing and assisted living facilities, skilled nursing per diem increases from some of our government payors, and the continued reduction of nurse agency staffing expense within our operations.

Net operating revenues and grant income

Net income/(loss) attributable to stockholders of NHC

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Results for the quarter ended September 30, 2023 compared to the third quarter of 2022 include a 6.5% increase in net operating revenues. The net operating revenues increase was primarily driven by the continued occupancy increase in our skilled nursing facilities, as well as increases in skilled nursing per diems from some of our government payors.

Excluding the seven skilled nursing facilities in Massachusetts and New Hampshire in which we ceased operations in September 2022, same-facility net operating revenues increased 11.8% during the third quarter of 2023 compared to the same period a year ago.  

For the quarter ended September 30, 2023, GAAP net income attributable to NHC was $10,388,000 compared to a net loss of $2,429,000 for the same period in 2022.

Excluding the unrealized losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended September 30, 2023 was $13,250,000 compared to $7,783,000 for the same period in 2022. The increase in non-GAAP earnings for the quarter ended September 30, 2023 compared to the third quarter of 2022 was primarily due to the continued occupancy increase in our skilled nursing and assisted living facilities, skilled nursing per diem increases from some of our government payors, and the continued reduction of nurse agency staffing expense within our operations.

Net operating revenues

Net patient revenues increased $16,758,000, or 6.4%, compared to the same period last year.

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Overall, the composite skilled nursing facility per diem increased 7.6% compared to the same quarter a year ago.

Our Medicare per diem rates increased 1.6% and managed care per diem rates increased 7.6% compared to the same quarter a year ago.

Our Medicare per diem rates increased 3.0% and managed care per diem rates increased 14.0% compared to the same quarter a year ago.

Medicaid and private pay per diem rates increased 7.9% and 6.7%, respectively, compared to the same quarter a year ago.

For the three months ended June 30, 2023 and 2022, respectively, $6,247,000 and $5,001,000 have been included in our net patient revenues for supplemental COVID-19 Medicaid payments.

New operations, which include one skilled nursing facility acquired May 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $5,890,000 in net patient revenues for the three months ended June 30, 2023 compared to the same quarter last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in net patient revenues decreasing $17,684,000 for the three months ended June 30, 2023 compared to the same quarter last year. 

For the three months ended September 30, 2023 and 2022, respectively, $4,232,000 and $4,773,000 have been included in our net patient revenues for supplemental COVID-19 Medicaid payments.

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 $9,625,000 in net patient revenues for the three months ended September 30, 2023 compared to the same quarter last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in net patient revenues decreasing $12,876,000 for the three months ended September 30, 2023 compared to the same quarter last year. 

Other revenues increased $884,000, or 8.3%, compared to the same quarter last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

During the three months ended June 30, 2023 and 2022, respectively, we recorded $0 and $320,000 in government stimulus income related to funds received from the CARES Act Provider Relief Fund.

See Note 3 - Coronavirus Pandemic for additional information.  

Total costs and expenses

Total costs and expenses for the three months ended June 30, 2023 compared to the same period of 2022 increased $1,797,000, or 0.7% to $268,605,000 from $266,808,000.

Total costs and expenses for the three months ended September 30, 2023 compared to the same period of 2022 increased $8,695,000, or 3.3% to $275,460,000 from $266,765,000.

Salaries, wages, and benefits increased $9,466,000 or 5.5%, to $182,664,000 from $173,198,000.

Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.0% compared to 64.5% for the three months ended June 30, 2023 and 2022, respectively.

Salaries, wages, and benefits as a percentage of net operating revenues was 63.3% compared to 63.9% for the three months ended September 30, 2023 and 2022, respectively.

We continue to face workforce and labor shortages within all of our operations.

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therefore, we are working diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

For the quarter ended June 30, 2023, our agency nurse staffing expenses decreased $10,587,000, or approximately 50.4%, compared to the same period a year ago.  

New operations, which include one skilled nursing facility acquired May 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase in salaries, wages, and benefits of $4,360,000 for the three months ended June 30, 2023 compared to the same quarter last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in salaries, wages, and benefits decreasing $11,838,000 for the three months ended June 30, 2023 compared to the same quarter last year.

Other operating expenses increased $1,923,000, or 2.7%, to $73,234,000 for the 2023 period compared to $71,311,000 for the 2022 period.

Other operating expenses as a percentage of net operating revenues and grant income was 25.9% and 26.3% for the three months ended June 30, 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 $4,994,000 for the three months ended June 30, 2023 compared to the same quarter last year.

For the quarter ended September 30, 2023, our agency nurse staffing expenses decreased $8,181,000, or approximately 48.4%, compared to the same period a year ago.  

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 in salaries, wages, and benefits of $4,778,000 for the three months ended September 30, 2023 compared to the same quarter last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in salaries, wages, and benefits decreasing $8,210,000 for the three months ended September 30, 2023 compared to the same quarter last year.

Other operating expenses decreased $393,000, or 0.5%, to $72,490,000 for the 2023 period compared to $72,883,000 for the 2022 period.

Other operating expenses as a percentage of net operating revenues was 25.1% and 26.9% for the three months ended September 30, 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 $3,245,000 for the three months ended September 30, 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.  

Non–operating income increased by $1,366,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements.

The income tax provision for the three months ended June 30, 2023 is $6,406,000 (an effective income tax rate of 28.7%). 

The income tax provision for the three months ended September 30, 2023 is $3,908,000 (an effective income tax rate of 27.9%). 

Noncontrolling interest

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Results for the six months ended June 30, 2023 compared to the same period of 2022 include a 0.3% increase in net operating revenues and grant income. Excluding the government stimulus income and the seven skilled nursing facilities in Massachusetts and New Hampshire in which we ceased operations in September 2022, same-facility net operating revenues increased 9.6% for the six months ended June 30, 2023 compared to the same period a year ago.  

For the six months ended June 30, 2023, GAAP net income attributable to NHC was $28,004,000 compared to net income of $18,521,000 for the same period in 2022.

Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the six months ended June 30, 2023 was $25,729,000 compared to $21,253,000 for the same period in 2022. 

The increase in non-GAAP earnings for the six months ended June 30, 2023 compared to the same period in the prior year was primarily due to the continued occupancy increase in our skilled nursing facilities, skilled nursing per diem increases from some of our government payors, and the continued reduction of nurse agency staffing expense within our operations.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Results for the nine months ended September 30, 2023 compared to the same period of 2022 include a 2.4% increase in net operating revenues and grant income. Excluding the government stimulus income and the seven skilled nursing facilities in Massachusetts and New Hampshire in which we ceased operations in September 2022, same-facility net operating revenues increased 10.3% for the nine months ended September 30, 2023 compared to the same period a year ago.  

For the nine months ended September 30, 2023, GAAP net income attributable to NHC was $38,392,000 compared to net income of $16,092,000 for the same period in 2022.

Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the nine months ended September 30, 2023 was $38,978,000 compared to $29,036,000 for the same period in 2022. 

The increase in non-GAAP earnings for the nine months ended September 30, 2023 compared to the same period in the prior year was primarily due to the continued occupancy increase in our skilled nursing facilities, skilled nursing per diem increases from some of our government payors, and the continued reduction of nurse agency staffing expense within our operations.

Net operating revenues and grant income

Net patient revenues increased $27,956,000, or 3.6%, compared to the same period last year.

The total census at owned and leased skilled nursing facilities for the six months ended June 30, 2023 averaged 87.7%, compared to an average of 83.3% for the same period a year ago.

The total census at owned and leased skilled nursing facilities for the nine months ended September 30, 2023 averaged 87.8%, compared to an average of 83.4% for the same period a year ago.

Overall, the composite skilled nursing facility per diem increased 6.0% compared to the same period a year ago.

1 unchanged sentence

Medicaid and private pay per diem rates increased 7.9% and 4.1%, respectively, compared to the same period a year ago.

For the six months ended June 30, 2023 and 2022, respectively, $11,130,000 and $10,539,000 have been included in our net patient revenues for supplemental COVID-19 Medicaid payments.

New operations, which include one skilled nursing facility acquired May 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $8,873,000 in net patient revenues for the six months ended June 30, 2023 compared to the same period last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in net patient revenues decreasing $35,485,000 for the six months ended June 30, 2023 compared to the same period last year. 

For the nine months ended September 30, 2023 and 2022, respectively, $15,362,000 and $15,312,000 have been included in our net patient revenues for supplemental COVID-19 Medicaid payments.

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 $18,490,000 in net patient revenues for the nine months ended September 30, 2023 compared to the same period last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in net patient revenues decreasing $48,362,000 for the nine months ended September 30, 2023 compared to the same period last year. 

Other revenues increased $2,429,000, or 7.2%, compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

During the six months ended June 30, 2023 and 2022, respectively, we recorded $0 and $10,940,000 in government stimulus income related to funds received from the CARES Act Provider Relief Fund.

During the nine months ended September 30, 2023 and 2022, respectively, we recorded $0 and $10,940,000 in government stimulus income related to funds received from the CARES Act Provider Relief Fund.

See Note 3 - Coronavirus Pandemic for additional information.  

Total costs and expenses

Total costs and expenses for the six months ended June 30, 2023 compared to the same period of 2022 decreased $3,418,000, or 0.6% to $528,156,000 from $531,574,000.

Salaries, wages, and benefits decreased $2,512,000, or 0.7%, to $343,118,000 from $345,630,000.

Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.2% compared to 62.8% for the six months ended June 30, 2023 and 2022, respectively.

Total costs and expenses for the nine months ended September 30, 2023 compared to the same period of 2022 increased $5,277,000, or 0.7% to $803,616,000 from $798,339,000.

Salaries, wages, and benefits increased $6,954,000, or 1.3%, to $525,782,000 from $518,828,000.

Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.5% compared to 63.2% for the nine months ended September 30, 2023 and 2022, respectively.

We continue to face workforce and labor shortages within all of our operations.

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therefore, we are working diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

For the six months ended June 30, 2023, our agency nurse staffing expenses decreased $15,528,000, or approximately 41.5%, compared to the same period a year ago.  

New operations, which include one skilled nursing facility acquired May 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase in salaries, wages, and benefits of $7,056,000 for the six months ended June 30, 2023 compared to the same period last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in salaries, wages, and benefits decreasing $23,722,000 for the six months ended June 30, 2023 compared to the same period last year.

For the nine months ended September 30, 2023, our agency nurse staffing expenses decreased $23,709,000, or approximately 43.6%, compared to the same period a year ago.  

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 in salaries, wages, and benefits of $9,968,000 for the nine months ended September 30, 2023 compared to the same period last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in salaries, wages, and benefits decreasing $31,856,000 for the nine months ended September 30, 2023 compared to the same period last year.

Other operating expenses decreased $1,066,000, or 0.5%, to $217,213,000 for the 2023 period compared to $218,279,000 for the 2022 period.

Other operating expenses as a percentage of net operating revenues and grant income was 26.2% and 26.4% for the six months ended June 30, 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 $10,060,000 for the six months ended June 30, 2023 compared to the same period last year.

Other operating expenses as a percentage of net operating revenues and grant income was 25.8% and 26.6% for the nine months ended September 30, 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 $13,170,000 for the nine months ended September 30, 2023 compared to the same period 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.  

Non–operating income increased by $3,665,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements.

The income tax provision for the six months ended June 30, 2023 is $10,842,000 (an effective income tax rate of 28.5%). 

The income tax provision for the nine months ended September 30, 2023 is $14,750,000 (an effective income tax rate of 28.3%). 

Noncontrolling interest

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

Six Months Ended

Six Month Change

Nine Months Ended

Nine Month Change

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

Cash provided by/(used in) operating activities

Cash provided by/(used in) operating activities

Cash used in investing activities

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Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2023 was $53,178,000 as compared to cash used in operating activities of $1,215,000 in the same period last year.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $85,483,000 as compared to cash used in operating activities of $3,192,000 in the same period last year.

Cash provided by operating activities consisted of net income of $37,323,000 and adjustments for non–cash items of $26,442,000.

There was cash provided by working capital in the amount of $9,999,000 for the six months ended June 30, 2023 compared to cash used for working capital needs of $44,552,000 for the same period a year ago.

There was cash provided by working capital in the amount of $20,645,000 for the nine months ended September 30, 2023 compared to cash used for working capital needs of $63,011,000 for the same period a year ago.

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

Investing Activities

Net cash used in investing activities totaled $2,247,000 for the six months ended June 30, 2023, compared to $8,163,000 for the six months ended June 30, 2022.

Cash used for property and equipment additions was $12,789,000 and $17,033,000 for the six months ended June 30, 2023, and 2022, respectively.

On May 1, 2023, we acquired the assets of a 66-bed skilled nursing facility in Nashville, Tennessee. Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of $13,645,000 and $5,917,000 for the six months ended June 30, 2023 and 2022, respectively. 

Net cash used in investing activities totaled $7,382,000 for the nine months ended September 30, 2023, compared to $8,810,000 for the nine months ended September 30, 2022.

Cash used for property and equipment additions was $19,300,000 and $24,563,000 for the nine months ended September 30, 2023, and 2022, respectively.

On May 1, 2023, we acquired the assets of a 66-bed skilled nursing facility in Nashville, Tennessee. Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of $14,815,000 and $9,397,000 for the nine months ended September 30, 2023 and 2022, respectively. 

Financing Activities  

Net cash used in financing activities totaled $22,891,000 for the six months ended June 30, 2023 compared to $18,797,000 for the six months ended June 30, 2022.

We made principal payments under our finance lease obligations in the amount of $2,455,000 and $2,312,000 for the six months ended June 30, 2023 and 2022, respectively.

Net cash used in financing activities totaled $32,711,000 for the nine months ended September 30, 2023 compared to $35,541,000 for the nine months ended September 30, 2022.

We made principal payments under our finance lease obligations in the amount of $3,711,000 and $3,495,000 for the nine months ended September 30, 2023 and 2022, respectively.

Cash used for dividend payments to common stockholders totaled $26,520,000 in the current year period compared to $25,830,000 for the same period a year ago.

7 unchanged sentences

We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $100,308,000, our marketable equity and debt securities of $110,186,000, and our borrowing capacity on the credit facility.

At June 30, 2023, we do not have an outstanding balance on our credit facility;

At September 30, 2023, we do not have an outstanding balance on our credit facility;

therefore, leaving $50 million available for future borrowings.

8 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis