What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-02 · 170 added, 232 removed, 157 unchanged (72% of the section changed)

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

Forward –

Looking Statements

Forward – Looking Statements

References throughout this document to the Company include National HealthCare Corporation and its wholly owned subsidiaries.

In accordance with the Securities and Exchange Commissions “Plain English”

guidelines, this Quarterly Report on Form 10–Q has been written in the first person.

In this document, the words “we”, “our”, “ours”

and “us”

refer only to National HealthCare Corporation and its wholly–owned subsidiaries and not any other person.

This Quarterly Report on Form 10–Q and other information we provide from time to time, contains certain “forward–looking”

statements as that term is defined by the Private Securities Litigation Reform Act of 1995.

All statements regarding our expected future financial position, results of operations or cash flows, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, ability to control our patient care liability costs, ability to respond to changes in government regulations, ability to execute our three–year strategic plan, and similar statements including, without limitations, those containing words such as “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans”, and other similar expressions are forward–looking statements.

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

In accordance with the Securities and Exchange Commissions “Plain English” guidelines, this Quarterly Report on Form 10–Q has been written in the first person.

In this document, the words “we”, “our”, “ours” and “us” refer only to National HealthCare Corporation and its wholly–owned subsidiaries and not any other person.

This Quarterly Report on Form 10–Q and other information we provide from time to time, contains certain “forward–looking” statements as that term is defined by the Private Securities Litigation Reform Act of 1995.

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

6 unchanged sentences

the competitive environment in which we operate;

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

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

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

1 unchanged sentence

demographic changes.

See the notes to the quarterly financial statements, and “Item 1.

Business”

in our 2022 Annual Report on Form 10–K for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them.

See the notes to the quarterly financial statements, and “Item 1.

Business” in our 2023 Annual Report on Form 10–K for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them.

This may be found on our web site at www.nhccare.com.

4 unchanged sentences

In that case, the trading price of our shares of stock could decline, and you may lose all or part of your investment.

Given these risks and uncertainties, we can give no assurances that these forward–looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them.

National HealthCare Corporation (“NHC”

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

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.

Given these risks and uncertainties, we can give no assurances that these forward–looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them.

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services.

As of March 31, 2024, we operate or manage, through certain affiliates, 65 skilled nursing facilities with a total of 8,421 licensed beds, 24 assisted living facilities with 1,365 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies.

We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units.

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

We operate in 8 states and are located primarily in the southeastern United States. 

Impact of COVID-19

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.

As a provider of healthcare services, we were significantly exposed to the public health and economic effects of the COVID-19 pandemic.

NHC’s primary objective was and has remained the same throughout the COVID-19 pandemic:

that is to protect the health and safety of our patients, residents, and partners (employees).

We continue to follow all guidance from the Centers for Medicare and Medicaid Services (“CMS”), the Centers for Disease Control and Prevention (“CDC”), and state and local health departments to prevent the spread of the disease within our operations. 

We began our first vaccination clinics in our skilled nursing facilities in December 2020.

As the vaccination clinics progressed and as the vaccine became more accessible, we began to see a significant decline in COVID-19 cases among our operations, as well as a significant decrease in the adverse health events related to COVID.

Despite the COVID-19 cases and adverse health events from COVID declining, our operating expenses remained elevated with incentive compensation being paid to attract and retain frontline partners, as well as increased costs of personal protective equipment (“PPE”), sanitizers and cleaning supplies, and COVID-19 testing of our patients and partners.

Despite the continued disruption of COVID-19 to our operations, our capital and financial resources, including our overall liquidity, remain strong.

Our liquidity provides us with significant flexibility to maintain the strength of our balance sheet in periods of uncertainty or stress. 

Legislation and Government Stimulus Due to COVID-19

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

The new laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective was the CARES Act.

Through the CARES Act, as well as the PPPCHE, the federal government 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 unreimbursed health care related expenses or lost revenue attributable to the public health emergency resulting from COVID-19.

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 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.

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 U.S.

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

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 $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.

We operate in 8 states and are located primarily in the southeastern United States.

Centers for Medicare and Medicaid Services Minimum Staffing Standards

On April 22, 2024, the Centers for Medicare and Medicaid Services (“CMS”) issued the Minimum Staffing Standards for Long-Term Care (“LTC”) Facilities and Medicaid Institutional Payment Transparency Reporting final rule.

Included in this final rule are new comprehensive minimum nurse staffing requirements, which aim to significantly reduce the risk of residents receiving unsafe and low-quality care within LTC facilities.

CMS is finalizing a total nurse staffing standard of 3.48 hours per resident day (“HPRD”), which must include at least 0.55 HPRD of direct registered nurse (“RN”) care and 2.45 HPRD of direct nurse aide care.

Facilities may use any combination of nurse staff (RN, licensed practical nurse and licensed vocational nurse, or nurse aide) to account for the additional 0.48 HPRD needed to comply with the total nurse staffing standard.

CMS is also finalizing enhanced facility assessment requirements and a requirement to have an RN onsite 24 hours a day, seven days a week (“24/7”), to provide skilled nursing care.

The 24/7 RN onsite can be the Director of Nursing;

however, they must be available to provide direct resident care.

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

Summary of Goals and Areas of Focus

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 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.

The overall census in owned and leased skilled nursing facilities for the three months ending March 31, 2024 was 88.5% compared to 87.4% for the same period a year ago.

Due to America’s healthcare labor shortage, the challenge of maintaining desirable patient census levels has been amplified.

Management has undertaken a number of steps in order to best position our current and future health care facilities.

This includes working internally to examine and improve systems to be most responsive to referral sources and payors, as well as find creative initiatives to retain and attract qualified healthcare professionals.

Additionally, NHC is in various stages of partnerships with hospital systems, payors, and other post–acute alliances to better position us so we are an active participant in the delivery of post-acute healthcare services. 

Additionally, NHC is in various stages of partnerships with hospital systems, payors, and other post–acute alliances to better position ourselves so we are an active participant in the delivery of post-acute healthcare services.

Quality of Patient Care

1 unchanged sentence

The Five-Star Quality Rating System gives each skilled nursing operation a rating ranging between one and five stars in various categories (five stars being the best).

The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance. 

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

The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance.

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

Industry Ratings

7 unchanged sentences

Placed in Service

Tullahoma, TN

Behavioral Health Hospital

Knoxville, TN

Behavioral Health Hospital

Cedar Bluff, VA

10 unchanged sentences

New Operations

Morristown, TN

Accrued Risk Reserves

Our accrued professional liability and workers’

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’

compensation liabilities.

As to exposure for professional liability claims, we have developed performance certification criteria to measure and bring focus to the patient care issues most likely to produce professional liability exposure, including in–house acquired pressure ulcers, significant weight loss and numbers of falls.

Our accrued professional liability and workers’ compensation reserves totaled $108,237,000 at March 31, 2024 and are a primary area of management focus.

We have set aside restricted cash and cash equivalents and marketable securities to fund our estimated professional liability and workers’ compensation liabilities.

These programs for certification, which we regularly modify and improve, have produced measurable improvements in reducing these incidents.

1 unchanged sentence

Government Reimbursement Programs

Medicare –

Skilled Nursing Facilities

Medicare – Skilled Nursing Facilities

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

The fiscal year 2023 rule provided for an approximate 2.7% increase, or $904 million, compared to 2022 levels.

The net increase includes a 3.9% market-basket increase plus a 1.5% market basket forecast error adjustment, less a 0.3% productivity adjustment and a 2.3% decrease in the FY 2023 SNF PPS rates as a result of the recalibrated parity adjustment.

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 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 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 –

Skilled Nursing Facilities

The fiscal year 2024 rule equates to a net increase of 4.0%, or approximately $1.4 billion, in Medicare Part A payments to SNFs in fiscal year 2024 compared to 2023 levels.

The rule includes a 3.0% market basket rate increase, a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3%, or approximately $789 million, decrease in 2024 SNF Payment Prospective Systems rates as a result of the second phase of the Patient Driven Payment Model parity adjustment recalibration.

In March 2024, CMS released its proposed rule outlining fiscal year 2025 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2024.

The fiscal year 2025 proposal equates to a net 4.1% increase in Medicare Part A payments to SNFs in fiscal year 2025 compared to 2024 levels.

The rule includes a market basket increase of 2.8%, an increase of 1.7% to the market basket forecast error adjustment, and a negative 0.4% productivity adjustment.

These figures do not incorporate the SNF Value Based Purchasing (“VBP”) reduction for certain SNFs subject to the net reduction in payments under the SNF VBP;

those adjustments are estimated to total $196.5 million in fiscal year 2025.

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

Medicaid – Skilled Nursing Facilities

Effective July 1, 2023 and for the fiscal year 2024, the state of Tennessee implemented specific individual nursing facility increases.

4 unchanged sentences

We estimate the resulting increase in revenue for the 2024 fiscal year will be approximately $5,000,000 annually, or $1,250,000 per quarter.

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

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.

We have also received from many of the states in which we operate a supplemental Medicaid payment to help mitigate the inflationary labor and medical supplies costs resulting from the pandemic.

We have recorded $3,462,000 and $4,883,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2024 and 2023, respectively.

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

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

1 unchanged sentence

Some states will not keep pace with post-acute healthcare inflation.

States are currently under pressure to pursue other alternatives to skilled nursing care such as community and home–based services.

Medicaid programs are funded jointly by the federal government and the states and are administered by states under approved plans.

Most state Medicaid payments are made under a prospective payment system or under programs which negotiate payment levels with individual providers.

Some states use, or have applied to use, waivers granted by CMS to implement expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. 

Medicare –

Homecare Programs

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

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.

In June 2023, CMS released its proposed rule outlining fiscal year 2024 Medicare payment rates.

CMS projects payments to home health agencies in fiscal year 2024 will decrease by 2.2% or $375 million, relative to the prior year.

This decrease reflects a 3.0% market basket update, reduced by a 0.3 % productivity adjustment.

However, the agency also proposes to apply the full permanent behavioral adjustment due to the implementation of the Patient-Driven Groups Model, resulting in a decrease of 5.1% in CY 2024, which would reduce total payments by an aggregate of $870 million.

In addition, the agency also proposes an estimated 0.2% increase in payments for high-cost outlier cases.

Medicare –

Medicare – Homecare Programs

In November 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates.

CMS projects payments to home health agencies in fiscal year 2024 will increase in aggregate by 0.8%, or $140 million.

The increase is the result of a 3.3% market basket update, reduced by a 0.3% productivity adjustment.

The increase is offset by a behavioral adjustment that will cut payments by a net 2.6%.

The behavioral adjustment was designed to achieve budget-neutral implementation of the PDPM.

Finally, CMS also adjusted the fixed-dollar loss ratio for outlier payments, which will increase payments by 0.4%.

Medicare – Hospice

In July 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates.

CMS issued a rate increase of 3.1%, or $780 million, effective October 1, 2023.

The increase is the result of a 4.1% inpatient hospital market basket increase reduced by a 0.3% productivity adjustment.

This increase is the result of a 3.3% market basket increase reduced by a 0.2% productivity adjustment.

The FY2024 hospice payment update also includes an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually.

The cap amount for FY2024 is $33,494.

In July 2023, CMS released its final rule outlining fiscal year 2024 Medicare payment rates.

In March 2024, CMS released its proposed rule outlining fiscal year 2025 Medicare payment rates.

CMS issued a rate increase of 2.6%, or $705 million, effective October 1, 2024.

1 unchanged sentence

The FY2025 hospice payment update also includes an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually.

The cap amount for FY2024 is $33,494.

The proposed cap amount for FY2025 is $34,365.

Segment Reporting

2 unchanged sentences

and (2) homecare and hospice services.

These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources.

The Company also reports an “all other”

category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

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

Three Months Ended September 30, 2023

Net patient revenues

Other revenues

Net operating revenues

Costs and expenses:

Salaries, wages, and benefits

Other operating

Depreciation and amortization

Total costs and expenses

Income/(loss) from operations

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Three Months Ended September 30, 2022

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

Three Months Ended March 31, 2024

Net patient revenues

8 unchanged sentences

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Nine Months Ended September 30, 2023

Unrealized gains on marketable equity securities

Income before income taxes

Three Months Ended March 31, 2023

Net patient revenues

10 unchanged sentences

Income before income taxes

Nine Months Ended September, 2022

Revenues and grant income:

Net patient revenues

Other revenues

Government stimulus income

Net operating revenues and grant income

Costs and expenses:

Salaries, wages, and benefits

Other operating

Depreciation and amortization

Total costs and expenses

Income/(loss) from operations

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company’s operations and measure the Company’s performance more consistently across periods.

Therefore, the Company believes this information is meaningful in addition to the information contained in the GAAP presentation of financial information.

The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities, operating results for 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 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.

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

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

For the three months ended March 31, 2023, included are facilities that began operations from 2021 to 2023, which is two behavioral health hospitals, one homecare agency, and two hospice agencies.

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

Three Months Ended

Nine Months Ended

Net income/(loss) attributable to National Healthcare Corporation

Net income attributable to National Healthcare Corporation

Non-GAAP adjustments

Unrealized (gains)/losses on marketable equity securities

Unrealized gains on marketable equity securities

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

Gain on sale of unconsolidated company

Share-based compensation expense

Income tax provision on non-GAAP adjustments

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

Non-GAAP Net income

GAAP diluted earnings/(loss) per share

GAAP diluted earnings per share

Non-GAAP adjustments

Unrealized (gains)/losses on marketable equity securities

Unrealized gains on marketable equity securities

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

Gain on sale of unconsolidated company

Share-based compensation expense

1 unchanged sentence

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 nine months ended September 30, 2023 and 2022.

Percentage of Net Operating Revenues and Grant Income

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

Percentage of Net Operating Revenues

Three Months Ended

Nine Months Ended

Net operating revenues and grant income

Net operating revenues

Costs and expenses:

5 unchanged sentences

Income from operations

Non–operating income

Unrealized gains/(losses) on marketable equity securities

Income/(loss) before income taxes

Income tax (provision)/benefit

Net income/(loss)

Net loss attributable to noncontrolling interest

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.

Non–operating income

Unrealized gains on marketable equity securities

Income before income taxes

Income tax provision

Net (income)/loss attributable to noncontrolling interest

Net income attributable to stockholders of NHC

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

Results for the quarter ended March 31, 2024 compared to the first quarter of 2023 include a 10.2% increase in net operating revenues.

For the quarter ended March 31, 2024, GAAP net income attributable to NHC was $26,213,000 compared to $11,723,000 for the same period in 2023.

Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended March 31, 2024 was $15,048,000 compared to $12,071,000 for the same period in 2023.

The increase in adjusted net income for the first quarter of 2024 compared to the first quarter of 2023 was primarily due the continued occupancy increase in our skilled nursing and assisted living facilities, skilled nursing per diem increases from some of our governmental payors, and the continued reduction of nurse agency staffing expense within our operations.

Net operating revenues

2 unchanged sentences

Overall, the composite skilled nursing facility per diem increased 8.8% compared to the same quarter a year ago.

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

Our Medicare per diem rates increased 4.7% and managed care per diem rates increased 5.8% compared to the same quarter a year ago.

Medicaid and private pay per diem rates increased 12.0% and 10.5%, respectively, compared to the same quarter a year ago.

For the three months ended 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.

For the three months ended March 31, 2024 and 2023, respectively, $3,462,000 and $4,883,000 have been included in our net patient revenues for supplemental Medicaid payments that are in addition to our Medicaid skilled nursing per diems.

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

On March 1, 2024, the Company exited a lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in net patient revenues decreasing $1,972,000 for the quarter ended March 31, 2024 compared to the same quarter in the prior year.

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

Total costs and expenses

Total costs and expenses for the three months ended 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 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.

The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies in certain markets. 

The agency nurse staffing companies charge inflated hourly rates;

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

For the quarter ended 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 September 30, 2023 is $3,908,000 (an effective income tax rate of 27.9%). 

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

Salaries, wages, and benefits as a percentage of net operating revenues was 61.6% compared to 62.3% for the three months ended March 31, 2024 and 2023, respectively.

We continue to face workforce and labor shortages within all of our operations, which increases wage pressure in regards to retaining and attracting qualified healthcare partners (employees).

We continue to work diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

Our agency staffing expense decreased approximately 51% for the three months ended March 31, 2024 compared to the same period of 2023.

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

On March 1, 2024, the Company exited the lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in salaries, wages, and benefits decreasing $1,799,000 for the quarter ended March 31, 2024 compared to the same quarter in the prior year.

Other operating expenses as a percentage of net operating revenues was 26.1% and 26.5% for the three months ended March 31, 2024 and 2023, respectively.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $2,176,000 in other operating expenses for the quarter ended March 31, 2024 compared to the same quarter in the prior year.

We continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies.

Non–operating income increased by $1,362,000 compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency located in Nashville, Tennessee.

The total consideration paid to the company was $2,100,000, which resulted in a gain of $1,025,000.

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

Noncontrolling interest

The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets.

The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets.

The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its consolidated statements of operations.

The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders.

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

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.

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

Results for the quarter ended March 31, 2023 compared to the first quarter of 2022 include a 3.4% decrease in net operating revenues and grant income.

The net operating revenues and grant income decrease was primarily driven by the reduction in government stimulus income of $10,620,000 during the first quarter of 2023 compared to the same period a year ago, as well as us exiting seven skilled nursing facilities in Massachusetts and New Hampshire during the third quarter of 2022.

Excluding the government stimulus income and the seven skilled nursing facilities in Massachusetts and New Hampshire, same-facility net operating revenues increased 7.1% during the first quarter of 2023 compared to the same period a year ago.

For the quarter ended March 31, 2023, GAAP net income attributable to NHC was $11,723,000 compared to net income of $15,318,000 for the same period in 2022.

Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended March 31, 2023 was $12,071,000 compared to $14,081,000 for the same period in 2022.

The decrease in adjusted net income for the first quarter of 2023 compared to the first quarter of 2022 was primarily due to the $10,620,000 less in government stimulus income recorded during the current quarter.

Net operating revenues and grant income

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

The total census at owned and leased skilled nursing facilities for the 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.

Our Medicare per diem rates increased 2.2% and managed care per diem rates increased 8.2% compared to the same period a year ago.

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

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 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.  

The total census at owned and leased skilled nursing facilities for the quarter averaged 87.4%, compared to an average of 82.7% for the same quarter a year ago.

Overall, the composite skilled nursing facility per diem increased 3.3% compared to the same quarter a year ago.

Our Medicare per diem rates increased 2.1% and managed care per diem rates increased 2.7% compared to the same quarter a year ago.

Medicaid and private pay per diem rates increased 3.6% and 3.1%, respectively, compared to the same quarter a year ago.

For the three months ended March 31, 2023 and 2022, respectively, $4,883,000 and $5,538,000 have been included in our net patient revenues for supplemental COVID-19 Medicaid payments.

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

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

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

Total costs and expenses

Total costs and expenses for the 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.

The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies. 

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

Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.3% compared to 61.2% for the three months ended March 31, 2023 and 2022, respectively.

We continue to face workforce and labor shortages within all of our operations, which increases wage pressure in regards to retaining and attracting qualified healthcare partners (employees).

The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies.

The agency nurse staffing companies charge inflated hourly rates;

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

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

For the quarter ended March 31, 2023, our agency nurse staffing expense decreased $4,941,000, or approximately 34%, compared to the same period a year ago.

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

Other operating expenses as a percentage of net operating revenues and grant income was 26.5% and 26.6% for the three months ended March 31, 2023 and 2022, respectively.

The transfer of the operations of the seven skilled nursing facilities located in Massachusetts and New Hampshire, as noted above, resulted in other operating expenses decreasing $5,206,000 for the three months ended March 31, 2023 compared to the same quarter last year.

We continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies.

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

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

Noncontrolling interest

The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets.

The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets.

The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its consolidated statements of operations.

The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders.

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

4 unchanged sentences

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

Nine Months Ended

Nine Month Change

Three Months Ended

Three 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 operating activities

Cash used in investing activities

2 unchanged sentences

Operating Activities

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 $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. 

Net cash provided by operating activities for the three months ended March 31, 2024 was $9,646,000 as compared to 13,857,000 in the same period last year.

Cash provided by operating activities consisted of net income of $26,251,000 and decreases to operating cash flows related to adjustments for non–cash items of $1,627,000.

There was cash used for working capital needs in the amount of $14,634,000 for the three months ended March 31, 2024 compared to $6,017,000 for the same period a year ago.

On February 21, 2024, Change Healthcare was the target of a ransomware attack.

The Company uses Change Healthcare as an intermediary to process and pay our governmental and insurance company healthcare claims.

With Change Healthcare’s systems being down during the first quarter of 2024, we had to manually bill the majority of our skilled nursing claims for the months of February and March 2024.

Although we manually billed our skilled nursing healthcare claims in February and March 2024, we were not paid as we typically would in the ordinary course of business.

At March 31, 2024, our patient accounts receivable balances increased approximately $15 million from our December 31, 2023 accounts receivable balances.

We believe this increase in accounts receivable is temporary and over the next several months we expect our accounts receivable balances and operating cash flow to be back to normal levels.

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

Investing Activities

Net cash used in investing activities totaled $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 $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.

Net cash used in investing activities totaled $2,415,000 for the three months ended March 31, 2024, compared to $1,427,000 for the three months ended March 31, 2023.

Cash used for property and equipment additions was $5,955,000 and $6,640,000 for the three months ended March 31, 2024, and 2023, respectively.

Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of $2,912,000 and $5,211,000 for the three months ended March 31, 2024 and 2023, respectively.

In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency resulting in proceeds from the sale of $2,100,000.

Financing Activities

Net cash used in financing activities totaled $12,067,000 for the three months ended March 31, 2024 compared to $12,619,000 for the three months ended March 31, 2023.

We made principal payments under our finance lease obligations in the amount of $860,000 and $1,218,000 for the three months ended March 31, 2024 and 2023, respectively.

Cash used for dividend payments to common stockholders totaled $9,051,000 in the current year period compared to $8,748,000 for the same period a year ago.

We repurchased common shares outstanding in the amount of $2,482,000 in the current year period compared to $6,907,000 for the same period a year ago. 

Short –

term liquidity

Cash provided by the issuance of common stock totaled $8,412,000 for the quarter ended March 31, 2024.

We repurchased common shares outstanding in the amount of $9,900,000 and $2,482,000 for the three months ended March 31, 2024 and 2023, respectively.

Short – term liquidity

We expect to meet our short-term liquidity requirements primarily from our cash flows from operating activities.

In addition to cash flows from operations, our current cash on hand of $100,308,000, our marketable equity and debt securities of $110,186,000, and our borrowing capacity on the $50 million credit facility are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months. 

Long –

term liquidity

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

therefore, leaving $50 million available for future borrowings.

In addition to cash flows from operations, our current cash on hand of $93,982,000 and our marketable equity and debt securities of $123,524,000 are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months.

We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.

Our ability to meet our long–term contractual obligations, and to finance our operating requirements and growth plans will depend upon our future performance.

Long – term liquidity

We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $93,982,000 and our marketable equity and debt securities of $123,524,000.

We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.

Our ability to meet our long–term contractual obligations, and to finance our operating requirements and growth plans will depend upon our future performance.

Our future performance will be affected by business, economic, financial and other factors, including potential changes in state and federal government payment rates for healthcare, customer demand, success of our marketing efforts, pressures from competitors, and the state of the economy, including the state of financial and credit markets, as well as many unforeseen factors.

1 unchanged sentence

Governmental Regulations

Laws and regulations governing Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation.

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.

1 unchanged sentence

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