What changed in this filing

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Item 1. Business

2025-02-28 compared with 2024-02-16 · 56 added, 40 removed, 308 unchanged (24% of the section changed)

72 unchanged sentences

We believe these independent living units offer a positive marketing aspect to all our senior care offerings and services.

In 2023 and 2022, the rate of occupancy was 89.0%.

We have one independent living facility which is a "continuing care community", where the resident pays a substantial entrance fee and a monthly maintenance fee.

The resident then receives a full range of services, including skilled nursing and home health, without additional charge.

In 2024, the rate of occupancy was 93.2% compared to 89.0% in 2023.

Behavioral Health Hospitals.

10 unchanged sentences

Hospice Agencies .

We provide hospice care through Caris Healthcare, L.P.

(“Caris”), a wholly owned subsidiary of NHC.

We provide hospice care through Caris Healthcare (“Caris”), a wholly owned subsidiary of NHC.

Caris specializes in providing hospice and palliative care to over 1,514 patients per day in 33 locations in Georgia, Missouri, South Carolina, Tennessee, and Virginia.

3 unchanged sentences

Pharmacy Operations.

At December 31, 2023, we operated four regional pharmacy locations (two locations in Tennessee and one location each in South Carolina and Missouri).

At December 31, 2024, we operated five regional pharmacy locations (two locations each in Tennessee and South Carolina and one location in Missouri).

These pharmacies primarily service our patients that are in an inpatient setting using a central location to deliver pharmaceutical supplies.

18 unchanged sentences

Rental Income.

The healthcare properties currently owned and leased to third party operators include nine skilled nursing facilities and one assisted living communities.

Government Stimulus Income.

We received government stimulus funds as part of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES ACT").

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

The CARES Act appropriated $178 billion to the Public Health and Social Services Emergency Fund, which is referred to as the Provider Relief Fund ("PRF").

The Company recorded $0, $11,457,000 and $63,360,000 of government stimulus income from the PRF for the years ended December 31, 2023, 2022, and 2021, respectively.

The healthcare properties currently owned and leased to third party operators include nine skilled nursing facilities and one assisted living community.

Government Grant Income.

We received government grant funds as part of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES ACT").

The Employee Retention Credit (“ERC”) was established by the CARES Act and intended to help businesses retain their workforce and avoid layoffs during the pandemic.

The ERC provided a per employee credit to eligible businesses based on a percentage of qualified wages and health insurance benefits paid to employees.

The qualified wages and health insurance benefits paid by the Company were related to the second, third, and fourth quarters of 2020.

All conditions related to the ERC were met during 2024.

The Company recorded $9,445,000 of government grant income related to the ERC credit for the year ended December 31, 2024.

The Company recorded $11,457,000 of government grant income from the Provider Relief Fund for the year ended December 31, 2022.

Non – Operating Income.

1 unchanged sentence

Quality of Patient Care

CMS introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily.

The Centers for Medicare and Medicaid Services (“CMS”) introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily.

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

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

In July 2022, CMS launched its enhanced Five-Star Quality Rating System which integrates weekend staffing rates for nurses and information on annual turnover among nurses and administrators.

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

24 unchanged sentences

New Operations

Morristown, TN

Lawrenceburg, TN

Wytheville, VA

On August 1, 2024, the Company purchased the White Oak portfolio, including its long-term care pharmacy.

The White Oak portfolio consists of 15 skilled nursing facilities, two assisted living facilities, and four independent living facilities.

The White Oak operations have 1,928 licensed skilled nursing beds, 48 assisted living units, and 302 independent living units in the states of South Carolina and North Carolina.

Business Segments

17 unchanged sentences

Medicaid is a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government.

The states in which we operate primarily use a cost–based reimbursement system.

Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

Medicaid may supplement Medicare benefits for the disabled and for persons aged 65 and older meeting financial eligibility requirements.

Medicaid reimbursement formulas are established by each state with the approval of the federal government in accordance with federal guidelines.

Seniors who enter skilled nursing facilities as private pay patients can become eligible for Medicaid once they have substantially depleted their assets.

Medicaid is generally the largest source of funding for most skilled nursing facilities.

Medicaid typically covers patients that require standard room and board services and provides reimbursement rates that are generally lower than rates earned from other sources.

Medicaid reimbursement varies from state to state and is based upon a number of different systems.

The states in which we operate primarily use a cost–based reimbursement system.

Rates are subject to a state's annual budgetary requirements and funding, statutory and regulatory changes and interpretations and rulings by individual state agencies and state plan amendments approved by CMS.

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration.

62 unchanged sentences

In July 2024, CMS released its final rule outlining fiscal year 2025 Medicare payment rates and policy changes for skilled nursing facilities, which began on October 1, 2024.

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.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act) and other subsequent Congressional actions temporarily suspended Medicare sequestration beginning May 1, 2020 through March 31, 2022.

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

Effective April 1, 2022, sequestration was reinstated but only 1% was reduced from Medicare payments from April 1, 2022 through June 30, 2022.

Beginning July 1, 2022, sequestration was increased back to the 2% reduction of Medicare payments for the remainder of 2022.

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

The fiscal year 2025 rule equates to a net 4.2% increase in Medicare Part A payments to SNFs in fiscal year 2025 compared to 2024 levels.

The rule includes a market basket increase of 3.0%, an increase of 1.7% to the market basket forecast error adjustment, and a negative 0.5% productivity adjustment.

This final rule also changes CMS’ enforcement policies to impose more equitable and consistent civil monetary penalties ("CMPs") for health and safety violations as part of the agency’s ongoing work to increase the safety and care provided in America’s nursing homes.

CMS revised the regulation to expand the type of CMPs that can be imposed to allow for more per instance and per day CMPs to be imposed, as appropriate.

The final rule also finalized updates to the SNF Quality Reporting Program ("QRP") to better account for adverse social conditions that negatively impact individuals’ health or healthcare.

CMS also finalized its proposal to adopt a data validation process for the SNF QRP beginning the same year.

Medicare is uniform nationwide and reimburses homecare agencies under a Patient-Driven Groupings Model (“PDGM”).

5 unchanged sentences

In November 2024, CMS released its final rule outlining fiscal year 2025 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%.

CMS projects payments to home health agencies in fiscal year 2025 will increase by 0.5% or $85 million, relative to the prior year.

This increase reflects a 2.7% home health payment update, reduced by a 1.8% decrease that reflects the permanent behavior adjustment and an estimated 0.4% decrease that reflects the updated fixed-dollar loss ratio for outlier payments.

As required by the Bipartisan Budget Act of 2018, this rule proposes a permanent prospective adjustment to the CY2025 home health payment rate to account for the impact of implementing the PDGM.

This adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the CY2020 implementation of PDGM and the change to a 30-day unit of payment.

Medicare payment rates are calculated as daily rates for each of four levels of care we deliver.

27 unchanged sentences

We estimate the resulting increase in revenue for the 2025 fiscal year will be approximately $11,000,000 annually, or $2,750,000 per quarter.

Effective October 1, 2023 and for the fiscal year 2024, the state of South Carolina implemented specific individual nursing facility increases.

We estimate the resulting increase in revenue for the 2024 fiscal year will be approximately $9,000,000 annually, or $2,250,000 per quarter.

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

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

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

Additionally, the state of Tennessee implemented non-recurring rate increases for fiscal year 2025 for continued stabilization payments and Medicaid rate rebasing.

These non-recurring rate increases will result in an additional increase in revenue for the 2025 fiscal year of approximately $8,200,000 annually, or $2,050,000 per quarter.

Effective July 1, 2024 and for the fiscal year 2025, the state of Missouri has proposed specific individual nursing facility increases, subject to approval from CMS.

Upon CMS' approval, we estimate the resulting increase in revenue for the 2025 fiscal year will be approximately $6,600,000 annually, or $1,650,000 per quarter.

We have also received from many of the states in which we operate a supplemental Medicaid payment to help mitigate the inflationary labor and healthcare workforce crisis.

For the years ended December 31, 2024, 2023 and 2022, we have recorded $12,749,000, $20,214,000 and $19,442,000, respectively, due to these supplemental Medicaid payments.

We have recorded these payments in net patient revenues in our consolidated statements of operations.

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.

In most of the communities in which we operate health care facilities, we compete with other health care facilities in the area.

2 unchanged sentences

The reputation in the community and the physical appearance of our facilities are important in obtaining patients since members of the patient’s family generally participate to a greater extent in selecting skilled nursing facilities than in selecting an acute care hospital.

We believe that by providing and emphasizing rehabilitative, as well as patient-centered healthcare services, we can broaden our patient base and to differentiate our operations from competing operations.

We believe that by providing and emphasizing rehabilitative, as well as patient-centered healthcare services, we can broaden our patient base and differentiate our operations from competing operations.

As we continue to expand into all areas of senior health care, we monitor proposed or existing competing operations.

Our development goal is to link our skilled nursing facilities with our senior living communities, home health and hospice operations, and behavioral health hospitals;

Our goal is to link our skilled nursing facilities with our senior living communities, home health operations, hospice operations, and behavioral health hospitals;

therefore, obtaining a competitive advantage for our operations.

Human Capital

As of December 31, 2023, we had 13,123 full-time and part-time employees (“partners”) through our Administrative Services Contractor (National Health Corporation).

As of December 31, 2024, we had 14,962 full-time and part-time employees (“partners”), mainly through our Administrative Services Contractor (National Health Corporation).

None of our partners were represented by a collective bargaining agreement.

8 unchanged sentences

We offer a 401(k) plan which includes matching company contributions.

Also, to foster a stronger sense of ownership, we offer an Employee Stock Purchase Plan where partners may purchase company stock through payroll deduction.

Also, to foster a stronger sense of ownership, we offer an Employee Stock Purchase Plan where partners may purchase company stock through payroll deductions.

We face competition in employing and retaining nurses, technicians, aides, and other high-quality professional and non–professional employees.

1 unchanged sentence

We also conduct an "Administrator in Training" course, which is 24 months in duration, for the professional training of skilled nursing facility administrators.

Presently, we have six (four male and two female) full–time individuals in this program.

All six of our regional vice presidents and 52 of our 68 health care center administrators are graduates of this program.

Presently, we have six (two male and four female) full–time individuals in this program.

Six of our seven regional vice presidents and 59 of our 80 health care center administrators are graduates of this program.

We regularly utilize third-party consultants to conduct anonymous surveys to seek feedback from our partners on a variety of topics, including but not limited to, confidence in company leadership, competitiveness of our compensation and benefits package, career growth opportunities and improvements on how we can continue to make our company an employer of choice.

13 unchanged sentences

We are focusing on being more energy efficient and reducing our water use and wastewater discharges while continuing to provide a healthy environment for our patients, partners and visitors.

We have partnered with a company to study and identify areas on our properties that would benefit from lighting upgrades as part of our efforts to reduce energy consumption.

We are committed to adhering to applicable federal, state and local environmental regulations.

9 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-K

Item 1. Business