Overview
National HealthCare Corporation ("NHC" or the "Company") is a leading provider
of long-term health care services. We operate or manage, through certain
affiliates, 75 long-term health care centers with 9,460 beds in 10 states and
provide other services in one additional state. These operations are provided
by separately funded and maintained subsidiaries. We provide long-term health
care services to patients in a variety of settings including long-term nursing
centers, managed care specialty units, sub-acute care units, Alzheimer's care
units, homecare programs, assisted living centers and independent living
centers. In addition, we provide insurance services, management and accounting
services, and lease properties to operators of long-term health care centers.
Summary of Goals and Areas of Focus
Earnings
To monitor our earnings, we have developed budgets and management reports to
monitor labor, census, and the composition of revenues.
Medicare Reimbursement Rate Changes
In July 2011, the Centers for Medicare and Medicaid Services ("CMS") announced a
final rule reducing Medicare skilled nursing facility PPS payments in fiscal
year 2012 by $3.87 billion, or 11.1% lower than payments for fiscal year 2011.
We estimate the resulting decrease in revenue from the fiscal year 2012
Medicare rate changes will be approximately $24,000,000 annually, or $6,000,000
quarterly. Furthermore, changes in government requirements for providing
therapy services are estimated to increase our operating costs by approximately
$6,000,000 annually, or $1,500,000 per quarter. We have implemented and
continue to implement cost saving measures to help mitigate a portion of the
revenue decrease and cost increase, but we are also committed to maintaining the
quality of care to our patients.
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Development and Growth
We are undertaking to expand our long-term care operations while protecting our
existing operations and markets. The following table lists our recent
construction and purchase activities.
Type of Operation Description Size Location Placed in Service
Assisted Living New Facility 75 Units Columbia, SC May, 2011
Assisted Living Addition 46 Units Franklin, TN June, 2011
Hospice Acquisition Additional Knoxville, TN December, 2011
7.5%
interest in
Caris
HealthCare
LP
Hospice Acquisition Additional Knoxville, TN June, 2012
7.5%
interest in
Caris
HealthCare
LP
Also, in 2012, we expect to begin construction on a 90-bed skilled nursing
facility in Tullahoma, Tennessee, a 92-bed skilled nursing facility in Sumner
County, Tennessee and a 50-bed skilled nursing addition to NHC Lexington in
Lexington, SC.
During 2012, we will apply for Certificates of Need for additional beds in our
markets and also evaluate the feasibility of expansion into new markets by
building private pay health care centers or by the purchase of existing health
care centers. We will also evaluate the feasibility of construction of new
assisted living facilities in select markets.
Accrued Risk Reserves
Our accrued professional liability reserves, workers' compensation reserves and
health insurance reserves totaled $103,693,000 at June 30, 2012 and are a
primary area of management focus. We have set aside restricted cash and cash
equivalents and marketable securities to fund substantially all of our
professional liability and workers' compensation liabilities.
As to exposure for professional liability claims, we have developed performance
certification criteria to measure and bring focus to the patient care issues
most likely to produce professional liability exposure, including in-house
acquired pressure ulcers, significant weight loss and numbers of falls. These
programs for certification, which we regularly modify and improve, have produced
measurable improvements in reducing these incidents. Our experience is that
achieving goals in these patient care areas improves both patient and employee
satisfaction.
Application of Critical Accounting Policies
There have been no significant changes during the six month period ended June
30, 2012 to the items we disclosed as our critical accounting policies and
estimates in our discussion and analysis of financial condition and results of
operations in our December 31, 2011 Annual Report on Form 10-K filed with the
SEC.
Government Program Financial Changes
Cost containment will continue to be a priority for Federal and State
governments for health care services, including the types of services we
provide. Government reimbursement programs such as Medicare and Medicaid
prescribe, by law, the billing methods and amounts that health care providers
may charge and be reimbursed to care for patients covered by these programs.
Congress has passed a number of laws that have effected major changes in the
Medicare and Medicaid programs. The Balanced Budget Act of 1997 sought to
achieve a balanced federal budget by, among other things, reducing federal
spending on Medicare and Medicaid to various providers. The Balanced Budget Act
of 1997 defined the Medicare Prospective Payment System ("PPS") and this system
has subsequently been refined in 1999, 2000, 2005, 2006 and 2010.
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Federal Health Care Reform
In March 2010, President Obama signed into law the Patient Protection and
Affordable Care Act ("PPACA" or, commonly, "ACA") and the Health Care and
Education Reconciliation Act of 2010 ("HCERA"), which represents significant
changes to the current U.S. health care system (collectively the "Acts"). The
primary goals of the Acts are to: (1) expand coverage to Americans without
health insurance, (2) reform the delivery system to improve quality and drive
efficiency, (3) and to lower the overall costs of providing health care. The
timeline of the enacted provisions span over several years - some of the
provisions were effective immediately in 2010 and others will be phased in
through 2020. We have evaluated the Acts as they currently stand and do not
expect material effects on our results of operations, liquidity and cash flows
in 2012.
In June 2012, the U.S. Supreme Court issued its ruling on the constitutionality
of a key provision in the ACA, which is the requirement that every American
maintain a minimum level of health coverage or pay a penalty beginning in 2014.
The Supreme Court upheld the constitutionality of the "individual mandate",
holding that the penalty for not doing so could reasonably be interpreted as a
tax, which the Constitution permits. The ruling also permits the federal
government to pursue a broad expansion of the Medicaid program, but the ruling
gives the states the maximum flexibility on whether to do so. In preparation
for the Medicaid coverage expansion to occur in 2014, the current Administration
is expected to release a host of regulations and an array of new taxes and fees.
It is uncertain at this time the effect the Acts, their modifications, or
Medicaid expansion will have on our future results of operations or cash flows.
In August 2011 and pursuant to the Budget Control Act of 2011, Congress created
a 12-member bipartisan committee called the Joint Select Committee on Deficit
Reduction, or the Joint Committee. The Joint Committee was charged with issuing
a formal recommendation by November 23, 2011 on how to reduce the federal
deficit by at least $1.5 trillion over the next ten years. The Committee
concluded their work in November and was not able to reach a bipartisan
agreement before the Committee's deadline period. This failure by the Committee
is scheduled to trigger automatic reductions in discretionary and mandatory
spending starting in 2013, including reductions of not more than 2% to payments
to Medicare providers. We are unable to predict the financial impact, if
enacted, of the automatic payment cuts beginning in 2013. However, such impact
may be adverse and material to our future results of operations and cash flows.
Medicare
In July 2011, CMS issued a final rule providing a net 11.1% reduction in PPS
payments to skilled nursing facilities for CMS's fiscal year 2012 (which began
October 1, 2011) as compared to PPS payments in CMS's fiscal year 2011 (which
ended September 30, 2011). The final CMS rule also adjusts the method by which
group therapy is counted for reimbursement purposes, and changes the timing in
which patients who are receiving therapy must be reassessed for purposes of
determining their RUG category. We continue to anticipate that, assuming other
factors remain constant, the resulting decrease in revenue from the fiscal year
2012 Medicare rate changes will be approximately $24,000,000 annually, or
$6,000,000 per quarter. Furthermore, changes in government requirements for
providing therapy services are estimated to increase our operating costs by
approximately $6,000,000 annually, or $1,500,000 per quarter. The effect of the
rate changes on our revenues is dependent upon our census and the mix of our
patients at the PPS pay rates. We have implemented and continue to implement
cost saving measures to help mitigate the effects of a portion of the revenue
decrease and cost increase, but we are also committed to maintaining the quality
of care to our patients. The PPS rates had a net market basket increase of 2.3%
for CMS's fiscal year 2011.
On July 27, 2012, CMS released its skilled nursing facility PPS update for the
fiscal year 2013, which begins October 1, 2012. The notice provides a 1.8% rate
update, which reflects a 2.5% market basket increase that is reduced under the
ACA by a 0.7% multifactor productivity adjustment. CMS estimates the update
will increase overall payments to skilled nursing facilities in fiscal year 2013
by $670 million compared to fiscal year 2012 levels. The notice also provides an
update to certain fiscal year 2012 policy changes involving recalibration of the
parity adjustment, reallocation of group therapy time, and changes to the MDS
3.0 patient assessment instrument. At this time, we are unable to predict the
financial impact of the fiscal year 2013 PPS payments on our future results of
operations or cash flows.
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For the first six months of 2012, our average Medicare per diem rate decreased
6.0% compared to the same period in 2011. The decrease is due to the October 1,
2011 rate reductions, but partially offset by the increased acuity levels of the
patients in our skilled nursing centers.
Effective January 1, 2012, CMS issued a final ruling for homecare programs which
stated an approximate 2.4% rate reduction from the 2011 HH PPS rates. The 2.4%
rate reduction impacts individual providers unevenly. Per the final ruling,
providers with high volume of therapy cases may see greater net rate reductions
while others with non-therapy patients may see a negligible overall reduction in
revenue or a slight increase. We estimate the effect of the revenue decrease
for NHC homecare programs to be approximately $2,600,000 annually, or $650,000
per quarter.
Medicaid
Beginning January 1, 2012, the state of Tennessee implemented a 4.25% rate
reduction for their Medicaid program. On May 14, 2012 and effective
retroactively to January 1, 2012, Tennessee's legislation voted to restore 1.75%
of the 4.25% rate reduction. This effectively leaves a net 2.5% rate reduction
for the six months ended June 30, 2012. The 2.5% rate reduction will also
continue for the state of Tennessee's fiscal year beginning July 1, 2012. We
estimate the resulting decrease in revenue will be approximately $1,500,000
annually, or $375,000 per quarter.
In February 2012 and effective retroactively to October 1, 2011, the state of
Missouri'sMedicaid program announced a net $6.00 per patient day increase in
their Medicaid rates. We estimate the resulting increase in revenue will be
approximately $1,720,000 annually, or $430,000 per quarter.
There was no rate increase or decrease implemented for the fiscal year beginning
October 1, 2011 for the Medicaid program in the state of South Carolina.
For the first six months of 2012, our average Medicaid per diem overall
increased by 0.1% compared to the same period in 2011. We face challenges with
respect to states' Medicaid payments because many states currently do not cover
the total costs incurred in providing care to those patients. States will
continue to control Medicaid expenditures but also look for adequate funding
sources, including provider assessments. Other provisions could increase state
funding for home and community-based services, potentially having an impact on
funding for nursing facilities. There is no assurance that the funding for our
services will increase or decrease in the future.
Results of Operations
Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011
Results for the three month period ended June 30, 2012 include a 1.6% decrease
in net operating revenues and a 0.9% increase in income before taxes compared to
the same period in 2011.
The total census at owned and leased long-term health care centers for the
quarter averaged 90.6% compared to an average of 90.5% for the same quarter a
year ago.
Medicare and Managed Care per diem rates decreased 7.5% and 1.8%, respectively,
compared to the quarter a year ago. Medicaid and private pay per diem rates
increased 1.1% and 3.0%, respectively, compared to the quarter a year ago. The
Medicare per diem rate decrease is due to the 11.1% rate reduction in fiscal
year 2012, but is partially offset by the increased acuity levels of our
patients.
Net patient revenues decreased $3,107,000 or 1.8% compared to the same period
last year. In addition to our Medicare per diem rates decreasing, the remaining
decrease in net patient revenues is due from the assignment of our Solaris
Hospice business to Caris effective January 1, 2012. There were $0 and
$2,858,000 of net patient revenues recorded for the eight Solaris Hospice
entities for the three months ended June 30, 2012 and 2011, respectively. The
increase in our earnings in equity recorded from Caris is presented in
"non-operating income" in our interim condensed consolidated statements of
income. The two newly constructed assisted living communities helped increase
net patient revenues approximately $1,071,000.
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Other revenues increased $89,000 or 0.6% in the three month 2012 period to
$14,028,000 from $13,939,000 in the 2011 three-month period. The increase in
other revenues is primarily due to the increased collections of management and
accounting services fees of $287,000, as further detailed in Note 3 of our
interim condensed consolidated financial statements.
Total costs and expenses for the 2012 second quarter compared to the 2011 second
quarter decreased $2,465,000 or 1.4% to $171,278,000 from $173,743,000.
Salaries, wages and benefits, the largest operating costs of our company,
decreased $80,000 or 0.1% to $104,713,000 from $104,793,000. Other operating
expenses decreased $2,664,000 or 5.1% to $49,224,000 for the 2012 period
compared to $51,888,000 for the 2011 period. Facility rent expense decreased
$32,000 or 0.3% to $9,847,000. Depreciation and amortization increased 4.4% to
$7,386,000.
The decrease in salaries, wages and benefits is primarily due to the cost saving
measures implemented at our skilled nursing facilities ($1,353,000). The
assignment of our Solaris Hospice entities to Caris also decreased salaries and
wages $1,446,000 compared to same period a year ago. We had increased costs for
therapist services of $2,351,000, which offsets these decreases.
The decrease in other operating expenses is primarily due to the assignment of
our Solaris Hospice entities to Caris. There were $0 and $1,406,000 other
operating expenses recorded for the Solaris entities for the three months ended
June 30, 2012 and 2011, respectively. Our skilled nursing centers also
decreased other operating expenses of $881,000 compared to the same period a
year ago.
Non-operating income increased by $752,000 to $5,907,000 in the three month 2012
period in comparison to $5,155,000 for the three-month 2011 period, as further
detailed in Note 4 to our interim condensed consolidated financial statements.
The increase ($565,000) is primarily due to our investment in Caris, including
our increased non-controlling ownership interest effective January 1, 2012 and
June 1, 2012.
The income tax provision for the three months ended June 30, 2012 is $8,780,000
(an effective income tax rate of 39.2 %, which is consistent with management
expectations). The income tax provision and effective tax rate for the three
months ended June 30, 2012 were unfavorably impacted by adjustments to
unrecognized tax benefits of $75,000 and permanent differences including
nondeductible expenses of $62,000 resulting in an increase in the provision.
The income tax provision for the three months ended June 30, 2011 was
$8,584,000 (an effective tax rate of 38.7%). The income tax provision and
effective tax rate for the three months ended June 30, 2011 were unfavorably
impacted by permanent differences including non-deductible expenses.
Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011
Results for the six month period ended June 30, 2012 include a 1.5% decrease in
net operating revenues and a 18.3% decrease in income before taxes compared to
the same period in 2011. For comparative purposes, other operating expenses for
the 2011 six month period included favorable results within our accrued risk
reserves of $10,500,000. Excluding this adjustment, the six months ended June
30, 2012 would have reflected an increase in income before taxes of $867,000, or
2.1%, over the same period in 2011.
The total census at owned and leased long-term health care centers for the six
months averaged 89.9% compared to an average of 90.8% for the same period a year
ago.
Medicare and Managed Care per diem rates decreased 6.0% and 2.6%, respectively,
compared to the six month period a year ago. Medicaid and private pay per diem
rates increased 0.1% and 2.3%, respectively, compared to the six month period a
year ago. The Medicare per diem rate decrease is due to the 11.1% rate
reduction in fiscal year 2012, but is partially offset by the increased acuity
levels of our patients.
Net patient revenues decreased $4,547,000 or 1.3% compared to the same period
last year. In addition to our Medicare per diem rates decreasing, the remaining
decrease in net patient revenues is due from the assignment of our Solaris
Hospice business to Caris effective January 1, 2012. There were $0 and
$6,728,000 of net patient revenues recorded for the eight Solaris Hospice
entities for the six months ended June 30, 2012 and 2011, respectively. The
increase in our earnings in equity recorded from Caris is presented in
"non-operating income" in
26
our interim condensed consolidated statements of income. The two newly
constructed assisted living communities helped increase net patient revenues
approximately $2,172,000.
Other revenues decreased $1,333,000 or 4.5% in the 2012 six month period to
$28,001,000 from $29,334,000 in the 2011 six month period. The decrease in
other revenues is primarily due to the decreased collections of management and
accounting services fees of $644,000, as further detailed in Note 3 of our
interim condensed consolidated financial statements.
Total costs and expenses for the 2012 six months compared to the 2011 period
increased $5,812,,000 or 1.7% to $346,622,000 from $340,810,000. Salaries,
wages and benefits, the largest operating costs of our company, decreased
$2,371,000 or 1.1% to $211,184,000 from $213,555,000. Other operating expenses
increased $7,475,000 or 8.0% to $100,752,000 for the 2012 period compared to
$93,277,000 for the 2011 period. Facility rent expense decreased $50,000 or
0.3% to $19,694,000. Depreciation and amortization increased 5.2% to
$14,766,000.
The decrease in salaries, wages and benefits is primarily due to the cost saving
measures implemented at our skilled nursing facilities ($5,148,000). The
assignment of our Solaris Hospice entities to Caris also decreased salaries and
wages $2,931,000 compared to same period in 2011. We had increased costs for
therapist services of $4,594,000, which offsets these decreases.
As discussed above, the increase in other operating expenses is primarily due to
the 2011 six month period having a favorable adjustment within the accrued risk
reserves of $10,500,000, thus lowering the prior year expense by this amount.
Excluding this adjustment, other operating expenses for the 2012 six month
period would have decreased $3,025,000. The assignment of our Solaris Hospice
entities to Caris decreased other operating expenses $2,773,000 compared to same
period in 2011. Our skilled nursing centers also decreased other operating
expenses $477,000 compared to the same period a year ago.
Non-operating income increased by $2,059,000 to $11,775,000 in the 2012 six
month period in comparison to $9,716,000 for the same period a year ago, as
further detailed in Note 4 to our interim condensed consolidated financial
statements. The increase ($1,287,000) is primarily due to our investment in
Caris, including our increased non-controlling ownership interest effective
January 1, 2012 and June 1, 2012.
The income tax provision for the six months ended June 30, 2012 is $16,714,000
(an effective income tax rate of 38.9 %, which is consistent with management
expectations). The income tax provision and effective tax rate for the six
months ended June 30, 2012 were unfavorably impacted by adjustments to
unrecognized tax benefits of $25,000 and permanent differences including
nondeductible expenses of $140,000 resulting in an increase in the provision.
The income tax provision for the six months ended June 30, 2011 was $20,302,000
(an effective tax rate of 38.6%). The income tax provision and effective tax
rate for the six months ended June 30, 2011 were unfavorably impacted by
permanent differences including non-deductible expenses.
Liquidity, Capital Resources, and Financial Condition
Our primary sources of cash include revenues from the operations of our
healthcare and senior living facilities, insurance services, management services
and accounting services. Our primary uses of cash include salaries, wages and
other operating costs of our healthcare and senior living facilities, the cost
of additions to and acquisitions of real property, facility rent expenses, and
dividend distributions. These sources and uses of cash are reflected in our
interim condensed consolidated statements of cash flows and are discussed in
further detail below. The following is a summary of our sources and uses of
cash flows (dollars in thousands):
Six Months Ended
June 30 Six Month Change
2012 2011 $ %
Cash and cash equivalents at
beginning of period $ 61,008 $ 28,478 $ 32,530 114.2%
Cash provided by operating
activities 30,485 27,158 3,327 12.3%
Cash used in investing activities (15,009) (13,473) (1,536) (11.4)%
Cash used in financing activities (7,275) (4,832) (2,443) (50.6)%
Cash and cash equivalents at end of
period $ 69,209 $ 37,331 $ 31,878 85.4%
Operating Activities
Net cash provided by operating activities for the six months ended June 30, 2012
was $30,485,000 as compared to $27,158,000 in the same period last year. Cash
provided by operating activities consisted of net income of $26,290,000,
adjustments for non-cash items of $13,177,000, and $8,982,000 used for working
capital. Cash used for working capital primarily consisted of a decrease in
accrued payroll of $14,640,000, which is offset by an increase in our accrued
risk reserves of $4,961,000. The decrease in accrued payroll is due to the
timing of payroll payments related to incentive compensation.
Investing Activities
Cash used in investing activities totaled $15,009,000 and $13,473,000 for the
six months ended June 30, 2012 and 2011, respectively. Cash used for property
and equipment additions was $6,242,000 for the six months ended June 30, 2012
and $13,352,000 in the comparable period in 2011. In the current period, we
acquired an additional 7.5% non-controlling ownership interest in Caris for
$7,500,000. Cash provided by net collections of notes receivable was $20,000 in
2012 compared to $1,139,000 in 2011. Purchases and sales of restricted
marketable securities resulted in a net use of cash of $1,287,000 for the 2012
period compared to $1,260,000 for the 2011 period.
Financing Activities
Net cash used in financing activities totaled $7,275,000 and $4,832,000 for the
six months ended June 30, 2012 and 2011, respectively. Cash used for dividend
payments to common and preferred stockholders totaled $12,684,000 in the current
year period compared to $12,004,000 for the same period a year ago. In the
current period, $5,583,000 of cash was provided by the issuance of common stock.
In the prior period, cash of $7,152,000 was provided by the issuance of common
stock.
Table of Contractual Cash Obligations
Our contractual cash obligations for periods subsequent to June 30, 2012 are as
follows (in thousands):
1-3 3-5 After
Total 1 year Years Years 5 Years
Long-term debt - principal $ 10,000 $ - $ - $ - $ 10,000
Long-term debt - interest 1,520 276 553 553 138
Operating leases 320,150 33,700 67,400 67,400 151,650
Total contractual cash obligations $ 331,670 33,976 67,953 67,953 161,788
Other noncurrent liabilities for uncertain tax positions of $4,457,000,
attributable to permanent differences, at June 30, 2012 has not been included in
the above table because of the inability to estimate the period in which the
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tax payment is expected to occur. See Note 12 of the interim condensed
consolidated financial statements for a discussion on income taxes.
We started paying quarterly dividends on our common shares outstanding in 2004
and our preferred shares outstanding in 2007. We anticipate the continuation of
both the common and preferred dividend payments as approved quarterly by the
Board of Directors.
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 $69,209,000 at June 30, 2012, marketable securities of
$97,602,000 at June 30, 2012 and as needed, our borrowing capacity, are expected
to be adequate to meet our contractual obligations and to finance our operating
requirements and our growth and development plans in the next twelve months. We
currently do not have any funds drawn against our revolving credit agreement and
the amount of $75,000,000 is available to be drawn for general corporate
purposes, including working capital and acquisitions.
Long-term liquidity
Our $75,000,000 revolving credit agreement matures on October 25, 2012. We
currently anticipate renewing the credit agreement at that time and while we
have had no indication from the lender that there is any question about renewal,
there has been no commitment at this time. We entered into this loan originally
on October 30, 2007, and have renewed the loan four times with one year
maturities. At the inception and at each renewal, the lender offered longer
maturities, but the Company chose a one-year maturity because of the terms. If
we are not able to refinance our debt as it matures, we will be required to use
our cash and marketable securities to meet our debt and contractual obligations
and will be limited in our ability to fund future growth opportunities.
Our ability to refinance the credit agreement, to meet our long-term contractual
obligations and to finance our operating requirements, and growth and
development plans will depend upon our future performance, which 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.
Commitment and Contingencies
Governmental Regulations
Laws and regulations governing the Medicare, Medicaid and other federal
healthcare programs are complex and subject to interpretation. Management
believes that it is in compliance with all applicable laws and regulations in
all material respects. However, compliance with such laws and regulations can
be subject to future government review and interpretation as well as significant
regulatory action including fines, penalties, and exclusions from the Medicare,
Medicaid and other federal healthcare programs. We are not aware of any
material regulatory proceeding or investigation underway or threatened involving
allegations of potential wrongdoing.
On July 24, 2009, the Company received a civil investigative demand from the
Tennessee Attorney General's Office, requesting production of documents related
to NHC's business relationships with non-profit entities. The Company has
responded to the demand and complied as required with the terms of the demand.
Acquisitions
We have acquired and will continue to acquire businesses with prior operating
histories. Acquired companies may have unknown or contingent liabilities,
including liabilities for failure to comply with healthcare laws and
regulations, such as billing and reimbursement, anti-kickback and physician
self-referral laws. Although we institute policies designed to conform practices
to our standards following completion of acquisitions and attempts to structure
our acquisitions as asset acquisitions in which we do not assume liability for
seller wrongful
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actions, there can be no assurance that we will not become liable for past
activities that may later be alleged to be improper by private plaintiffs or
government agencies. Although we obtain general indemnifications from sellers
covering such matters, there can be no assurance that any specific matter will
be covered by such indemnifications, or if covered, that such indemnifications
will be adequate to cover potential losses and fines.
Inflation
We have historically derived a substantial portion of our revenue from the
Medicare and Medicaid programs, along with similar reimbursement programs.
Payments under these programs generally provide for reimbursement levels that
are adjusted for inflation annually based upon the state's fiscal year for the
Medicaid programs and in each October for the Medicare program. The adjustments
may not continue in the future, and even if received, such adjustments may not
reflect the actual increase in our costs for providing healthcare services.
New Accounting Pronouncements
See Note 2 to the Interim Condensed Consolidated Financial Statements for the
impact of new accounting standards.
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:
·
national and local economic conditions, including their effect on the
availability and cost of labor, utilities and materials;
·
the effect of government regulations and changes in regulations governing the
healthcare industry, including our compliance with such regulations;
·
changes in Medicare and Medicaid payment levels and methodologies and the
application of such methodologies by the government and its fiscal
intermediaries;
·
liabilities and other claims asserted against us, including patient care
liabilities, as well as the resolution of current litigation (see Note 13:
Guarantees and Contingencies);
·
the ability of third parties for whom we have guaranteed debt, if any, to
refinance certain short term debt obligations;
·
30
the ability to attract and retain qualified personnel;
·
the availability and terms of capital to fund acquisitions and capital
improvements;
·
the ability to refinance existing debt on favorable terms;
·
the competitive environment in which we operate;
·
the ability to maintain and increase census levels; and
·
demographic changes.
See the notes to the quarterly financial statements, and "Item 1. Business" in
our 2011 Annual Report on Form 10-K for a discussion of various governmental
regulations and other operating factors relating to the healthcare industry and
the risk factors inherent in them. This may be found on our web site at
www.nhccare.com. You should carefully consider these risks before making any
investment in the Company. These risks and uncertainties are not the only ones
facing us. There may be additional risks that we do not presently know of or
that we currently deem immaterial. If any of the risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected. In that case, the trading price of our shares of stock
could decline, and you may lose all or part of your investment. Given these
risks and uncertainties, we can give no assurances that these forward-looking
statements will, in fact, transpire and, therefore, caution investors not to
place undue reliance on them.
Item 3.
