1、The BETTER wayOur navigational tool,guiding us in ways to be exceptional customer service providers100 E.Vine Street,Murfreesboro,TN 37130|Phone:615.890.2020|Greet you with a smile and make eye contact.Use your name always.Address your needs with a sense of urgency.“Put my heart”into everything I do
2、.Respect your privacy,dignity,and confidentiality.Answer the telephone within 3 rings and with a“smile.”Give you as many choices as I can.Maintain a safe and secure environment for you.Do my part in keeping the environment pleasant.Resolve any of your concerns.Give no excuses!Apologies only.Anticipa
3、te your needs.Be a part of the NHC teamthere is no“I”in team.Only make promises to you that I can keep.Be neatly dressed and well groomed according to NHC standards.Respond to your“needs”rather than maintaining my schedule.Use compassion as my second language.Escort you to your destination.Recognize
4、 that all your concerns are major.Maintain a positive attitude.20Our 20 promises to help guide us in our daily practicesNAT IONAL HEALTHCARE CORPORAT ION2013 ANNUAL REPORTThe BETTER wayOur navigational tool,guiding us in ways to be exceptional customer service providers100 E.Vine Street,Murfreesboro
5、,TN 37130|Phone:615.890.2020|Greet you with a smile and make eye contact.Use your name always.Address your needs with a sense of urgency.“Put my heart”into everything I do.Respect your privacy,dignity,and confidentiality.Answer the telephone within 3 rings and with a“smile.”Give you as many choices
6、as I can.Maintain a safe and secure environment for you.Do my part in keeping the environment pleasant.Resolve any of your concerns.Give no excuses!Apologies only.Anticipate your needs.Be a part of the NHC teamthere is no“I”in team.Only make promises to you that I can keep.Be neatly dressed and well
7、 groomed according to NHC standards.Respond to your“needs”rather than maintaining my schedule.Use compassion as my second language.Escort you to your destination.Recognize that all your concerns are major.Maintain a positive attitude.20Our 20 promises to help guide us in our daily practices2013 ANNU
8、AL REPORTA CULTURE ofSERVICECommitted to being the industry leader in customer and investor satisfaction260974 NHCC CVR R1.indd 13/25/14 3:03 PMFinancial and Health Care HighlightsAs of and for the Year Ended December 31,(in thousands,except per share data)20132012201120102009Operating Data:Net oper
9、ating revenues$788,957$761,002$773,242$720,653$673,202Total costs and expenses(716,876)(692,766)(694,391)(663,026)(622,330)Non-operating income30,09525,24520,53323,34016,784Income before income taxes102,17693,48199,38480,96767,656Income tax provision(37,563)(34,181)(34,394)(28,272)(27,607)Net income
10、64,61359,30064,99052,69540,049Dividends to preferred stockholders(8,671)(8,671)(8,671)(8,673)(8,673)Net income available to common stockholders55,94250,62956,31944,02231,376Earnings per common share:Basic$4.05$3.65$4.09$3.22$2.31 Diluted3.873.573.963.222.31Cash dividends declared:Per preferred share
11、$.80$.80$.80$.80$.80 Per common share1.262.201.181.101.02Balance Sheet Data:Total assets$980,725$924,700$870,424$829,505$788,532Accrued risk reserves110,557110,33198,732105,549107,456Long-term debt10,00010,00010,00010,00010,000Stockholders equity688,112656,148606,869555,361519,994Other Data:Skilled
12、Nursing FacilitiesTotal Operating Centers6975757776Owned or Leased Centers6254545450Centers Managed for Others721212326Total Licensed Beds8,9439,4609,4569,7429,772Beds Owned or Leased8,1797,2987,2947,3386,858Beds Managed for Others7642,1622,1622,4042,914Assisted Living Units628653653620921Retirement
13、Retirement Centers56677Retirement Apartments475485485761761HomecareHomecare Programs3837363633“As a provider of not only skilled nursing care but also independent living,assisted living,home care,and pharmacy services,NHC is well positioned to not only meet but also exceed our customers expectations
14、 for quality care.”Robert G.AdamsChairman and CEOFinancial and Health Care HighlightsAs of and for the Year Ended December 31,(in thousands,except per share data)20132012201120102009Operating Data:Net operating revenues$788,957$761,002$773,242$720,653$673,202Total costs and expenses(716,876)(692,766
15、)(694,391)(663,026)(622,330)Non-operating income30,09525,24520,53323,34016,784Income before income taxes102,17693,48199,38480,96767,656Income tax provision(37,563)(34,181)(34,394)(28,272)(27,607)Net income64,61359,30064,99052,69540,049Dividends to preferred stockholders(8,671)(8,671)(8,671)(8,673)(8
16、,673)Net income available to common stockholders55,94250,62956,31944,02231,376Earnings per common share:Basic$4.05$3.65$4.09$3.22$2.31 Diluted3.873.573.963.222.31Cash dividends declared:Per preferred share$.80$.80$.80$.80$.80 Per common share1.262.201.181.101.02Balance Sheet Data:Total assets$980,72
17、5$924,700$870,424$829,505$788,532Accrued risk reserves110,557110,33198,732105,549107,456Long-term debt10,00010,00010,00010,00010,000Stockholders equity688,112656,148606,869555,361519,994Other Data:Skilled Nursing FacilitiesTotal Operating Centers6975757776Owned or Leased Centers6254545450Centers Man
18、aged for Others721212326Total Licensed Beds8,9439,4609,4569,7429,772Beds Owned or Leased8,1797,2987,2947,3386,858Beds Managed for Others7642,1622,1622,4042,914Assisted Living Units628653653620921RetirementRetirement Centers56677Retirement Apartments475485485761761HomecareHomecare Programs3837363633“
19、As a provider of not only skilled nursing care but also independent living,assisted living,home care,and pharmacy services,NHC is well positioned to not only meet but also exceed our customers expectations for quality care.”Robert G.AdamsChairman and CEOAnnual Report Design by Curran&Connors,Inc./ww
20、w.curran-STANDING,FROM LEFT TO RIGHTLAWRENCE C.TUCKER(1)(2)(3)INDEPENDENT DIRECTOR,71Mr.Tucker joined the board in 1998.He has been with Brown Brothers Harriman&Co.for 47 years and became a general partner of the firm in January 1979.ERNEST G.BURGESS,III(1)(2)(3)INDEPENDENT DIRECTOR,74Mr.Burgess joi
21、ned the board in 1992.He served as NHCs senior vice president of operations for 20 years before retiring in 1994.He currently serves as mayor of Rutherford County,Tennessee.DR.J.PAUL ABERNATHY(1)(2)(3)INDEPENDENT DIRECTOR,78,CHAIRMAN,NOMINATING AND CORPORATE GOVERNANCE COMMITTEEDr.Abernathy joined t
22、he board in 2003.He is a retired general surgeon.As a Lt.Col.,he also served as a flight surgeon for the Homestead Air Force Base in Florida and Chief of Surgery for the United States Air Force at Keesler Air Force Base.He is a member of the American College of Surgeons.EMIL E.HASSAN(1)(2)(3)INDEPEN
23、DENT DIRECTOR,67,CHAIRMAN,COMPENSATION COMMITTEEMr.Hassan joined the board in 2004.He is a retired senior vice president of manufacturing,purchasing,quality and logistics for Nissan North America,Inc.He is the chairman of the Business/Education Partnership of Murfreesboro and Rutherford County and s
24、erves on the Finance Committee of the St.Thomas Health Board.SITTING,FROM LEFT TO RIGHTRICHARD F.LAROCHE,JR.(1)(2)(3)INDEPENDENT DIRECTOR,68,CHAIRMAN,AUDIT COMMITTEEMr.LaRoche joined the board in 2002.He retired from NHC after 27 years of service,serving as secretary,general counsel and senior vice
25、president.He currently serves on the boards of Cross Border Resources,Inc.and privately held Lodge Manufacturing Company.ROBERT G.ADAMSCHAIRMAN/CEO,INSIDE DIRECTOR,67Mr.Adams joined the board in 1992 and has served as chairman since 2009.He has served NHC for 40 years18 years as senior vice presiden
26、t,10 years as chief operating officer,five years as president and nine years as CEO.He also served as a regional vice president and health care administrator for NHC.W.ANDREW ADAMSAFFILIATED DIRECTOR,68Mr.Adams joined the board in 1974,serving as chairman from 1994 to 2008.He served NHC for 32 years
27、 and resigned as president and CEO in 2004.He is currently chairman of the board of National Health Investors,Inc.(1)Audit Committee(2)Compensation Committee(3)Nominating and Corporate Governance CommitteeBOARD OF DIRECTORS260974 NHCC CVR R1.indd 23/25/14 3:03 PMLETTER FROM THE CHAIRMANThe costly an
28、d complex Affordable Care Act is moving slowly out of the starting gate creating numerous uncertainties.Changes in care delivery,data collection,length of stay and hospital readmission rates are all creating new and challenging opportunities.We are developing strong working relationships with hospit
29、al systems,managed care organizations,state Medicaid programs and other providers to ensure that we provide high quality care in the most efficient and effective manner.As a provider of not only skilled nursing care but also independent liv-ing,assisted living,home care,and pharmacy services,NHC is
30、well positioned to not only meet but also exceed our customers expecta-tions for quality care.EARNINGS AND FINANCIAL POSITIONOur income available to common shareholders was$55,942,000 or$4.05 per share basic for the year ended December 31,2013,compared to$50,629,000 or$3.65 per share basic for the y
31、ear ended December 31,2012.Annual net operating revenues in 2013 increased 3.7%from$761,002,000 to$788,957,000,despite the automatic 2%cut to Medicare providers known as“sequestration”that began on April 1,2013.Operating results for the 2013 year compared to the 2012 year were favorably impacted by
32、a gain on the recovery of notes receivable in the amount of$5,454,000(approximately$3,327,000 after income taxes),by the positive results within our accrued risk reserves,as well as the continued efforts to control operational expenses.Our occupancy and census mix continue to be strong at our skille
33、d health care centers.In 2013,our occupancy remained above the national average at 89.2%.Private pay,managed care,and Medicare revenue accounted for 75%of our net patient revenue in 2013.DIVIDENDSDuring the second quarter of 2013,we increased our quarterly com-mon share dividend to$.32 per share whi
34、le our quarterly preferred share dividend remains at$.20.We will continue to evaluate dividend payment levels for appropriateness.FUTURENHC continues to expand our post-acute opportunities in all areas of senior care.In the fourth quarter of 2013,we opened a new 90-bed skilled nursing center in Tull
35、ahoma,Tennessee and opened a 50-bed addition to our existing skilled nursing center in Lexington,South Carolina.We also began construction on a 92-bed skilled nursing center and 60-unit assisted living community in Sumner County,Tennessee.During the first quarter of 2014,NHC has initiated leases on
36、three properties located in Independence and St.Louis,Missouri.Also in 2014,we anticipate starting construction on a 52-bed transitional care center in Kingsport,Tennessee;a 90-bed skilled nursing center and an 80-unit assisted living community in Nashville,Tennessee;an 80-unit assisted living commu
37、nity in Garden City,South Carolina;and a 76-unit assisted living community in Bluffton,South Carolina.Collectively,these properties total 250 skilled nursing beds,104 assisted living beds,and 70 memory care beds.NHC is also expanding through select partnership agreements.We have entered into a partn
38、ership with RSF Partners,Inc.,and Flournoy Development,Inc.to build and operate an 85-unit assisted living com-munity(“Camellia Walk”)in Augusta,Georgia.Camellia Walk is cur-rently under construction and plans to open in the second quarter of 2014.NHC has also entered into a partnership with Reliant
39、 Healthcare,LLC to develop and operate a 14-bed psychiatric hospital focusing on geriatric care in Osage Beach,Missouri.This project is projected to open in the second quarter of 2014.Finally,in 2013,a certificate of need was approved that will be used to build a replacement skilled nursing center t
40、hat would combine the current 92 beds of NHC Hillview located in Columbia,Tennessee with 20 beds from the existing skilled nursing unit at Maury Regional Medical Center.The resulting replace-ment center would be a partnership between NHC and Maury Regional Medical Center.Thank you for your continued
41、 trust and investment in NHC.On behalf of the over 11,500 full and part time partners at NHC,we want to assure you that we remain steadfast in our commitment to continue our“Culture of Service.”Sincerely,Robert G.AdamsCEO/Chairman01NHC continues to be recognized by our patients,families,communities
42、and industry peers as a leader in post-acute care.The ability to fulfill our mission of continuing as the industry leader in customer and investor satisfaction is a testimony to our“Culture of Service”devel-oped over the past 43 years.It is this culture which sets NHC apart and helps attract and ret
43、ain high-performance partners(employees)to provide the care to our customers.260974 NHCC NARR R1.indd 13/25/14 2:57 PM2013 ANNUAL REPORT76%76%of our centers are CMS 4 or 5 star ratedA SERVICE ROOTEDin QUALITYCommitted to being the leader in our industry through the ways we produce quality results fo
44、r our customers.02Four and Five Star Ratings%AHCANHCAHCANHCAverage Overall ScoresOperational Excellence AHCA vs.NHC0204060800.01.02.03.04.0CMS FIVE-STAR RATINGS3.354.0751%76%260974 NHCC NARR R1.indd 23/25/14 2:57 PM03At NHC,quality is both a reality and a destinationsomething we deliver on a daily b
45、asis and strive to continuously improve upon over time.OUR APPROACH CREATES THE RIGHT CONDITION FOR THE RIGHT QUALITY OF SERVICE At National HealthCare Corporation(NHC),quality is both a reality and a destinationsomething we deliver on a daily basis and strive to continuously improve upon over time.
46、We are committed to being the leader in our industry through the ways we produce quality results for our cus-tomersby equipping our facilities with current health-care technologies,stressing continuing education for our partners,providing excellent home care services and lever-aging the expertise we
47、 have gained from our longevity in the industry.Our commitment to quality also means that the new centers we are currently developing in several states are designed to exceed our customers expectations.While some of our competitors roll out cookie-cutter facili-ties,our development process begins wi
48、th a needs assess-ment and discussions with local community leaders,social workers and hospital officials.We take many measures to ensure that our projects are based on each communitys specific needs.We believe this approach is good for the communities we serve,and it creates the right conditions fo
49、r delivering quality service and success.260974 NHCC NARR R1.indd 33/25/14 2:57 PM2013 ANNUAL REPORT11,500We employ more than 11,500 partnersA SERVICE COMMITTEDto DEPENDABILITYProviding our customers with a level of service we believe is unrivaled in our industry.04260974 NHCC NARR R1.indd 43/25/14
50、2:57 PM05Our partners extensive lengths of service with us are a reflection of NHCs longevity in this industry.MANY OF OUR PARTNERS HAVE BEEN WITH US FOR DECADESWe pride ourselves on the fact that many of our partners have been with us for decadesseasoned professionals whose experience allows us to
51、provide our customers with a level of service we believe is unrivaled in our industry.Our partners extensive lengths of service with us are a reflection of NHCs longevity in this industry.While we are proud of our newest facilities,we also take pride in the quality of service we continue to offer at
52、 all of the health care centers we have developed or acquired since 1971.Our goal is to be the local“facility of choice”for post acute services,getting a majority of the referrals from the local hospital.This is,despite the age of the facility,due in no small part to NHCs focus on providing quality,
53、depend-able service and maintaining each facility with up-to-date,current healthcare trends.260974 NHCC NARR R1.indd 53/25/14 2:57 PM2013 ANNUAL REPORT260260 combined years of service by senior management.Average tenure of 29 years.A SERVICE BORNfrom EXPERIENCEOur excellent partners are delivering e
54、xceptional outcomes for both patients and physicians.06260974 NHCC NARR R1.indd 63/25/14 2:57 PM07Our goal is to exceed our customers expectations in providing care and servicesand not just for their immediate post-acute care needs.OUR COLLECTIVE EXPERIENCE DELIVERS EXCEPTIONAL CAREMost people,if th
55、ey live long enough,will spend some time in a skilled nursing facility whether for a short-term rehab stay or a longer stay in their final years.Our goal is to exceed our customers expectations in providing care and servicesand not just for their immediate post-acute care needs.We strive to assess a
56、nd address each and every customers needs.Our responsibility is to the whole personmind,body and spiritand their families.We recognize that the patient,their family and the patients physician are our customers,and our efforts to deliver a quality experience and a good result extends to all con-cerne
57、d.While we strive to provide expert healthcare to our patients,we also employ innovative technology to speed placements,pre-reserve rooms,streamline admissions and eliminate concerns for both our patients and their physicians.This helps to create a quality experience that drives cus-tomer satisfacti
58、onand our excellent partners are deliver-ing exceptional outcomes for both patients and physicians,resulting in fewer instances of hospital readmissions.260974 NHCC NARR R1.indd 73/25/14 2:57 PM2013 ANNUAL REPORTA SERVICE DEDICATEDto the INDIVIDUALOur new,nationally-recognized customer satisfaction
59、measurement system has already verified that we are an industry leader.08“The staff has a very compassionate and warm attitude with patients and their families.They go the extra mile to make things the best they can be.Im so glad we came to NHC.”Customer testimonial260974 NHCC NARR R1.indd 83/25/14
60、2:57 PM09NHC is consistently recognized as the healthcare provider of choice in our markets for an ever-increasing number of both physicians and patients who want quality care.WE INTEND FOR OUR SERVICE TO BRING THE BEST POSSIBLE RESULT FOR OUR CUSTOMERSAt NHC,we intend for our service to bring the b
61、est possi-ble result for each customer.In 2013,we implemented a new,nationally-recognized customer satisfaction measure-ment system that,in our first year of use,has already veri-fied that we are an industry leader.The changing healthcare landscape means NHC facilities arent the“nursing homes”people
62、 remember from decades past.Today,a large percentage of NHCs guests are younger than the ages people typically associate with nursing homes,and many are there for short-term rehab stays following an illness or injury.Although were often referred to as a“senior-care provider,”NHC is consistently reco
63、gnized as an ever increasing healthcare provider of choice in our markets for a number of both physicians and patients who want quality care in an attractive,affordable and caring setting,supported by innovative techniques and processes.Increasingly,our skilled nursing facilities are serving as the
64、post-acute resource for thousands of hip and knee replace-ment patients of all ages.The average stay for our post-acute and rehab patients is now measured in daysnot months and years.Our skilled nursing facilities offer sophisticated equipment and a staff of professionals who are trained for this ty
65、pe of care.We focus on providing healthcare that gets people back to the life they experienced before their accident or surgery.260974 NHCC NARR R1.indd 93/25/14 2:57 PM102013 ANNUAL REPORTLOCATIONSOur business is long-term health care services.At December 31,2013,we operated or managed 69 skilled n
66、ursing facilities with a total of 8,943 licensed beds.These numbers include 62 centers with 8,179 beds that we lease or own and seven centers with 764 beds that we manage for others.Our 15 assisted living centers(14 leased or owned and one managed)have 628 units(604 units leased or owned and 24 unit
67、s managed).Our five independent living centers(four leased or owned and one managed)have 475 retirement apartments(338 apart-ments leased or owned and 137 apartments managed).We operate 38 homecare programs licensed in four states(Florida,Missouri,South Carolina,and Tennessee)and pro-vided 469,437 h
68、omecare patient visits to 18,995 patients in 2013.We have a partnership agreement and a 75.1%non-controlling ownership interest in Caris HealthCare,L.P.(“Caris”),a business that specializes in hospice care services in NHC owned skilled nursing facilities and in other settings.Caris provided hospice
69、care to over 1,250 patients per day in 24 locations in Tennessee,South Carolina,and Virginia.150150 total operating locations in 10 states31210313244378KentuckyTennesseeAlabamaGeorgiaFloridaSouth CarolinaVirginiaNew HampshireMassachusettsMissouriSkilled Nursing CentersNHCAssisted LivingAccounting&Fi
70、nancial ServicesRehabilitationIndependentLivingHospiceHomeCarePharmacy2013NHC A POST ACUTE CARE COMPANY260974 NHCC NARR R1.indd 103/25/14 2:57 PMTOP,FROM LEFT TO RIGHTDAVID L.LASSITERSENIOR VICE PRESIDENT,CORPORATE AFFAIRS,5918 years with NHC.DONALD K.DANIELSENIOR VICE PRESIDENT,CONTROLLER AND PRINC
71、IPAL ACCOUNTING OFFICER,6736 years with NHC.R.MICHAEL USSERYCHIEF OPERATING OFFICER,5533 years with NHC.Mr.Ussery also served as senior regional vice president and a health care center administrator.JOHN K.LINESSENIOR VICE PRESIDENT,GENERAL COUNSEL AND SECRETARY,54Seven years with NHC.D.GERALD COGGI
72、NSENIOR VICE PRESIDENT,ANCILLARY SERVICES AND CORPORATE RELATIONS,6240 years with NHC.Mr.Coggin also served as a senior regional vice president and a health care center administrator.BOTTOM,FROM LEFT TO RIGHTJULIA W.POWELLSENIOR VICE PRESIDENT,PATIENT SERVICES,6439 years with NHC.Ms.Powell also serv
73、ed as NHC nurse consultant and director of NHCs patient assessment computerized services.STEPHEN F.FLATTPRESIDENT,58Eight years with NHC.Mr.Flatt also served as senior vice president of development prior to becoming president in 2009.ROBERT G.ADAMSCHAIRMAN/CEO,6739 years with NHC9 years as CEO.Mr.Ad
74、ams also served as president,chief operating officer and senior vice president,regional vice president and a health care administrator.CHARLOTTE A.SWAFFORDSENIOR VICE PRESIDENT AND TREASURER,6640 years with NHC.Ms.Swafford also served as assistant treasurer,accounting manager,and staff accountant.CO
75、RPORATE OFFICERS260974 NHCC NARR R1.indd 113/25/14 2:58 PMVICE PRESIDENTSASSISTANT VICE PRESIDENTSCORPORATE INFORMATIONCHRISTY J.BEARDNursing InformaticsBRIGITTE L.BURKEDietary ServicesKATHY W.CAMPBELLPartner BenefitsBRUCE K.DUNCANHealth PlanningCHARLEEN D.FORSYTHEInformation SystemsBARBARA F.HARRIS
76、OperationsDONNIE P.HESTERWorkers CompensationMARTHA L.HUGHEYReimbursementLESLIE A.JOYNERHealth InformationN.BART KINGChief Audit ExecutivePHYLLIS F.KNIGHTPayrollJOHN D.MCKINNEYOperational AccountingJESSE W.MYATTInformation SystemsWAYNE L.OLIFFProfessional LiabilityJOAN B.PHILLIPSRehabilitationDEBBIE
77、 L.PRICEAccounts ReceivableJUDY G.THOMASSONHomecare Acquisitions and AccountingSTACIA H.VETTERLong Term Care Insurance&Government RelationsCHRISTOPHER S.WESTHuman ResourcesCHARLES J.WYSOCKIOperationsCORPORATE HEADQUARTERSNational HealthCare Corporation100 E.Vine StreetMurfreesboro,Tennessee 37130Pho
78、ne:(615)890-2020Fax:(615)890-0123WEBSITETRANSFER AGENT AND REGISTRARComputershare Trust Company,N.A.P.O.Box 30170College Station,TX 77842-3170800-568- STOCKHOLDERS MEETINGCity Center,14th Floor100 E.Vine StreetMurfreesboro,TennesseeThursday,May 8,2014 4:00 p.m.Central TimeANNUAL REPORT ON FORM 10-K
79、Copies of our Annual Report on Form 10-K and all other U.S.Securities and Exchange Commission filings are available free of charge on our website or by contacting us.INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMErnst&Young LLP150 Fourth Avenue NorthNashville,Tennessee 37219SENIOR REGIONAL VICE PRESI
80、DENTSCATHERINE E.REEDHomecareJEFFREY R.SMITHTreasuryGREG G.BIDWELLCentral Tennessee and KentuckyM.RAY BLEVINSEast Tennessee,Georgia and VirginiaD.DORAN JOHNSONSouth Central Tennessee and AlabamaJ.B.KINNEY,JR.South CarolinaMICHAEL C.NEALNew Hampshire and MassachusettsMELVIN J.RECTORMissouri260974 NHC
81、C NARR R1.indd 123/25/14 2:58 PM2013 FORM 10-KA CULTURE ofSERVICECommitted to being the industry leader in customer and investor satisfaction(This page intentionally left blank.)UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549FORM 10-K(Mark One)x ANNUAL REPORT PURSUANT TO SECTIO
82、N 13 OR 15(D)OF THE SECURITIES AND EXCHANGE ACT OF 1934For the fiscal year ended December 31,2013ORo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ to _Commission File No.001-13489(Exact name of registrant as specified in its
83、Corporate Charter)Delaware52-2057472(State of Incorporation)(I.R.S.Employer I.D.No.)100 Vine Street Murfreesboro,Tennessee 37130(Address of principal executive offices)Telephone Number:615-890-2020Securities registered pursuant to Section 12(b)of the Act.Title of Each ClassName of Each Exchange on w
84、hich RegisteredShares of Common StockNYSE MKTShares of Preferred Cumulative Convertible StockNYSE MKTSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes o No xIndicate
85、by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes o No xIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12
86、months or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days:Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Inte
87、ractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such period that the registrant was required to submit and post such files).Yes x No oIndicate by check mark if disclosure of delinquent filers p
88、ursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.oIndicate by check mark whether the re
89、gistrant is a large accelerated filer,an accelerated filer,a non-accelerated filer or a smaller reporting company(as defined in Rule 12b-2 of the Act).Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company oIndicate by check mark whether the registrant is a s
90、hell company(as defined in Rule 12b-2 of the Exchange Act).Yes o No xThe aggregate market value of Common Stock held by non-affiliates on June 30,2013(based on the closing price of such shares on the NYSE MKT)was approximately$346 million.For purposes of the foregoing calculation only,all directors,
91、named executive officers and persons known to the Registrant to be holders of 5%or more of the Registrants Common Stock have been deemed affiliates of the Registrant.The number of shares of Common Stock outstanding as of February 19,2014 was 14,080,796.DOCUMENTS INCORPORATED bY REFERENCEThe followin
92、g documents are incorporated by reference into Part III,Items 10,11,12,13 and 14 of this Form 10-K:The Registrants definitive proxy statement for its 2014 shareholders meeting.TAbLE OF CONTENTSPart IItem 1.Business.3Item 1B.Unresolved Staff Comments.22Item 2.Properties.22Item 3.Legal Proceedings.27I
93、tem 4.Mine Safety Disclosures.28Part IIItem 5.Market For Registrants Common Equity,Related Stockholder Matters,and Issuer Purchases of Equity Securities.29Item 6.Selected Financial Data.32Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.32Item 7A.Quantitati
94、ve and Qualitative Disclosure about Market Risk.46Item 8.Financial Statements and Supplementary Data.47Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.81Item 9A.Controls and Procedures.81Item 9B.Other Information.83Part IIIItem 10.Directors,Executive Offic
95、ers and Corporate Governance.83Item 11.Executive Compensation .83Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.83Item 13.Certain Relationships and Related Transactions and Director Independence.83Item 14.Principal Accountant Fees and Services.
96、83Part IVItem 15.Exhibits And Financial Statement Schedule.84Signatures.85Exhibit Index.863PART 1ITEM 1.bUSINESSGeneral Development of businessNational HealthCare Corporation,which we also refer to as NHC or the Company,began business in 1971.Our principal business is the operation of skilled nursin
97、g facilities with associated assisted living and independent living centers.Our business activities include providing sub and post-acute skilled nursing care,intermediate nursing care,rehabilitative care,senior living services,and home health care services.We also have a non-controlling ownership in
98、terest in a hospice care business that services NHC owned health care centers and others.In addition,we provide management services,accounting and financial services and insurance services to third party owners of health care facilities.We operate in 10 states,and our owned and leased properties are
99、 located primarily in the southeastern United States.Narrative Description of the businessOur business is post-acute care and senior health care services.At December 31,2013,we operate or manage 69 skilled nursing facilities with a total of 8,943 licensed beds.These numbers include 62 centers with 8
100、,179 beds that we lease or own and seven centers with 764 beds that we manage for others.Of the 62 leased or owned facilities,35 are leased from National Health Investors,Inc.(“NHI”).Our 15 assisted living centers(14 leased or owned and one is managed)have 628 units(604 units leased or owned and 24
101、units managed).Our five independent living centers(four leased or owned and one managed)have 475 retirement apartments(338 apartments leased or owned,and 137 apartments managed).We operate 38 homecare programs licensed in four states(Tennessee,South Carolina,Missouri and Florida)and provided 469,437
102、 homecare patient visits to 18,995 patients in 2013.We have a partnership agreement and a 75.1%non-controlling ownership interest in Caris Healthcare,LP(“Caris”),a business that specializes in hospice care services in NHC owned health care centers and in other settings.Caris provides hospice care to
103、 over 1,250 patients per day in 24 locations in Tennessee,South Carolina,and Virginia.We operate specialized care units within certain of our healthcare centers such as Alzheimers disease care units,sub-acute nursing units and a number of in-house pharmacies.Similar specialty units are under conside
104、ration at a number of our centers,as well as free standing projects.Net Patient Revenues.Health care services we provide include a comprehensive range of services.In fiscal 2013,93.3%of our net operating revenues was derived from such health care services.Highlights of health care services activitie
105、s during 2013 were as follows:A.Skilled Nursing Facilities.The most significant portion of our business and the base for our other health care services is the operation of our skilled nursing facilities.In our facilities,experienced medical professionals provide medical services prescribed by physic
106、ians.Registered nurses,licensed practical nurses and certified nursing assistants provide comprehensive,individualized nursing care 24 hours a day.In addition,our facilities provide licensed therapy services,quality nutrition services,social services,activities,and housekeeping and laundry services.
107、We operate 62 skilled nursing facilities as of December 31,2013.We manage seven facilities for third party owners.Revenues from the 62 facilities we own or lease are reported as net patient revenues in our financial statements.Management fee income is recorded as other revenues from the seven facili
108、ties that we manage.We generally charge 6%to 7%of facility net operating revenues for our management services.Average occupancy in skilled nursing facilities we operate was 89.2%during the year ended December 31,2013.B.Rehabilitative Services.We provide therapy services through Professional Health S
109、ervices,a subsidiary of NHC.Our licensed therapists provide physical,speech,respiratory and occupational therapy for patients recovering from strokes,heart attacks,orthopedic conditions,neurological illnesses,or other illnesses,injuries or disabilities.We maintained a rehabilitation staff of over 1,
110、390 highly trained,professional 4therapists in 2013.The majority of our rehabilitative services are for patients in our owned and managed skilled nursing facilities.However,we also provide services to over 80 additional health care providers.Our rates for these services are competitive with other ma
111、rket rates.C.Medical Specialty Units.All of our long-term care facilities participate in the Medicare program,and we have expanded our range of offerings by the creation of center-specific medical specialty units such as our Alzheimers disease care units and subacute nursing units.Our trained staff
112、provides care for Alzheimers patients in early,middle and advanced stages of the disease.We provide specialized care and programming for persons with Alzheimers or related disorders in dedicated units within many of our skilled nursing facilities.Our specialized rehabilitation programs are designed
113、to shorten or eliminate hospital stays and help to reduce the cost of quality health care.We develop individualized patient care plans to target appropriate medical and functional planning objectives with a primary goal where feasible for a return to home or a similar environment.D.Managed Care Cont
114、racts.We operate five regional contract management offices,staffed by experienced case managers who contract with managed care organizations(MCOs)and insurance carriers for the provision of subacute and other medical specialty services within a regional cluster of our owned and managed facilities.Ma
115、naged care patient days were 181,152 in 2013,156,827 in 2012,and 143,223 in 2011.E.Assisted Living Centers.Our assisted living centers are dedicated to providing personal care services and assistance with general activities of daily living such as dressing,bathing,meal preparation and medication man
116、agement.We perform resident assessments to determine what services are desired or required and our qualified staff encourages residents to participate in a range of activities.We own or lease 14 and manage one assisted living facilities.Of these 15 centers,nine are located within the physical struct
117、ure of a skilled nursing facility or retirement center and six are freestanding.In 2013,the rate of occupancy was 91.1%.Certificates of Need are not required to build these projects and we believe that overbuilding has occurred in some of our markets.F.Independent Living Centers.Our four owned or le
118、ased and one managed independent living centers offer specially designed residential units for the active and ambulatory elderly and provide various ancillary services for our residents,including restaurants,activity rooms and social areas.Charges for services are paid from private sources without a
119、ssistance from governmental programs.Independent living centers may be licensed and regulated in some states,but do not require the issuance of a Certificate of Need(“CON”)such as is required for skilled nursing facilities.We have,in several cases,developed independent living centers adjacent to our
120、 nursing facilities with an initial construction of 40 to 80 units and which units are rented by the month;thus these centers offer an expansion of our continuum of care.We believe these independent living units offer a positive marketing aspect of our skilled nursing facilities.We have one owned re
121、tirement center 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 home care nursing-without additional charge.G.Homecare Programs.Our home health care programs(we call t
122、hem homecares)assist those who wish to stay at home or in assisted living residences but still require some degree of medical care or assistance with daily activities.Registered and licensed practical nurses and therapy professionals provide skilled services such as infusion therapy,wound care and p
123、hysical,occupational and speech therapies.Home health aides may assist with daily activities such as assistance with walking and getting in and out of bed,personal hygiene,medication assistance,light housekeeping and maintaining a safe environment.NHC operates 38 homecare licensed and Medicare-certi
124、fied offices in four states(Tennessee,South Carolina,Missouri and Florida)and some of our homecare patients are previously discharged from our skilled nursing facilities.Medicare reimbursement for homecare services is paid under a prospective payment system.Under this payment system,we receive a pro
125、spectively determined amount per patient per 60 day episode as defined by Medicare guidelines.Medicare episodes increased from 20,374 in 2012 to 20,947 in 2013.Patients served increased from 16,290 in 2012 to 18,995 in 2013.Visits increased from 420,421 in 2012 to 469,437 in 2013.H.Pharmacy Operatio
126、ns.At December 31,2013,we operated four regional pharmacy operations(one in east Tennessee,one in central Tennessee,one in South Carolina,and one in Missouri).These pharmacy operations use a central location to supply pharmaceutical services(consulting and medications)and 5supplies.Regional pharmaci
127、es bill Medicare Part D Prescription Drug Plans(PDPs)electronically and directly for inpatients who have selected a PDP.Our regional pharmacies currently serve 50 owned facilities,five managed facilities,and 13 third party entities.Other Revenues.We generate revenues from management,accounting and f
128、inancial services to third party owners of healthcare facilities,from insurance services to our managed centers,and from rental income.In fiscal 2013,6.7%of our net operating revenues were derived from such other sources.The significant sources of our other revenues are described as follows:A.Manage
129、ment,Accounting and Financial Services.We provide management services to skilled nursing facilities,assisted living centers and independent living centers operated by third party owners.We typically charge 6%to 7%of the managed centers net operating revenues as a fee for these services.Additionally,
130、we provide accounting and financial services to other skilled nursing facilities or related types of entities for small operators.No management services are provided for entities in which we provide accounting and financial services.As of December 31,2013,we perform management services for 9 centers
131、 and accounting and financial services for 27 centers.B.Insurance Services.NHC owns a Tennessee domestic licensed insurance company.The company is licensed in several states and provides workers compensation coverage to the majority of NHC operated and managed facilities in addition to other skilled
132、 nursing facilities,assisted living and retirement centers.A second wholly owned insurance subsidiary is licensed in the Cayman Islands and provides general and professional liability coverage in substantially all of NHCs owned and managed centers.This company elects to be taxed as a domestic subsid
133、iary.We also self-insure our employees(referred to as“partners”)health insurance benefit program at a cost we believe is less than a commercially obtained policy.Finally,we operate a long-term care insurance division,which is licensed to sell commercially underwritten long-term care policies.C.Renta
134、l Income.The healthcare properties currently owned and leased to third party operators include nine skilled nursing facilities and four assisted living communities.Non-Operating Income.We generate non-operating income from equity in earnings of unconsolidated investments,from dividends and realized
135、gains and losses on marketable securities,interest income,and other miscellaneous non-operating income.The significant source of non-operating income is described as follows:Equity in Earnings of Unconsolidated Investments.Earnings from investments in entities in which we lack control but have the a
136、bility to exercise significant influence over operating and financial policies are accounted for on the equity method.Our most significant equity method investment is a 75.1%non-controlling ownership interest in Caris Healthcare,L.P.(“Caris”),a business that specializes in hospice care services in N
137、HC owned health care centers and in other settings.Caris currently has twenty-four locations serving three states(Tennessee,South Carolina,and Virginia).6Development and GrowthWe are undertaking to expand our post-acute and senior health care operations while protecting our existing operations and m
138、arkets.The following table lists our recent construction and purchase activities.Type of OperationDescriptionSizeLocationPlaced in Service Assisted LivingNew Facility75 UnitsColumbia,SCMay,2011Assisted LivingAddition46 UnitsFranklin,TNJune,2011HospiceAcquisitionAdditional 7.5%interest in Caris Healt
139、hCare LPKnoxville,TNDecember,2011HospiceAcquisitionAdditional 7.5%interest in Caris HealthCare LPKnoxville,TNJune,2012SNFAcquisition106 BedsColumbia,TNSeptember,2013SNFAcquisition92 BedsColumbia,TNSeptember,2013SNFAcquisition139 BedsKnoxville,TNSeptember,2013SNFAcquisition107 BedsSpringfield,TNSepte
140、mber,2013SNFAcquisition94 BedsMadisonville,KYSeptember,2013SNFAcquisition112 BedsRossville,GASeptember,2013SNFNew Facility90 BedsTullahoma,TNNovember,2013SNFAddition50 BedsLexington,SCDecember,2013SNFNew Facility92 BedsSumner County,TNUnder ConstructionAssisted LivingNew Facility60 UnitsSumner Count
141、y,TNUnder ConstructionAssisted LivingNew Facility85 UnitsAugusta,GAUnder ConstructionIn the fourth quarter of 2013,we opened a 90-bed skilled nursing facility in Tullahoma,Tennessee and began construction on a 92-bed skilled nursing facility and 60-unit assisted living community in Sumner County,Ten
142、nessee.In early 2014,we anticipate starting construction on a 52-bed transitional care center in Kingsport,Tennessee and a 90-bed skilled nursing facility and an 80-unit assisted living community in Nashville,Tennessee.We entered into a partnership with RSF Partners,Inc.,and Flournoy Development,Inc
143、.to build and operate an 85-unit assisted living community(“Camellia Walk”)in Augusta,Georgia.Camellia Walk is currently under construction and plans to open in the second quarter of 2014.We also entered into a partnership with Reliant Healthcare,LLC to develop and operate a 14-bed psychiatric hospi
144、tal focusing on geriatric care in Osage Beach,Missouri.This project is projected to open the first or second quarter of 2014.Also in 2013,a CON was approved that will be used to build a replacement center(SNF)that would combine the current 92 beds of NHC Hillview(Columbia,TN)with 20 beds from the ex
145、isting skilled nursing unit at Maury Regional Medical Center.The resulting replacement center would be a partnership between NHC and Maury Regional Medical Center.7Skilled Nursing FacilitiesThe skilled nursing facilities operated by our subsidiaries provide in-patient skilled and intermediate nursin
146、g care services and in-patient and out-patient rehabilitation services.Skilled nursing care consists of 24-hour nursing service by registered or licensed practical nurses and related medical services prescribed by the patients physician.Intermediate nursing care consists of similar services on a les
147、s intensive basis principally provided by non-licensed personnel.These distinctions are generally found in the health care industry although for Medicaid reimbursement purposes,some states in which we operate have additional classifications,while in other states the Medicaid rate is the same regardl
148、ess of patient classification.Rehabilitative services consist of physical,speech,and occupational therapies,which are designed to aid the patients recovery and enable the patient to resume normal activities.Each health care facility has a licensed administrator responsible for supervising daily acti
149、vities,and larger facilities have assistant administrators.All have medical directors,a director of nurses and full-time registered nurse coverage.All centers provide physical therapy and most have other rehabilitative programs,such as occupational or speech therapy.Each facility is located near at
150、least one hospital and is qualified to accept patients discharged from such hospitals.Each facility has a full dining room,kitchen,treatment and examining room,emergency lighting system,and sprinkler system where required.Management believes that all facilities are in compliance with the existing fi
151、re and life safety codes.We provide centralized management and support services to NHC operated health care nursing centers.The management and support services include operational support through the use of regional vice presidents and regional nurses,accounting and financial services,cash managemen
152、t,data processing,legal,consulting and services in the area of rehabilitative care.Our personnel are employed by our administrative services affiliate,National Health Corporation(“National”),which is also responsible for overall services in the area of personnel,loss control,insurance,education and
153、training.We reimburse the administrative services contractor by paying all the costs of personnel employed for our benefit as well as a fee.National is wholly owned by the National Health Corporation Employee Stock Ownership Plan and provides its services only to us.We provide management services to
154、 centers operated under management contracts and offsite accounting and financial services to other third party owners,all pursuant to separate contracts.The term of each contract and the amount of the management fee or accounting and financial services fee is determined on a case-by-case basis.Typi
155、cally,we charge 6%to 7%of net operating revenues of the managed centers for our management contracts and specific item fees for our accounting and financial service agreements.The initial terms of the contracts range from two years to ten years.In certain contracts,we maintain a right of first refus
156、al should the owner desire to sell a managed center.Skilled Nursing Facility Occupancy RatesThe following table shows certain information relating to occupancy rates for our owned and leased skilled nursing facilities:Year Ended December 31,201320122011Overall census .89.2%90.1%90.6%Occupancy rates
157、are calculated by dividing the total number of days of patient care provided by the number of patient days available(which is determined by multiplying the number of licensed beds by 365 or 366).Customers and Sources of RevenuesNo individual customer,or related group of customers,accounts for a sign
158、ificant portion of our revenues.We do not expect the loss of a single customer or group of related customers would have a material adverse effect.8Certain groups of patients receive funds to pay the cost of their care from a common source.The following table sets forth sources of net patient revenue
159、s for the periods indicated:Year Ended December 31,Source201320122011Medicare.40%42%44%Private Pay,Managed Care,and Other .35%33%30%Medicaid/Intermediate.20%19%19%Medicaid/Skilled.5%6%7%Total .100%100%100%The source and amount of the revenues are further dependent upon(i)the licensed bed capacity of
160、 our health care facilities,(ii)the occupancy rate of the facilities,(iii)the extent to which the rehabilitative and other skilled ancillary services provided at each facility are utilized by the patients in the centers,(iv)the mix of private pay,Medicare and Medicaid patients,and(v)the rates paid b
161、y private paying patients and by the Medicare and Medicaid programs.We attempt to attract an increased percentage of private and Medicare patients by providing rehabilitative services and increasing the marketing of those services through market areas and“Managed Care Offices”,of which five were ope
162、n at December 31,2013.These services are designed to speed the patients recovery and allow the patient to return home as soon as it is practical.In addition to educating physicians and patients to the advantages of the rehabilitative services,we have also implemented incentive programs which provide
163、 for the payment of bonuses to our regional and center personnel if they are able to achieve private and Medicare goals at their centers.Medicare is a health insurance program for the aged and certain other chronically disabled individuals operated by the federal government.Medicare covers nursing h
164、ome services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days.For each eligible day a Medicare beneficiary is in a skilled nursing facility,Medicare pays the facility a daily payment,subject to adjustment for cer
165、tain factors such as wage index in the particular geographic area.The payment covers all services provided by the skilled nursing facility for the beneficiary that day,including room and board,nursing,therapy and drugs,as well as an estimate of capital-related costs to deliver those services.Private
166、 pay,managed care,and other sources include commercial insurance,individual patient funds,managed care plans and the Veterans Administration.Although payment rates vary among these sources,market forces and costs largely determine these rates.Private paying patients,private insurance carriers and th
167、e Veterans Administration generally pay on the basis of the centers charges or specifically negotiated contracts.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 currently
168、 use prospective cost-based reimbursement systems.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.Government reimb
169、ursement 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 continually passes laws that effect major or minor changes in the Medicare and Medicaid pro
170、grams.Regulation and LicensesHealth care is an area of extensive regulatory oversight and frequent regulatory change.The federal government and the states in which we operate regulate various aspects of our business.These regulatory bodies,among other things,require us annually to license our skille
171、d nursing facilities,assisted living facilities in some states and other health care businesses,including home health.In particular,to operate nursing facilities and provide health care services we must comply with federal,state and local laws relating to the delivery and adequacy of medical care,di
172、stribution of pharmaceuticals,equipment,personnel,operating policies,fire prevention,rate-setting,building codes and environmental protection.9Governmental and other authorities periodically inspect our skilled nursing facilities and home health agencies to assure that we continue to comply with the
173、ir various standards.We must pass these inspections to continue our licensing under state law,to obtain certification under the Medicare and Medicaid programs,and to continue our participation in the Veterans Administration program.We can only participate in other third-party programs if our facilit
174、ies pass these inspections.In addition,these authorities inspect our record keeping and inventory control.From time to time,we,like others in the health care industry,may receive notices from federal and state regulatory agencies alleging that we failed to comply with applicable standards.These noti
175、ces may require us to take corrective action,and may impose civil money penalties and/or other operating restrictions.If our skilled nursing facilities and home health agencies fail to comply with these directives or otherwise fail to comply substantially with licensure and certification laws,rules
176、and regulations,we could lose our certification as a Medicare and Medicaid provider and/or lose our licenses.Local and state health and social service agencies and other regulatory authorities specific to their location regulate,to varying degrees,our assisted living facilities.Although regulations
177、and licensing requirements vary significantly from state to state,they typically address,among other things,personnel education,training and records;facility services,including administration of medication,assistance with supervision of medication management and limited nursing services;physical pla
178、nt specifications;furnishing of resident units;food and housekeeping services;emergency evacuation plans;and resident rights and responsibilities.If assisted living facilities fail to comply with licensing requirements,these facilities could lose their licenses.Most states also subject assisted livi
179、ng facilities to state or local building codes,fire codes and food service licensure or certification requirements.In addition,the manner and extent to which the assisted living industry is regulated at federal and state levels are evolving.Changes in the laws or new interpretations of existing laws
180、 as applied to the skilled nursing facilities,the assisted living facilities or other components of our health care businesses,may have a significant impact on our operations.In all states in which we operate,before a skilled nursing facility can make a capital expenditure exceeding certain specifie
181、d amounts or construct any new skilled health care beds,approval of the state health care regulatory agency or agencies must be obtained and a Certificate of Need issued.The appropriate state health planning agency must review the Certificate of Need according to state specific guidelines before a C
182、ertificate of Need can be issued.A Certificate of Need is generally issued for a specific maximum amount of expenditure and the project must be completed within a specific time period.There is no advance assurance that we will be able to obtain a Certificate of Need in any particular instance.In som
183、e states,approval is also necessary in order to purchase existing health care beds,although the purchaser is normally permitted to avoid a full scale Certificate of Need application procedure by giving advance written notice of the acquisition and giving written assurance to the state regulatory age
184、ncy that the change of ownership will not result in a change in the number of beds,services offered and,in some cases,reimbursement rates at the facility.While there are currently no significant legislative proposals to eliminate Certificates of Need pertaining to skilled nursing care in the states
185、in which we do business,deregulation in the Certificate of Need area would likely result in increased competition and could adversely affect occupancy rates and the supply of licensed and certified personnel.Medicare and Medicaid ParticipationAll health care centers,owned,leased or managed by us are
186、 certified to participate in Medicare.Health care centers participating in Medicare are known as SNFs(“Skilled Nursing Facilities”).All but six of our affiliated nursing centers participate in Medicaid.All of our homecares(Home health agencies)participate in Medicare,which comprises over 80%of their
187、 revenue.Homecares also participate in Medicaid.During the fiscal year,we received payments from Medicare and,if participating,from Medicaid.We record as receivables the amounts we ultimately expect to receive under the Medicare and Medicaid programs and record into profit or loss any differences in
188、 amounts actually received at the time of interim or final settlements.Adjustments have not had a material adverse effect within the last three years.Certifications and Participation Requirements;Efforts to Impose Reduced PaymentsChanges in certification and participation requirements of the Medicar
189、e and Medicaid programs have restricted,and are likely to continue to restrict further,eligibility for reimbursement under those programs.Failure to obtain and maintain Medicare and Medicaid certification at our nursing centers would result in denial of Medicare and Medicaid 10payments which would l
190、ikely result in a significant loss of revenue.In addition,private payors,including managed care payors,increasingly are demanding that providers accept discounted payments resulting in lost revenue for specific patients.Efforts to impose reduced payments,greater discounts and more stringent cost con
191、trols by government and other payors are expected to continue.For the fiscal year ended December 31,2013,we derived 40%and 25%of our net patient revenues from the Medicare and Medicaid programs,respectively.Any reforms that significantly limit rates of reimbursement under the Medicare and Medicaid p
192、rograms could have a material adverse effect on our profitability.We are unable to predict what reform proposals or reimbursement limitations will be adopted in the future or the effect such changes will have on our operations.No assurance can be given that such reforms will not have a material adve
193、rse effect on us.Medicare Legislation and RegulationsFederal Health Care ReformIn 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 chan
194、ges 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 timelin
195、e 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.The U.S.Supreme Court has since issued its ruling on the constitutionality of a key provision in the ACA,which is the requirement that every America
196、n 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 fed
197、eral 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
198、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 12member bipartisan committee called the Joint Se
199、lect 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 2011 and was not ab
200、le to reach a bipartisan agreement before the Committees deadline period.This failure by the Committee has triggered automatic reductions in discretionary and mandatory spending that started April 1,2013,including reductions of not more than 2%to payments to Medicare providers.Skilled Nursing Facili
201、ties(SNFs)SNF PPS-Medicare is uniform nationwide and reimburses nursing centers under a fixed payment methodology named the Skilled Nursing Facility Prospective Payment System(“SNF PPS”).PPS is an acuity based classification system that uses nursing and therapy indexes adjusted by geographical wage
202、indexes to calculate per diem rates for each Medicare patient.Payment rates are updated annually and are generally increased or decreased each October when the federal fiscal year begins.The acuity classification system is named RUGs(Resource Utilization Groups IV).There are currently 66 classificat
203、ions of RUG groups.In July 2012,Centers for Medicare and Medicaid Services(“CMS”)released its skilled nursing facility PPS update for the fiscal year 2013,which began October 1,2012.The notice provided a 1.8%rate update,which reflects a 2.5%market basket increase that is reduced under the ACA by a 0
204、.7%multifactor productivity adjustment.CMS estimated the update would increase overall payments to skilled nursing facilities in fiscal year 2013 by$670 million compared to fiscal year 2012 levels.The notice also provided an update to certain fiscal year 2012 policy changes involving recalibration o
205、f the parity adjustment,reallocation of group therapy time,and changes to the MDS 3.0 patient assessment instrument.11On April 1,2013,the automatic 2%cuts(known as“sequestration”)began for Medicare providers.The resulting decrease in revenue to our skilled nursing facilities was approximately$3,000,
206、000 for the 2013 calendar year,or$1,000,000 per quarter.We are unable to predict the financial impact of other cuts Congress may implement.However,such impact may be adverse and material to our future results of operations and cash flows.In July 2013,CMS released its skilled nursing facility PPS upd
207、ate for the fiscal year 2014,which began October 1,2013.The notice provided for a 1.3%rate update,which reflects a 2.3%market basket increase less a 0.5%multifactor productivity adjustment and a 0.5%adjustment to correct market basket forecasting errors in fiscal year 2012.CMS estimates the update w
208、ill increase overall payments to skilled nursing facilities in fiscal year 2014 by$470 million compared to fiscal year 2013 levels.The effect of the 2014 PPS rate update on our revenues will be dependent upon our census and the mix of our patients at the PPS pay rates.Homecares(HHAs)HH PPS-Medicare
209、is uniform nationwide and reimburses homecares under a fixed payment methodology named the Home Health Prospective Payment System(“HH PPS”).Generally,Medicare makes payments under the HH PPS on the basis of a national standardized 60-day episode payment,adjusted for case mix and geographical wage in
210、dex.Payment rates are updated at the beginning of each calendar year.The acuity classification system is named HHRGs(Home Health Resource Groups).In November 2012,CMS issued a final rule to update and revise reimbursement rates for the calendar year 2013.The final rule included a 2.3%market basket i
211、ncrease,a 1%reduction mandated by the ACA,and a negative 1.32%case-mix adjustment.The net effect of these changes is a 0.04%decrease in the base reimbursement rate.Additionally,the wage index was updated which impacts providers differently depending on their geographic location and changes were made
212、 to outlier eligibility standards.In total,CMS estimated the effect of these changes will result in a 0.01%reduction in reimbursement to home health providers.On April 1,2103,the automatic 2%Medicare cuts began for homecare providers.The resulting decrease in revenue to our homecare programs was app
213、roximately$750,000 for the 2013 calendar year,or$250,000 per quarter.Medicaid Legislation and RegulationsSkilled Nursing Facilities(SNF)State Medicaid plans subject to budget constraints are of particular concern to us.Changes in federal funding coupled with state budget problems and Medicaid expans
214、ion under the Affordable Care Act have produced an uncertain environment.States will more likely than not be unable to keep pace with nursing center inflation.States are under pressure to pursue other alternatives to long term care such as community and home-based services.Effective July 1,2012 and
215、for the fiscal year 2013,the state of Tennessee implemented specific individual nursing facility rate increases.The resulting increase in revenue beginning July 1,2012 was approximately$3,500,000 annually,or$875,000 per quarter.Effective July 1,2013 and for the fiscal year 2014,the state of Tennesse
216、e implemented specific individual nursing facility rate increases.We estimate the resulting increase in revenue beginning July 1,2013 will be approximately$1,800,000 annually,or$450,000 per quarter.Effective October 1,2012 and for the fiscal year 2013,South Carolina implemented specific individual n
217、ursing facility rate increases.The resulting increase in revenue beginning October 1,2012 was approximately$1,660,000 annually,or$415,000 per quarter.Effective October 1,2013 and for the fiscal year 2014,South Carolina implemented specific individual nursing facility rate increases.We estimate the r
218、esulting increase in revenue beginning October 1,2013 will be approximately$1,540,000 annually,or$385,000 per quarter.There was no rate increase or decrease implemented during the 2013 calendar year for the Medicaid program in the state of Missouri.12CompetitionIn most of the communities in which we
219、 operate health care centers,there are other health care centers with which we compete.We own,lease or manage(through subsidiaries)69 skilled nursing facilities located in nine states.Each of these states are certificate of need states which generally requires the state to approve the opening of any
220、 new skilled nursing facilities.There are hundreds of operators of skilled nursing facilities in each of these states and no single operator,including us,dominates any of these states skilled nursing care markets,except for some small rural markets which might have only one skilled nursing facility.
221、In competing for patients and staff with these facilities,we depend upon referrals from acute care hospitals,physicians,residential care facilities,church groups and other community service organizations.The reputation in the community and the physical appearance of our facilities are important in o
222、btaining patients,since members of the patients 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 skilled care services at our facilities,we are able
223、 to broaden our patient base and to differentiate our facilities from competing skilled nursing facilities.Our homecares compete with other home health agencies(HHAs)in most communities we serve.Competition occurs for patients and employees.Our homecares depend on hospital and physician referrals an
224、d reputation in order to maintain a healthy census.As we expand into the assisted living market,we monitor proposed or existing competing assisted living centers.Our development goal is to link our skilled nursing facilities with our assisted living centers,thereby obtaining a competitive advantage
225、for both.We experience competition in employing and retaining nurses,technicians,aides and other high quality professional and non-professional employees.In order to enhance our competitive position,we have an educational tuition loan program,an American Dietetic Association approved internship prog
226、ram,a specially designed nurses aide training class,and we make financial scholarship aid available to physical therapy vocational programs.We support the Foundation for Geriatric Education.We also conduct an“Administrator in Training”course,30 months in duration,for the professional training of adm
227、inistrators.Presently,we have four full-time individuals in this program.Four of our six regional vice presidents and 49 of our 69 health care center administrators are graduates of this program.We experience competition in providing management and accounting services to other long-term health care
228、providers.Those services are provided primarily to owners with whom we have had previous involvement through ownership or leasing arrangements.Our insurance services are provided primarily to centers for which we also provide management and/or accounting services.Our employee benefit package offers
229、a tuition reimbursement program.The goal of the program is to insure a well-trained qualified work force to meet future demands.While the program is offered to all disciplines,special emphasis has been placed on supporting students in nursing and physical therapy programs.Students are reimbursed at
230、the end of each semester after presenting tuition receipts and grades to management.The program has been successful in providing a means for many bright students to pursue a formal education.EmployeesAs of December 31,2013,our Administrative Services Contractor plus our managed centers had approxima
231、tely 11,500 full and part time employees,who we call“Partners”.No employees are represented by a bargaining unit.We believe our current relations with our employees are good.Investor InformationWe file reports with the Securities and Exchange Commission(“SEC”),including annual reports on Form 10-K,q
232、uarterly reports on Form 10-Q and current reports on Form 8-K.The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street,N.E.,Washington,DC 20549.The public may obtain information on the operation of the Public Reference Room by calling the SEC
233、at 1-800-SEC-0330.We are an electronic filer,and the SEC maintains an internet site at www.sec.gov that contains the reports,proxy and information statements,and other information we have filed electronically.We maintain an internet site at .We publish to this website our annual report on Form 10-K,
234、quarterly reports on Form 10-Q,current reports on Form 8-K,13and press releases.We do not necessarily have these filed the same day as they are filed with the SEC or released to the public,but rather have a policy of placing these on the web site within two(2)business days of public release or SEC f
235、iling.We also maintain the following documents on the website:The NHC Code of Ethics.This Code has been adopted for all employees of our Administrative Services Contractor,officers and directors of the Company.The website will also disclose whether there have been any amendments or waivers to the Co
236、de of Ethics and Standards of conduct.To date there have been none.Information on our“NHC Valuesline”,which allows our staff and investors unrestricted access to our Corporate Compliance Officer,executive officers and directors.The toll free number is 800-526-4064 and the communications may be incog
237、nito,if desired.The NHC Restated Audit Committee Charter.The NHC Compensation Committee Charter.The NHC Nomination and Corporate Governance Committee CharterWe will furnish,free of charge,a copy of any of the above documents to any interested investor upon receipt of a written request.ITEM 1A.RISK F
238、ACTORSYou should carefully consider the risk factors set forth below,as well as the other information contained in this Annual Report on Form 10-K.These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K,because
239、 these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements.The risks described below are not the only risks facing us.Additional risks and uncertainties that are not currently known to us or that we currently deem to be immate
240、rial may also materially and adversely affect our business operations.Any of the following risks could materially adversely affect our business,financial condition or results of operations and cash flows.Risks Relating to Our CompanyWe depend on reimbursement from Medicare,Medicaid and other third-p
241、arty payors and reimbursement rates from such payors may be reduced.We derive a substantial portion of our revenue from third-party payors,including the Medicare and Medicaid programs.For the year ended December 31,2013,we derived approximately 65%of our net patient revenues from the Medicare,Medica
242、id and other government programs.Third-party payor programs are highly regulated and are subject to frequent and substantial changes.Changes in the reimbursement rate or methods of payment from third-party payors,including the Medicare and Medicaid programs,or the implementation of other measures to
243、 reduce reimbursements for our services has in the past,and could in the future,result in a substantial reduction in our revenues and operating margins.Additionally,net revenue realizable under third-party payor agreements can change after examination and retroactive adjustment by payors during the
244、claims settlement processes or as a result of post-payment audits.Payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable because additional documentation is necessary or because certain services were not covered or were not reason
245、able and medically necessary.There also continue to be new legislative and regulatory proposals that could impose further limitations on government and private payments to health care providers.In some cases,states have enacted or are considering enacting measures designed to reduce their Medicaid e
246、xpenditures and to make changes to private health care insurance.We cannot assure you that adequate reimbursement levels will continue to be available for the services provided by us,which are currently being reimbursed by Medicare,Medicaid or private third-party payors.Further limits on the scope o
247、f services reimbursed and on reimbursement rates could have a material adverse effect on our liquidity,financial condition and results of operations.It is possible that the effects of further refinements to PPS that result in lower payments to us or cuts in state Medicaid funding could have a materi
248、al adverse effect on our results of operations.See Item 1,“Business Regulation and Licenses”and“Medicare Legislation and Regulations”and“Medicaid Legislation and Regulations”.We conduct business in a heavily regulated industry,and changes in,or violations of regulations may result in increased costs
249、 or sanctions that reduce our revenue and profitability.In the ordinary course of our business,we are regularly subject to inquiries,investigations and audits by federal and state agencies to determine whether 14we are in compliance with regulations governing the operation of,and reimbursement for,s
250、killed nursing,assisted living and independent living facilities,hospice,home health agencies and our other operating areas.These regulations include those relating to licensure,conduct of operations,ownership of facilities,construction of new and additions to existing facilities,allowable costs,ser
251、vices and prices for services.In particular,various laws,including federal and state anti-kickback and anti-fraud statutes,prohibit certain business practices and relationships that might affect the provision and cost of health care services reimbursable under federal and/or state health care progra
252、ms such as Medicare and Medicaid,including the payment or receipt of remuneration for the referral of patients whose care will be paid by federal governmental programs.Sanctions for violating the anti-kickback and anti-fraud statutes include criminal penalties and civil sanctions,including fines and
253、 possible exclusion from governmental programs such as Medicare and Medicaid.In addition,the Stark Law broadly defines the scope of prohibited physician referrals under federal health care programs to providers with which they have ownership or other financial arrangements.Many states have adopted,o
254、r are considering,legislative proposals similar to these laws,some of which extend beyond federal health care programs,to prohibit the payment or receipt of remuneration for the referral of patients and physician referrals regardless of the source of the payment for the care.These laws and regulatio
255、ns are complex and limited judicial or regulatory interpretation exists.We cannot assure you that governmental officials charged with responsibility for enforcing the provisions of these laws and regulations will not assert that one or more of our arrangements are in violation of the provisions of s
256、uch laws and regulations.The regulatory environment surrounding the post-acute and long-term care industry has intensified,particularly for larger for-profit,multi-facility providers like us.The federal government has imposed extensive enforcement policies resulting in a significant increase in the
257、number of inspections,citations of regulatory deficiencies and other regulatory sanctions,including terminations from the Medicare and Medicaid programs,denials of payment for new Medicare and Medicaid admissions and civil monetary penalties.If we fail to comply,or are perceived as failing to comply
258、,with the extensive laws and regulations applicable to our business,we could become ineligible to receive government program reimbursement,be required to refund amounts received from Medicare,Medicaid or private payors,suffer civil or criminal penalties,suffer damage to our reputation in various mar
259、kets or be required to make significant changes to our operations.We are also subject to federal and state laws that govern financial and other arrangements between health care providers.These laws often prohibit certain direct and indirect payments or fee-splitting arrangements between health care
260、providers that are designed to induce the referral of patients to a particular provider for medical products and services.Possible sanctions for violation of any of these restrictions or prohibitions include loss of eligibility to participate in reimbursement programs and/or civil and criminal penal
261、ties.Furthermore,some states restrict certain business relationships between physicians and other providers of health care services.Many states prohibit business corporations from providing,or holding themselves out as a provider of,medical care.From time to time,we may seek guidance as to the inter
262、pretation of these laws;however,there can be no assurance that such laws will ultimately be interpreted in a manner consistent with our practices.In addition,we could be forced to expend considerable resources responding to an investigation or other enforcement action under these laws or regulations
263、.Furthermore,should we lose licenses or certifications for a number of our facilities as a result of regulatory action or otherwise,we could be deemed in default under some of our agreements,including agreements governing outstanding indebtedness.We also are subject to potential lawsuits under a fed
264、eral whistle-blower statute designed to combat fraud and abuse in the health care industry,known as the federal False Claims Act.These lawsuits can involve significant monetary awards to private plaintiffs who successfully bring these suits.When a private party brings a qui tam action under the Fals
265、e Claims Act,it files the complaint with the court under seal,and the defendant will generally not be aware of the lawsuit until the government makes a determination whether it will intervene and take a lead in the litigation.Even if,in the course of an investigation,the court partially unseals a co
266、mplaint to allow the government and a defendant to work toward a resolution of the complaints allegations,the defendant is prohibited from revealing to anyone the existence of the compliant or that the partial unsealing has occurred.We have established policies and procedures that we believe are suf
267、ficient to ensure that our facilities will operate in substantial compliance with these anti-fraud and abuse requirements.While we believe that our business practices are consistent with Medicare and Medicaid criteria,those criteria are often vague and subject to change and interpretation.Aggressive
268、 anti-fraud actions,however,have had and could have an adverse effect on our financial position,results of operations and cash flows.See Item 1,“Business-Regulation and Licenses”.15We are unable to predict the future course of federal,state and local regulation or legislation,including Medicare and
269、Medicaid statutes and regulations,or the intensity of federal and state enforcement actions.Our failure to obtain or renew required regulatory approvals or licenses or to comply with applicable regulatory requirements,the suspension or revocation of our licenses or our disqualification from particip
270、ation in certain federal and state reimbursement programs,or the imposition of other harsh enforcement sanctions could have a material adverse effect upon our operations and financial condition.We are required to comply with laws governing the transmission and privacy of health information.The Healt
271、h Insurance Portability and Accountability Act of 1996,or HIPAA,requires us to comply with standards for the exchange of health information within our Company and with third parties,such as payors,business associates and patients.These include standards for common health care transactions,such as cl
272、aims information,plan eligibility,payment information and the use of electronic signatures,unique identifiers for providers,employers,health plans and individuals,and security,privacy and enforcement.If we are found to be in violation of the privacy or security rules under HIPAA or other federal or
273、state laws protecting the confidentiality of patient health information,we could be subject to criminal penalties and civil sanctions,which could increase our liabilities,harm our reputation and have a material adverse effect on our business,financial position,results of operations and liquidity.We
274、are defendants in significant legal actions,which are commonplace in our industry,and which could subject us to increased operating costs and substantial uninsured liabilities,which would materially and adversely affect our liquidity and financial condition.As is typical in the health care industry,
275、we are subject to claims that our services have resulted in resident injury or other adverse effects.We,like our industry peers,have experienced an increasing trend in the frequency and severity of professional liability and workers compensation claims and litigation asserted against us.In some stat
276、es in which we have significant operations,insurance coverage for the risk of punitive damages arising from professional liability claims and/or litigation may not,in certain cases,be available due to state law prohibitions or limitations of availability.We cannot assure you that we will not be liab
277、le for punitive damage awards that are either not covered or are in excess of our insurance policy limits.We also believe that there have been,and will continue to be,governmental investigations of long-term care providers,particularly in the area of Medicare/Medicaid false claims,as well as an incr
278、ease in enforcement actions resulting from these investigations.Insurance is not available to cover such losses.Any adverse determination in a legal proceeding or governmental investigation,whether currently asserted or arising in the future,could have a material adverse effect on our financial cond
279、ition.Due to the rising cost and limited availability of professional liability and workers compensation insurance,we are largely self-insured on all of these programs and as a result,there is no limit on the maximum number of claims or amount for which we or our insurance subsidiaries can be liable
280、 in any policy period.Although we base our loss estimates on independent actuarial analyses using the information we have to date,the amount of the losses could exceed our estimates.In the event our actual liability exceeds our estimates for any given period,our results of operations and financial c
281、ondition could be materially adversely impacted.In addition,our insurance coverage might not cover all claims made against us.If we are unable to maintain our current insurance coverage,if judgments are obtained in excess of the coverage we maintain,if we are required to pay uninsured punitive damag
282、es,or if the number of claims settled within the self-insured retention currently in place significantly increases,we could be exposed to substantial additional liabilities.We cannot assure you that the claims we pay under our self-insurance programs will not exceed the reserves we have set aside to
283、 pay claims.The number of claims within the self-insured retention may increase.Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could result in a restatement of our financial statements,cause investors to lose confidence in our financial state
284、ments and our company and have a material adverse effect on our business and stock price.We produce our consolidated financial statements in accordance with the requirements of GAAP.Effective internal controls are necessary for us to provide reliable financial reports to help mitigate the risk of fr
285、aud and to operate successfully as a publicly traded company.As a public company,we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002,or Section 404,which requires annual management assessments of t
286、he effectiveness of our internal controls over financial reporting.Testing and maintaining internal controls can divert our managements attention from other matters that are important to our business.We may not be able to conclude on an ongoing basis that we have effective internal controls over fin
287、ancial reporting in accordance with Section 404 or our independent registered public accounting firm may not be able to issue an unqualified report if we conclude that our internal controls over financial reporting are not effective.If either we are unable to conclude that we have effective internal
288、 controls over financial reporting or our independent 16registered public accounting firm is unable to provide us with an unqualified report as required by Section 404,investors could lose confidence in our reported financial information and our company,which could result in a decline in the market
289、price of our common stock,and cause us to fail to meet our reporting obligations in the future,which in turn could impact our ability to raise additional financing if needed in the future.Increasing costs of being publicly owned are likely to impact our future consolidated financial position and res
290、ults of operations.In connection with the Sarbanes-Oxley Act of 2002,we are subject to rules requiring our management to report on the effectiveness of our internal control over financial reporting.If we fail to have effective internal controls and procedures for financial reporting in place,we coul
291、d be unable to provide timely and reliable financial information which could,in turn,have an adverse effect on our business,results of operations,financial condition and cash flows.Significant regulatory changes,including the Sarbanes-Oxley Act and rules and regulations promulgated as a result of th
292、e Sarbanes-Oxley Act,have increased,and in the future are likely to further increase,general and administrative costs.In order to comply with the Sarbanes-Oxley Act of 2002,the listing standards of the NYSE MKT exchange,and rules implemented by the Securities and Exchange Commission(SEC),we have had
293、 to hire additional personnel and utilize additional outside legal,accounting and advisory services,and may continue to require such additional resources.Moreover,in the rapidly changing regulatory environment in which we operate,there is significant uncertainty as to what will be required to comply
294、 with many of the regulations.As a result,we may be required to spend substantially more than we currently estimate,and may need to divert resources from other activities,as we develop our compliance plans.New accounting pronouncements or new interpretations of existing standards could require us to
295、 make adjustments in our accounting policies that could affect our financial statements.The Financial Accounting Standards Board,the SEC,or other accounting organizations or governmental entities issue new pronouncements or new interpretations of existing accounting standards that sometimes require
296、us to change our accounting policies and procedures.Future pronouncements or interpretations could require us to change our policies or procedures and have a significant impact on our future financial statements.By undertaking to provide management services,advisory services,and/or financial service
297、s to other entities,we become at least partially responsible for meeting the regulatory requirements of those entities.We provide management and/or financial services to skilled nursing facilities,assisting living centers and independent living centers owned by third parties.At December 31,2013,we p
298、erform management services(which include financial services)for 9 such centers and accounting and financial services for an additional 27 such centers.The“Risk Factors”contained herein as applying to us may in many instances apply equally to these other entities for which we provide services.We have
299、 in the past and may in the future be subject to claims from the entities to which we provide management,advisory or financial services,or to the claims of third parties to those entities.Any adverse determination in any legal proceeding regarding such claims could have a material adverse effect on
300、our business,our results of operation,our financial condition and cash flows.We provide management services to skilled nursing facilities and other healthcare facilities under terms whereby the payments for our services are subject to subordination to other expenditures of the healthcare facility.Fu
301、rthermore,there are certain third parties with whom we have contracted to provide services and which we have determined,based on insufficient historical collections and the lack of expected future collections,that the service revenue realization is uncertain.We may,therefore,make expenditures relate
302、d to the provision of services for which we are not paid.The cost to replace or retain qualified nurses,health care professionals and other key personnel may adversely affect our financial performance,and we may not be able to comply with certain states staffing requirements.We could experience sign
303、ificant increases in our operating costs due to shortages in qualified nurses,health care professionals and other key personnel.The market for these key personnel is highly competitive.We,like other health care providers,have experienced difficulties in attracting and retaining qualified personnel,e
304、specially facility administrators,nurses,certified nurses aides and other important health care providers.There is currently a shortage of nurses,and trends indicate this shortage will continue or worsen in the future.The difficulty our skilled nursing facilities are experiencing in hiring and retai
305、ning qualified personnel has increased our average wage rate.We may continue to experience increases in our labor costs due to higher wages and greater benefits required to attract and retain qualified health care personnel.Our ability to control labor costs will significantly affect our future oper
306、ating results.17Certain states in which we operate skilled nursing facilities have adopted minimum staffing standards and additional states may also establish similar requirements in the future.Our ability to satisfy these requirements will depend upon our ability to attract and retain qualified nur
307、ses,certified nurses assistants and other staff.Failure to comply with these requirements may result in the imposition of fines or other sanctions.If states do not appropriate sufficient additional funds(through Medicaid program appropriations or otherwise)to pay for any additional operating costs r
308、esulting from minimum staffing requirements,our profitability may be adversely affected.Although we currently have no collective bargaining agreements with unions at our facilities,there is no assurance this will continue to be the case.If any of our facilities enter into collective bargaining agree
309、ments with unions,we could experience or incur additional administrative expenses associated with union representation of our employees.Our senior management team has extensive experience in the healthcare industry.We believe they have been instrumental in guiding our business,instituting valuable p
310、erformance and quality monitoring,and driving innovation.Accordingly,our future performance is substantially dependent upon the continued services of our senior management team.The loss of the services of any of these persons could have a material adverse effect upon us.Future acquisitions may be di
311、fficult to complete,use significant resources,or be unsuccessful and could expose us to unforeseen liabilities.We may selectively pursue acquisitions or new developments in our target markets.Acquisitions and new developments may involve significant cash expenditures,debt incurrence,capital expendit
312、ures,additional operating losses,amortization of the intangible assets of acquired companies,dilutive issuances of equity securities and other expenses that could have a material adverse effect on our financial condition and results of operations.Acquisitions also involve numerous other risks,includ
313、ing difficulties integrating acquired operations,personnel and information systems,diversion of managements time from existing operations,potential losses of key employees or customers of acquired companies,assumptions of significant liabilities,exposure to unforeseen liabilities of acquired compani
314、es and increases in our indebtedness.We cannot assure that we will succeed in obtaining financing for any acquisitions at a reasonable cost or that any financing will not contain restrictive covenants that limit our operating flexibility.We also may be unable to operate acquired facilities profitabl
315、y or succeed in achieving improvements in their financial performance.We also may face competition in acquiring any facilities.Our competitors may acquire or seek to acquire many of the facilities that would be suitable acquisition candidates for us.This could limit our ability to grow by acquisitio
316、ns or increase the cost of our acquisitions.Upkeep of healthcare properties is capital intensive,requiring us to continually direct financial resources to the maintenance and enhancement of our physical plant and equipment.As of December 31,2013,we leased or owned 62 skilled nursing facilities,14 as
317、sisted living centers,and four independent living centers.Our ability to maintain and enhance our physical plant and equipment in a suitable condition to meet regulatory standards,operate efficiently and remain competitive in our markets requires us to commit a substantial portion of our free cash f
318、low to continued investment in our physical plant and equipment.Certain of our competitors may operate centers that are not as old as our centers,or may appear more modernized than our centers,and therefore may be more attractive to prospective customers.In addition,the cost to replace our existing
319、centers through acquisition or construction is substantially higher than the carrying value of our centers.We are undertaking a process to allocate more aggressively capital spending within our owned and leased facilities in an effort to address issues that arise in connection with an aging physical
320、 plant.If factors,including factors indicated in these“Risk Factors”and other factors beyond our control render us unable to direct the necessary financial and human resources to the maintenance,upgrade and modernization of our physical plant and equipment,our business,results of operations,financia
321、l condition and cash flow could be adversely impacted.Our business is subject to a variety of federal,state and local environmental laws and regulations.As a healthcare provider,we face regulatory requirements in areas of air and water quality control,medical and low-level radioactive waste manageme
322、nt and disposal,asbestos management,response to mold and lead-based paint in our facilities and employee safety.As an operator of healthcare facilities,we also may be required to investigate and remediate hazardous substances that are located on and/or under the property,including any such substance
323、s that may have migrated off,or may have been discharged or transported from the property.Part of our operations involves the handling,use,storage,transportation,disposal and discharge of medical,biological,infectious,toxic,flammable and other hazardous materials,wastes,18pollutants or contaminants.
324、In addition,we are sometimes unable to determine with certainty whether prior uses of our facilities and properties or surrounding properties may have produced continuing environmental contamination or noncompliance,particularly where the timing or cost of making such determinations is not deemed co
325、st-effective.These activities,as well as the possible presence of such materials in,on and under our properties,may result in damage to individuals,property or the environment;may interrupt operations or increase costs;may result in legal liability,damages,injunctions or fines;may result in investig
326、ations,administrative proceedings,penalties or other governmental agency actions;and may not be covered by insurance.We believe that we are in material compliance with applicable environmental and occupational health and safety requirements.However,we cannot assure you that we will not encounter env
327、ironmental liabilities in the future,and such liabilities may result in material adverse consequences to our operations or financial condition.Provision for losses in our financial statements may not be adequate.Loss provisions in our financial statements for self-insured programs are made on an und
328、iscounted basis in the relevant period.These provisions are based on internal and external evaluations of the merits of individual claims,analysis of claims history and independent actuarially determined estimates.Our management reviews the methods of determining these estimates and establishing the
329、 resulting accrued liabilities frequently,with any material adjustments resulting therefrom being reflected in current earnings.Although we believe that our provisions for self-insured losses in our financial statements are adequate,the ultimate liability may be in excess of the amounts recorded.In
330、the event the provisions for loss reflected in our financial statements are inadequate,our financial condition and results of operations may be materially affected.Implementation of new information technology could cause business interruptions and negatively affect our profitability and cash flows.W
331、e continue to refine and implement our information technology to improve customer service,enhance operating efficiencies and provide more effective management of business operations.Implementation of information technology carries risks such as cost overruns,project delays and business interruptions
332、 and delays.If we experience a material business interruption as a result of the implementation of our existing or future information technology infrastructure or are unable to obtain the projected benefits of this new infrastructure,it could adversely affect us and could have a material adverse eff
333、ect on our business,results of operations,financial condition and cash flows.We depend on the proper function and availability of our information systems.We are dependent on the proper function and availability of our information systems.Though we have taken steps to protect the safety and security of our information systems and the data maintained within those systems,there can be no assurance th
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