National HealthCare Corporation (NHC) is the nation's oldest publicly traded senior health care company, with a rich history spanning over five decades. Founded in 1971, the company has established itself as a leader in the long-term care industry, providing a comprehensive range of services to meet the evolving needs of the aging population.
Business Overview A Legacy of Caring NHC's operations are primarily focused in the Southeastern and Midwestern United States, where it owns, leases, and manages a diverse portfolio of healthcare facilities. The company operates in 9 states, offering a comprehensive range of health care services, including subacute and post-acute skilled nursing care, intermediate nursing care, rehabilitative care, memory and Alzheimer's care, senior living services, home health care services, hospice services, and behavioral health services.
In addition to its core healthcare operations, NHC provides management services, accounting and financial services, as well as insurance services to third party operators of health care facilities. The company also owns the real estate of 10 healthcare properties and leases these properties to third party operators, further diversifying its revenue streams.
NHC's commitment to quality care is reflected in its performance, with 57% of its skilled nursing facilities achieving a 4- or 5-star rating from the Centers for Medicare and Medicaid Services (CMS) as of December 31, 2024, compared to the industry average of 35%.
Financial Performance Steady Growth and Resilience Over the past three years, NHC has demonstrated consistent financial performance, despite the challenges posed by the COVID-19 pandemic. In 2024, the company reported net operating revenues and grant income of $1.31 billion, an increase of 14.5% compared to 2023. This growth was driven by a 9.4% increase in same-facility net operating revenues, as well as the August 2024 acquisition of the White Oak Senior Living portfolio.
NHC's net income for the year ended December 31, 2024, was $101.93 million, or $6.53 per diluted share, up from $66.80 million, or $4.34 per diluted share, in the prior year. The company's strong financial position is further evidenced by its healthy balance sheet, with $216.19 million in cash, cash equivalents, and short-term investments as of December 31, 2024.
The company's financial performance has been supported by its ability to navigate industry challenges, such as staffing shortages and reimbursement pressures. NHC has implemented various initiatives to improve operational efficiency, including the utilization of agency nurse staffing and the expansion of its Institutional Special Needs Plan (I-SNP), which provides managed care services to Medicare-eligible individuals.
For the most recent fiscal year (2024), NHC reported revenue of $1.25 billion, net income of $101.93 million, operating cash flow of $107.30 million, and free cash flow of $79.70 million. In the most recent quarter (Q4 2024), the company reported revenue of $369.35 million and net income of $74.67 million. The Q4 2024 revenue represents a 15.1% increase compared to Q4 2023 revenue of $319.89 million, primarily driven by the acquisition of the White Oak portfolio in August 2024, which contributed $96.06 million in revenue in the final 5 months of 2024.
NHC maintains a strong liquidity position with a debt-to-equity ratio of 0.219, cash and cash equivalents of $76.12 million, and a $50 million revolving credit facility. The company's current ratio stands at 1.81, and its quick ratio is 1.77, indicating a healthy ability to meet short-term obligations.
Growth and Expansion Strategic Acquisitions and Organic Growth NHC's growth strategy combines strategic acquisitions and organic expansion. In 2024, the company completed the acquisition of the White Oak Senior Living portfolio, which added 22 healthcare operations, including 15 skilled nursing facilities, two assisted living facilities, four independent living facilities, and a long-term care pharmacy, to its operations.
The White Oak acquisition represents a significant milestone for NHC, as it expands the company's footprint into the North and South Carolina markets. Additionally, the company has continued to invest in the development of new healthcare facilities, including the construction of two behavioral health hospitals and the opening of several homecare and hospice agencies in 2022 and 2023.
Business Segments A Comprehensive Approach to Senior Care NHC operates in two primary business segments: Inpatient Services and Homecare and Hospice Services.
Inpatient Services Segment The Inpatient Services segment includes the operation of skilled nursing facilities, assisted living facilities, independent living facilities, and behavioral health hospitals. This segment generated $1.11 billion in net patient revenues in 2024, accounting for 88.8% of the company's total net patient revenues. The overall census based on operational beds in owned and leased skilled nursing facilities was 88.6% in 2024, up from 87.9% in 2023 and 83.8% in 2022.
NHC operates 80 skilled nursing facilities with 10,340 licensed beds, 26 assisted living facilities with 1,410 units, and 9 independent living facilities. Within this segment, NHC provides a range of specialized care services, including rehabilitative care, memory and Alzheimer's care, and sub-acute nursing. The company has expanded its offerings in these areas to differentiate its services and attract a wider patient base. NHC's skilled nursing facilities participate in the Medicare program, and the company has created specialized medical units, such as memory care units and sub-acute nursing units, to cater to the evolving needs of its patient population.
Homecare and Hospice Services Segment The Homecare and Hospice Services segment includes the operation of homecare agencies and hospice agencies. This segment generated $140.46 million in net patient revenues in 2024, accounting for 11.2% of the company's total net patient revenues. NHC operates 34 homecare agencies and 33 hospice agencies, providing services such as skilled nursing, therapy, and personal care to patients in their homes or in assisted living facilities.
Under the Medicare reimbursement system, NHC's homecare agencies receive a prospectively determined amount per patient per 30-day period of care, while the hospice agencies are paid a daily rate based on one of four levels of hospice care. The company's hospice services are subject to Medicare's inpatient cap and overall payment cap, which it monitors closely to ensure compliance.
Risks and Challenges Navigating Industry Dynamics As with any healthcare provider, NHC faces a variety of risks and challenges that could impact its operations and financial performance. These include reimbursement changes from government payers, such as Medicare and Medicaid, labor shortages and rising wages, and the potential for increased litigation and regulatory scrutiny.
The company's exposure to professional liability and workers' compensation claims is an ongoing concern, with the accrued risk reserves totaling $103.62 million as of December 31, 2024. NHC has proactively addressed this risk by utilizing a wholly-owned insurance subsidiary and engaging independent actuaries to assist in estimating its exposure.
Additionally, the company is subject to the ongoing shift towards value-based care and alternative payment models, which may require adaptations to its service delivery and reimbursement strategies. NHC has demonstrated its ability to navigate these industry changes, but continued vigilance and adaptability will be crucial to its long-term success.
The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. As a result, NHC, like others in the industry, has faced higher costs related to professional liability insurance and legal claims. The company has worked to implement programs and policies to improve patient care and reduce these types of exposures.
Outlook and Conclusion NHC's comprehensive approach to senior care, combined with its financial strength and strategic vision, positions the company well for continued growth and success. The successful integration of the White Oak portfolio, along with the company's focus on quality care, operational efficiency, and innovation, are expected to drive further expansion and solidify NHC's position as a leading provider in the senior healthcare industry.
As the aging population continues to grow, the demand for high-quality, integrated senior care services is expected to increase. NHC's diversified business model, experienced management team, and commitment to excellence make the company well-equipped to capitalize on these industry trends and deliver long-term value for its shareholders.
The company's strong financial performance, evidenced by its consistent revenue growth and healthy balance sheet, provides a solid foundation for future growth. With no major scandals, short seller reports, or CEO departures reported, NHC continues to navigate the evolving healthcare landscape effectively, adapting to industry trends towards value-based care and increased regulation.
NHC's focus on providing a continuum of post-acute and senior healthcare services, with the goal of improving patient outcomes and maintaining a strong competitive position in its markets, has been a key driver of its success. The company's diversified service offerings, geographic footprint, and emphasis on quality care position it well to continue its growth trajectory and meet the increasing demand for senior care services in the coming years.