National HealthCare Corporation (NHC) is a prominent provider of senior healthcare services, operating a diverse portfolio of skilled nursing facilities, assisted living centers, independent living facilities, behavioral health hospitals, homecare agencies, and hospice agencies. With a strong presence across 8 states, primarily in the southeastern United States, NHC has established itself as a leader in the senior care industry.
Business Overview
NHC's operations can be broadly categorized into two reportable segments: inpatient services and homecare and hospice services. The inpatient services segment includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals. The homecare and hospice services segment encompasses the company's homecare agencies and hospice agencies.
In addition to its core healthcare operations, NHC also provides insurance services, management and accounting services, and leases properties to operators of skilled nursing and assisted living facilities. This diversified business model allows the company to leverage its expertise and resources across multiple revenue streams.
Financials
NHC has demonstrated strong financial performance, with annual revenue reaching $1,115,100,000 and net income of $66,798,000 in the most recent fiscal year. The company's operating cash flow for the year was $111,216,000, while free cash flow amounted to $83,315,000.
For the first quarter of 2024, NHC reported net operating revenues of $297,176,000, a 10.2% increase compared to the same period in the prior year. Net income attributable to NHC for the quarter was $26,213,000, compared to $11,723,000 in the first quarter of 2023. Excluding the impact of unrealized gains on marketable equity securities and other non-GAAP adjustments, adjusted net income for the quarter was $15,048,000, up from $12,071,000 in the same period last year.
The increase in adjusted net income for the first quarter of 2024 was primarily driven by the continued occupancy improvement in the company's skilled nursing and assisted living facilities, as well as the skilled nursing per diem increases from some of NHC's governmental payors and the reduction in nurse agency staffing expenses.
Segment Performance
The inpatient services segment, which includes skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, generated net patient revenues of $252,254,000 in the first quarter of 2024, a 10.8% increase compared to the same period in 2023. The average census at owned and leased skilled nursing facilities for the quarter was 88.5%, up from 87.4% in the first quarter of 2023. The composite skilled nursing facility per diem increased 8.8% year-over-year, with Medicare per diem rates rising 4.7%, managed care per diem rates increasing 5.8%, and Medicaid and private pay per diem rates growing 12.0% and 10.5%, respectively.
The homecare and hospice services segment reported net patient revenues of $33,569,000 in the first quarter of 2024, a 5.4% increase compared to the same period in the prior year. This growth was driven by the continued expansion of the company's homecare and hospice operations, including the addition of new agencies.
Geographic Breakdown
NHC operates primarily in the southeastern United States, with a presence in 8 states. The company's largest markets include Tennessee, Florida, and South Carolina, which collectively account for a significant portion of its overall revenue and operations.
Regulatory Environment and Reimbursement
The healthcare industry, including the senior care sector, is subject to a complex regulatory environment. NHC closely monitors changes in Medicare, Medicaid, and other government reimbursement programs, as these can have a significant impact on the company's financial performance.
In fiscal year 2024, CMS implemented a 4.0% increase in Medicare Part A payments to skilled nursing facilities, which is expected to have a positive impact on NHC's revenue. Additionally, several states, including Tennessee, South Carolina, and Missouri, have implemented Medicaid rate increases that are expected to contribute an additional $29 million in annual revenue for the company.
Liquidity
NHC maintains a strong liquidity position, with $93,982,000 in cash and cash equivalents and $123,524,000 in marketable equity and debt securities as of March 31, 2024. The company's current cash on hand and marketable securities are expected to be adequate to meet its contractual obligations, operating liquidity needs, and growth and development plans in the next twelve months.
NHC also has substantial value in its unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities to support the company's long-term liquidity requirements and strategic initiatives.
Risks and Challenges
The senior care industry faces various risks and challenges, including regulatory changes, labor shortages, and rising costs. NHC is not immune to these industry-wide concerns, and the company closely monitors and addresses these issues to maintain its competitive position.
One key risk is the potential for changes in government reimbursement programs, such as Medicare and Medicaid, which could have a significant impact on the company's revenue and profitability. NHC actively engages with policymakers and industry associations to stay informed of regulatory developments and advocate for policies that support the senior care sector.
The ongoing labor shortage in the healthcare industry is another significant challenge for NHC. The company has implemented various initiatives to attract and retain qualified healthcare professionals, including competitive compensation packages and innovative workforce development programs.
Outlook
NHC remains focused on expanding its senior care operations while protecting its existing markets. The company has recently undertaken several development activities, including the acquisition of a skilled nursing facility, the opening of new assisted living facilities, and the launch of additional homecare and hospice agencies.
Looking ahead, NHC is well-positioned to capitalize on the growing demand for senior healthcare services driven by the aging population. The company's diversified business model, strong financial position, and commitment to quality patient care position it for continued success in the years to come.
Conclusion
National HealthCare Corporation is a leading provider of senior healthcare services, with a diverse portfolio of operations and a strong financial foundation. The company's focus on quality patient care, strategic growth initiatives, and proactive management of industry challenges have contributed to its success. As the senior care sector continues to evolve, NHC is poised to maintain its position as a trusted and innovative provider of comprehensive healthcare solutions for the aging population.