Accounting Policies, by Policy (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Accounting Policies, by Policy (Policies) [Line Items] | ' |
Basis of Accounting, Policy [Policy Text Block] | ' |
Basis of Presentation |
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The unaudited condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. We assume that users of these interim financial statements have read or have access to the audited December 31, 2012 consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons. |
Use of Estimates, Policy [Policy Text Block] | ' |
Estimates and Assumptions |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period. |
Revenue Recognition, Policy [Policy Text Block] | ' |
Change in Accounting Principle |
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Effective January 1, 2013, the Company recorded the cumulative effect of a change in accounting principle related to the adoption of ASU No. 2012-01, Continuing Care Retirement Communities — Refundable Advance Fees. This standard is intended to clarify the accounting for advance fees (“entrance fees”) received by a continuing care retirement community (“CCRC”). The updated guidance states the estimated amount of entrance fees that are expected to be refunded to current CCRC residents under the terms of the resident agreements shall be accounted for and reported as a liability (“refundable entrance fees”). Previously, we accounted for both the 10% non-refundable and the refundable portions of the entrance fees as deferred revenue, amortizing the deferred revenue over the life expectancy of the resident and the estimated useful life of the building, respectively, in accordance with ASC Topic 954-430, Health Care Entities-Deferred Revenue. The Company believes recording the refundable entrance fees as a liability, which includes 90% of the original entry fee paid plus 40% of any estimated appreciation if the apartment exceeds the original resident’s entry fee, more clearly aligns how we have historically operated the CCRC. Also, with the adoption of ASU No. 2012-01, our future service obligation calculation for the CCRC was modified. Because the future service obligation calculation includes an offset for unamortized deferred revenue, the reclassification of refundable entrance fee amounts from deferred revenue to a liability has a direct impact on the future revenues input of the calculation. With the loss of deferred revenue, the present value of the CCRC’s expenses exceeds the present value of the CCRC’s revenues, which creates the recording of a future service obligation. |
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As described in the guidance for accounting changes, the comparative interim consolidated financial statements of prior periods are adjusted to apply the new accounting method retrospectively. The following tables present the effect on the interim condensed consolidated financial statements of the accounting change that was retrospectively adopted on January 1, 2013: |
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Consolidated Balance Sheet | | | | | | | | | | | | | |
(in thousands) | | | | | | | | | | | | |
| | 31-Dec-12 | | | | | | | | | | | | | |
| | As | | | Effect of | | | As Adjusted | | | | | | | | | | | | | |
Previously | Accounting | | | | | | | | | | | | |
Reported | Change | | | | | | | | | | | | |
Deferred income taxes | | $ | 10,564 | | | $ | 2,253 | | | $ | 12,817 | | | | | | | | | | | | | |
Total assets | | | 922,447 | | | | 2,253 | | | | 924,700 | | | | | | | | | | | | | |
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Refundable entrance fees | | – | | | | 10,680 | | | | 10,680 | | | | | | | | | | | | | |
Deferred revenue | | | 10,124 | | | | (6,694 | ) | | | 3,430 | | | | | | | | | | | | | |
Obligation to provide future services | | – | | | | 1,791 | | | | 1,791 | | | | | | | | | | | | | |
Retained earnings | | | 283,517 | | | | (3,524 | ) | | | 279,993 | | | | | | | | | | | | | |
Total stockholders' equity | | | 659,672 | | | | (3,524 | ) | | | 656,148 | | | | | | | | | | | | | |
Total liabilities and stockholders' equity | | $ | 922,447 | | | $ | 2,253 | | | $ | 924,700 | | | | | | | | | | | | | |
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Interim Condensed Consolidated Statement of Income |
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(in thousands, except share and per share amounts) |
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| | Three Months Ended September 30, 2012 | | | Nine Months Ended September 30, 2012 | |
| | As | | | Effect of | | | As | | | As | | | Effect of | | | As | |
Previously | Accounting | Adjusted | Previously | Accounting | Adjusted |
Reported | Change | | Reported | Change | |
Other revenues | | $ | 14,007 | | | $ | (61 | ) | | $ | 13,946 | | | $ | 42,008 | | | $ | (194 | ) | | $ | 41,814 | |
Net operating revenues | | | 189,368 | | | | (61 | ) | | | 189,307 | | | | 567,219 | | | | (194 | ) | | | 567,025 | |
Income Before Non-Operating Income | | | 16,671 | | | | (61 | ) | | | 16,610 | | | | 47,900 | | | | (194 | ) | | | 47,706 | |
Income Before Income Taxes | | | 23,442 | | | | (61 | ) | | | 23,381 | | | | 66,446 | | | | (194 | ) | | | 66,252 | |
Income Tax Provision | | | (6,209 | ) | | | 24 | | | | (6,185 | ) | | | (22,923 | ) | | | 76 | | | | (22,847 | ) |
Net Income | | | 17,233 | | | | (37 | ) | | | 17,196 | | | | 43,523 | | | | (118 | ) | | | 43,405 | |
Net Income Available to Common Shareholders | | $ | 15,066 | | | $ | (37 | ) | | $ | 15,029 | | | $ | 37,020 | | | | (118 | ) | | $ | 36,902 | |
Basic Earnings Per Share | | $ | 1.09 | | | $ | (0.01 | ) | | $ | 1.08 | | | $ | 2.67 | | | $ | 0 | | | $ | 2.67 | |
Diluted Earnings Per Share | | $ | 1.04 | | | $ | 0 | | | $ | 1.04 | | | $ | 2.63 | | | $ | (0.01 | ) | | $ | 2.62 | |
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Interim Condensed Consolidated Statement of Comprehensive Income |
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(in thousands) |
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| | Three Months Ended September 30, 2012 | | | Nine Months Ended September 30, 2012 | |
| | As | | | Effect of | | | As | | | As | | | Effect of | | | As | |
Previously | Accounting | Adjusted | Previously | Accounting | Adjusted |
Reported | Change | | Reported | Change | |
Net Income | | $ | 17,233 | | | $ | (37 | ) | | $ | 17,196 | | | $ | 43,523 | | | $ | (118 | ) | | $ | 43,405 | |
Comprehensive Income | | $ | 17,991 | | | $ | (37 | ) | | $ | 17,954 | | | $ | 52,242 | | | $ | (118 | ) | | $ | 52,124 | |
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Interim Condensed Consolidated Statement of Cash Flows |
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(in thousands) |
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| | Nine Months Ended September 30, 2012 | | | | | | | | | | | | | |
| | As | | | Effect of | | | As | | | | | | | | | | | | | |
Previously | Accounting | Adjusted | | | | | | | | | | | | |
Reported | Change | | | | | | | | | | | | | |
Cash Flows From Operating Activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 43,523 | | | $ | (118 | ) | | $ | 43,405 | | | | | | | | | | | | | |
Deferred income taxes | | | (299 | ) | | | (76 | ) | | | (375 | ) | | | | | | | | | | | | |
Deferred revenue | | | 959 | | | | (93 | ) | | | 866 | | | | | | | | | | | | | |
Net cash provided by operating activities | | | 61,616 | | | | (287 | ) | | | 61,329 | | | | | | | | | | | | | |
Cash Flows From Financing Activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Entrance fee deposits | | | (1,498 | ) | | | 287 | | | | (1,211 | ) | | | | | | | | | | | | |
Net cash used in financing activities | | $ | (14,631 | ) | | $ | 287 | | | $ | (14,344 | ) | | | | | | | | | | | | |
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Interim Condensed Consolidated Statements of Stockholders' Equity |
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(in thousands) |
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| | Nine Months Ended September 30, 2012 | | | | | | | | | | | | | |
| | As | | | Effect of | | | As | | | | | | | | | | | | | |
Previously | Accounting | Adjusted | | | | | | | | | | | | | |
Reported | Change | | | | | | | | | | | | | | |
Contractual Adjustments and Third Party Settlements, Policy [Policy Text Block] | ' |
Revenue Recognition – Third Party Payors |
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Approximately 67% of our net patient revenues are derived from Medicare, Medicaid, and other government programs. Amounts earned under these programs are subject to review by the Medicare and Medicaid intermediaries or their agents. In our opinion, adequate provision has been made for any adjustments that may result from these reviews. Any differences between our original estimates of reimbursements and subsequent revisions are reflected in operations in the period in which the revisions are made often due to final determination or the period of payment no longer being subject to audit or review. We have made provisions of approximately $21,009,000 and $19,267,000 as of September 30, 2013 and December 31, 2012, respectively, for various Medicare and Medicaid current and prior year cost reports and claims reviews. |
Revenue Recognition for Alternative Revenue Programs, Policy [Policy Text Block] | ' |
Revenue Recognition – Private Pay |
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For private pay patients in skilled nursing or assisted living facilities, we bill room and board in advance with payment being due in the month the services are performed. Charges for ancillary, pharmacy, therapy and other services to private patients are billed in the month following the performance of services; however, all billings are recognized as revenue when the services are performed. |
Premiums Receivable, Allowance for Doubtful Accounts, Estimation Methodology, Policy [Policy Text Block] | ' |
Revenue Recognition – Subordination of Fees and Uncertain Collections |
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We provide management services to certain long–term care facilities and to others we provide accounting and financial services. We generally charge 6% to 7% of net operating revenues for our management services and a predetermined fixed rate per bed for the accounting and financial services. Our policy is to recognize revenues associated with both management services and accounting and financial services on an accrual basis as the services are provided. However, under the terms of our management contracts, payments for our management services are subject to subordination to other expenditures of the long–term care center being managed. Furthermore, for certain of the third parties with whom we have contracted to provide services and which we have determined that collection is not reasonably assured, our policy is to recognize income only in the period in which the amounts are realized. We may receive payment for the unpaid and unrecognized management fees in whole or in part in the future only if cash flows from the operating and investing activities of the centers or proceeds from the sale of the centers are sufficient to pay the fees. There can be no assurance that such future cash flows will occur. The realization of such previously unrecognized revenue could cause our reported net income to vary significantly from period to period. |
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We agree to subordinate our fees to the other expenses of a managed center because we believe we know how to improve the quality of patient services and finances of a long–term care center. We believe subordinating our fees demonstrates to the owner and employees of the managed center how confident we are of the impact we can have in making the center operations successful. We may continue to provide services to certain managed centers despite not being fully paid currently so that we may be able to collect unpaid fees in the future from improved operating results and because the incremental savings from discontinuing services to a center may be small compared to the potential benefit. Also, we may benefit from providing other ancillary services to the managed center. |
Liability Reserve Estimate, Policy [Policy Text Block] | ' |
Accrued Risk Reserves |
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We are principally self–insured for risks related to employee health insurance, workers’ compensation and professional and general liability claims. Our accrued risk reserves primarily represent the accrual for self–insured risks associated with employee health insurance, workers’ compensation and professional and general liability claims. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy with respect to our workers’ compensation and professional and general liability claims is to use an external, independent actuary to estimate our exposure for claims obligations (for both asserted and unasserted claims). Our health insurance reserve is based on our known claims incurred and an estimate of incurred but unreported claims determined by our analysis of historical claims paid. We reassess our accrued risk reserves on a quarterly basis. |
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Professional liability remains an area of particular concern to us. The entire long term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by nursing homes and their employees in providing care to residents. As of September 30, 2013, we and/or our managed centers are defendants in 30 such claims inclusive of years 2005 through September 30, 2013. It remains possible that those pending matters plus potential unasserted claims could exceed our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period. |
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We maintain insurance coverage for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us. |
Continuing Care Retirement Communities, Advance Fees, Policy [Policy Text Block] | ' |
Obligation to Provide Future Services |
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The CCRC annually calculates the present value of the net cost of future services and the use of facilities to be provided to the current residents and compares that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the net cost of future services exceeds the related anticipated revenues, a liability is recorded (obligation to provide future services) with a corresponding charge to income. With the recent adoption of ASU No. 2012–01, our future service obligation calculation was modified and we now have a liability recorded in the amount of $1,791,000 as of September 30, 2013 and December 31, 2012. |
Revenue Recognition, Deferred Revenue [Policy Text Block] | ' |
Deferred Revenue |
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Deferred revenue includes the deferred gain on the sale of assets to National, the non-refundable portion (10%) of CCRC entrance fees being amortized over the remaining life expectancies of the residents, and premiums received within our workers’ compensation and professional liability companies that are not yet earned. |
New Accounting Pronouncements, Policy [Policy Text Block] | ' |
New Accounting Pronouncements |
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In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2013–02, which is included in Codification under ASC 220, “Comprehensive Income”. The objective of this updated standard is to improve the reporting of reclassifications out of accumulated other comprehensive income. The standard states that disclosure of reclassification amounts required by U.S. GAAP to be reclassified out of accumulated other comprehensive income to net income in their entirety in the same reporting period, should be provided in one location, by component of other comprehensive income. Presentation of such amounts is permitted on either the face of the financial statement where net income is presented or as a separate tabular disclosure in the notes to the financial statements, and should be disclosed by respective line item of net income affected. This accounting standard update became effective beginning in our first quarter of fiscal 2013. The adoption of this accounting standard update resulted in financial statement presentation changes only. The Company has reclassified realized gains on the sale of marketable securities out of accumulated other comprehensive income; as such, these investment gains are classified as "non-operating income" in our consolidated statements of income. |
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In July 2012, the FASB issued ASU No. 2012–01, which is included in the Codification under ASC subtopic 954-430, “Health Care Entities—Deferred Revenue”. This revised standard is intended to clarify the accounting for refundable advance fees (“refundable entrance fees”) received by a continuing care retirement community. The guidance states that refundable portion of entrance fees should be accounted for as deferred revenue when the refund of the fee is contingent upon the resale of the contract holder’s unit, limited to the proceeds received by the resale, and the legal environment and management’s policy and practice support the withholding of refunds under said conditions. In the event that the refund is contingent upon reoccupancy, but not limited to the proceeds of the resale, then the fees should be accounted for and reported as a liability. This accounting standard update became effective beginning in our first quarter of fiscal 2013. The adoption of this accounting standard resulted in a change of accounting principle which was applied retrospectively, including the cumulative effect of this change recognized through beginning retained earnings. See the beginning of Note 2 under “Change in Accounting Principle” for further discussion on the adoption of ASU No. 2012-01. |
Reclassification, Policy [Policy Text Block] | ' |
Reclassifications |
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Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's consolidated financial position or results of operations. |
Refundable Advance Fees [Member] | ' |
Accounting Policies, by Policy (Policies) [Line Items] | ' |
Continuing Care Retirement Communities, Advance Fees, Policy [Policy Text Block] | ' |
Continuing Care Contracts and Refundable Entrance Fees |
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We have one continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center may enter into continuing care contracts with us. The contract provides that 10% of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lessor of the price at which the apartment is re-assigned or 90% of the original entry fee, plus 40% of any appreciation if the apartment exceeds the original resident’s entry fee. In each case, we amortize the non-refundable part of these fees into revenue over the actuarially determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees when residents relocate from our community and the apartment is re-occupied. Refundable entrance fees are classified as non-current liabilities and non-refundable entrance fees are classified as deferred revenue in the Company's consolidated balance sheets. The balances of refundable entrance fees as of September 30, 2013 and December 31, 2012 were $10,600,000 and $10,680,000, respectively. |