Forward-Looking Statements
References throughout this document to the Company includeNational HealthCare Corporation and its wholly owned subsidiaries. In accordance with the Securities and Exchange Commissions "Plain English" guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In this document, the words "we", "our", "ours" and "us" refer only toNational HealthCare Corporation and its wholly-owned subsidiaries and not any other person. This Quarterly Report on Form 10-Q and other information we provide from time to time, contains certain "forward-looking" statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations or cash flows, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, ability to control our patient care liability costs, ability to respond to changes in government regulations, ability to execute our three-year strategic plan, and similar statements including, without limitations, those containing words such as "believes", "anticipates", "expects", "intends", "estimates", "plans", and other similar expressions are forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors:
? national and local economic conditions, including their effect on the
availability and cost of labor, utilities and materials;
? the effect of government regulations and changes in regulations governing the
healthcare industry, including our compliance with such regulations;
? changes in Medicare and Medicaid payment levels and methodologies and the
application of such methodologies by the government and its fiscal
intermediaries;
? liabilities and other claims asserted against us, including patient care
liabilities, as well as the resolution of current litigation (see Note 16:
Contingencies and Commitments);
? the uncertainty of the extent, duration and effects of the COVID-19 pandemic
and the response of governments
? the ability to attract and retain qualified personnel;
? the availability and terms of capital to fund acquisitions and capital
improvements;
? the competitive environment in which we operate;
? the ability to maintain and increase census levels; and
? demographic changes.
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See the notes to the quarterly financial statements, and "Item 1. Business" in our 2021 Annual Report on Form 10-K for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them. This may be found on our web site at www.nhccare.com. You should carefully consider these risks before making any investment in the Company. These risks and uncertainties are not the only ones facing us. There may be additional risks that we do not presently know of or that we currently deem immaterial. If any of the risks occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our shares of stock could decline, and you may lose all or part of your investment. Given these risks and uncertainties, we can give no assurances that these forward-looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them. OverviewNational HealthCare Corporation ("NHC" or the "Company") is a leading provider of senior health care services. We operate or manage, through certain affiliates, 75 skilled nursing facilities with a total of 9,456 licensed beds, 24 assisted living facilities, five independent living facilities, one behavioral health hospital, 35 homecare agencies, and 29 hospice agencies. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 10 states and are located primarily in the southeasternUnited States . Impact of COVID-19 In earlyMarch 2020 , COVID-19, a disease caused by the novel strain of the coronavirus, was characterized as a pandemic by theWorld Health Organization . As a provider of healthcare services, we are significantly exposed to the public health and economic effects of the COVID-19 pandemic.NHC's primary objective has remained the same throughout the COVID-19 pandemic: that is to protect the health and safety of our patients, residents, and partners (employees). We continue to follow all guidance from theCenters for Medicare and Medicaid Services ("CMS"), theCenters for Disease Control and Prevention ("CDC"), and state and local health departments to prevent the spread of the disease within our operations. We began our first vaccination clinics in our skilled nursing facilities around the middle ofDecember 2020 . As the vaccination clinics progressed and as the vaccine became more accessible, we began to see a significant decline in COVID-19 cases among our operations in 2021. Despite the COVID-19 cases significantly declining during 2021, our operating expenses remain elevated with incentive compensation being paid to our frontline partners, as well as increased costs of personal protective equipment ("PPE"), sanitizers and cleaning supplies, and COVID-19 testing of our patients and partners. Despite the continued disruption of COVID-19 to our operations, our capital and financial resources, including our overall liquidity, remain strong. Our liquidity provides us with significant flexibility to maintain the strength of our balance sheet in periods of uncertainty or stress. At this time, we are not able to quantify the impact that the COVID-19 pandemic will have on our future financial results, but we expect the developments related to COVID-19 to adversely affect our financial performance in 2022. The ultimate impact of the pandemic on our financial results will depend on, among other factors, the duration and severity of the pandemic, the volume of acute and post-acute healthcare patients cared for across the broader health care systems, the timing and availability of effective medical treatments and vaccines, and the impact of government actions and administrative regulations on our industry and broader economy, including future government stimulus efforts. We have received and may continue to receive payments and advances from the various federal and state initiatives. These legislative initiatives have been beneficial to partially mitigate the impact of the COVID-19 pandemic on our results of operations and financial position to date. The federal and state governments may consider additional stimulus and relief efforts, but we are unable to predict whether any of the additional stimulus measures will be enacted or their impact.
Legislation and Government Stimulus Due to COVID-19
TheU.S. government enacted several laws beginning inMarch 2020 designed to help the nation respond to the COVID-19 pandemic. The new laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective is the CARES Act. Through the CARES Act, as well as the PPPCHE, the federal government allocated$178 billion to thePublic Health and Social Services Emergency Fund , which is referred to as theProvider Relief Fund .The Provider Relief Fund is administered through grants and other mechanisms to skilled nursing providers, home health providers, hospitals, and other Medicare and Medicaid enrolled providers to cover unreimbursed health care related expenses or lost revenue attributable to the public health emergency resulting from COVID-19. 25
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The Provider Relief Fund grants come with terms and condition certifications in which all providers are required to submit documents to ensure the funds will be used for healthcare-related expenses or lost revenue attributable to COVID-19. The Company recorded$10,620,000 and$22,749,000 of government stimulus income from the Provider Relief Funds for the three months endedMarch 31, 2022 and 2021, respectively. The grant income was determined on a systemic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate. The Company's assessment of whether the terms and conditions for amounts received have been met for income recognition and the Company's related income calculation considered all frequently asked questions and other interpretive guidance issued to date by HHS. Additionally, as part of the CARES Act, the legislation included an expansion of the Medicare Accelerated and Advance Payment Program. We received approximately$51,253,000 as part of this program. These funds are applied against claims for services provided to Medicare patients after approximately one year from the date we received the funds. Recoupment of the accelerated payments began in the second quarter of 2021. As ofMarch 31, 2022 ,$5,003,000 of the accelerated payments remain and is reflected within contract liabilities in the interim condensed consolidated balance sheet. The CARES Act and subsequent related legislation temporarily suspended Medicare sequestration beginningMay 1, 2020 throughMarch 31, 2022 . The Medicare sequestration policy reduces fee-for-service Medicare payments by 2 percent. BeginningApril 1, 2022 , the sequestration reductions will then be 1% fromApril 1, 2022 throughJune 30, 2022 . The full 2% reduction is scheduled to go back into effectJuly 1, 2022 . The CARES Act extends the sequestration policy through 2030 in exchange for this temporary suspension, which the sequestration reduction for 2030 has been increased up to 3%. The CARES Act also temporarily permitted employers to defer the deposit and payment of the employer's portion of the social security taxes (6.2% of employee wages) that otherwise would have been due betweenMarch 27, 2020 andDecember 31, 2020 . The provision requires that the deferred taxes be paid over a two-year period with half the amount required to be paid byDecember 31, 2021 , and the other half byDecember 31, 2022 . AtMarch 31, 2022 , we have deferred$10,545,000 of the Company's share of the social security taxes included in the current liabilities section of the consolidated balance sheet.
Summary of Goals and Areas of Focus
Occupancy A primary area of management focus continues to be the rates of occupancy within our skilled nursing facilities. The overall census in owned and leased skilled nursing facilities for the three months endingMarch 31, 2022 was 82.7% compared to 76.8% for the same period a year ago. Due to the pandemic, as well as the increased availability of assisted living facilities and home and community-based services, the challenge of maintaining desirable patient census levels has been amplified. Management has undertaken a number of steps in order to best position our current and future health care facilities. This includes working internally to examine and improve systems to be most responsive to referral sources and payors. Additionally,NHC is in various stages of partnerships with hospital systems, payors, and other post-acute alliances to better position ourselves so we are an active participant in the delivery of post-acute healthcare services. Quality ofPatient Care CMS introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily. The Five-Star Quality Rating System gives each skilled nursing operation a rating ranging between one and five stars in various categories (five stars being the best). The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance.
The tables below summarize
versus the skilled nursing industry as of
NHC Ratings
Industry Ratings
Total number of skilled nursing facilities, end of
period
75 Number of 4 and 5-star rated skilled nursing facilities 58 Percentage of 4 and 5-star rated skilled nursing facilities 77%
44%
Average rating for all skilled nursing facilities, end
of period 4.1 3.1
26
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Table of Contents Development and Growth
We are undertaking to expand our senior care operations while protecting our
existing operations and markets. The following table lists our recent
development activities.
Type of
Operation Description Size Location Placed in Service
Hospice Acquisition 28 offices Various June 2021
Behavioral Health
Hospital New Facility 64 beds Knoxville, TN April 2022
Behavioral Health
Hospital New Facility 16 beds St. Louis, MO May 2022
Accrued Risk Reserves
Our accrued professional liability and workers' compensation reserves totaled
$101,413,000 at March 31, 2022 and are a primary area of management focus. We
have set aside restricted cash and cash equivalents and marketable securities to
fund our estimated professional liability and workers' compensation liabilities.
As to exposure for professional liability claims, we have developed performance
certification criteria to measure and bring focus to the patient care issues
most likely to produce professional liability exposure, including in-house
acquired pressure ulcers, significant weight loss and numbers of falls. These
programs for certification, which we regularly modify and improve, have produced
measurable improvements in reducing these incidents. Our experience is that
achieving goals in these patient care areas improves both patient and employee
satisfaction.
Government Reimbursement Programs
Medicare – Skilled Nursing Facilities
OnJuly 29, 2021 , CMS released its final rule outlining fiscal year 2022 Medicare payment rates and policy changes for skilled nursing facilities, which beganOctober 1, 2021 . The fiscal year 2022 rule provided for an approximate 1.2% increase, or$410 million , compared to 2021 levels. The net increase includes a 2.7% market-basket update that is offset by a 0.7% productivity adjustment and a 0.8% market-basket forecast error adjustment since the difference between the projected and actual market basket for FY2020 exceeded its threshold. InApril 2022 , CMS released its proposed rule outlining fiscal year 2023 Medicare payment rates and policy changes for skilled nursing facilities, which will begin onOctober 1, 2022 . The fiscal year 2023 proposed rule equates to a net decrease of 0.7%, or approximately$320 million , in Medicare Part A payments to SNFs in fiscal year 2023 compared to 2022 levels. The proposed rule includes a 2.8% market basket rate increase, a 1.5% increase for forecast error adjustment, and a 0.4% decrease for multifactor productivity adjustment for a net update of 3.9%. But, CMS also proposes to offset the 3.9% increase with a downward adjustment to payment rates by 4.6%, or$1.7 billion , to achieve budget neutrality from the aggregate fiscal year 2020 Medicare payments under the new Patient Driven Payment Model.
For the first three months of 2022, our average Medicare per diem rate for
skilled nursing facilities increased 1.2% as compared to the same period in
2021.
Medicaid – Skilled Nursing Facilities
Effective
implemented specific individual nursing facility increases. We estimate the
resulting increase in revenue for the 2022 fiscal year will be approximately
Effective
implemented specific individual nursing facility increases. We estimate the
resulting increase in revenue for the 2022 fiscal year will be approximately
We have also received from many of the states in which we operate supplemental Medicaid payments to help mitigate the incremental costs resulting from the COVID-19 public health emergency. We have recorded$5,538,000 and$3,955,000 in net patient revenues for these supplemental Medicaid payments for the three months endedMarch 31, 2022 and 2021, respectively. 27
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For the first three months of 2022, our average Medicaid per diem increased 4.8%
compared to the same period in 2021.
We face challenges with respect to states' Medicaid payments, because many currently do not cover the total costs incurred in providing care to those patients. States will continue to control Medicaid expenditures and also look for adequate funding sources, including provider assessments. There are several pieces of legislation that include provisions designed to reduce Medicaid spending. These provisions include, among others, provisions strengthening the Medicaid asset transfer restrictions for persons seeking to qualify for Medicaid long-term care coverage, which could, due to the timing of the penalty period, increase facilities' exposure to uncompensated care. Other provisions could increase state funding for home and community-based services, potentially having an impact on funding for nursing facilities. Medicare - Homecare Programs InNovember 2021 , CMS released its final rule outlining fiscal year 2022 Medicare payment rates. CMS projects payments to home health agencies in fiscal year 2022 will increase in aggregate by 3.2%, or$570 million . The increase reflects the effects of the home health payment update percentage of 2.6%, an estimated 0.7% increase that reflects the effects of the updated fixed-dollar loss ratio, and an estimated 0.1% decrease in payments due to the changes in the rural add-on percentages for 2022. Medicare - Hospice InJuly 2021 , CMS released its final rule outlining fiscal year 2022 Medicare payment rates. CMS issued a rate increase of 2.0%, or$480 million , effectiveOctober 1, 2021 . The increase is the result of a 2.7% market basket increase reduced by a 0.7% productivity adjustment. The FY2022 hospice payment updates also include an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually. The cap amount for FY2022 is$31,298 . Segment Reporting The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital; and (2) homecare and hospice services. These reportable operating segments are consistent with information used by the Company's Chief Executive Officer, as chief operating decision maker ("CODM"), to assess performance and allocate resources. The Company also reports an "all other" category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. For additional information on these reportable segments see Note 2 - Summary of Significant Accounting Policies. The Company's CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.
The following table sets forth the Company’s unaudited interim condensed
consolidated statements of operations by business segment (in thousands):
Three Months Ended March 31, 2022
Inpatient Homecare
Services and Hospice All Other Total
Revenues:
Net patient revenues $ 224,842 $ 31,495 $ - $ 256,337
Other revenues 114 - 11,912 12,026
Government stimulus income 10,620 - - 10,620
Net operating revenues and grant income 235,576 31,495
11,912 278,983
Costs and expenses: Salaries, wages, and benefits 142,185 19,401 9,108 170,694 Other operating 64,383 7,095 2,607 74,085 Rent 8,347 592 1,126 10,065 Depreciation and amortization 8,838 113 806 9,757 Interest 165 - - 165 Total costs and expenses 223,918 27,201 13,647 264,766 Income (loss) from operations 11,658 4,294 (1,735 ) 14,217 Non-operating income - - 3,199 3,199 Unrealized gains on marketable equity securities - - 3,126 3,126 Income before income taxes$ 11,658 $ 4,294 $ 4,590 $ 20,542 28
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Three Months Ended March 31, 2021
Inpatient
Services Homecare All Other Total
Revenues:
Net patient revenues $ 203,242 $ 13,613 $ - $ 216,855
Other revenues 98 - 11,271 11,369
Government stimulus income 22,749 - - 22,749
Net operating revenues and grant income 226,089 13,613
11,271 250,973
Costs and expenses: Salaries, wages, and benefits 131,811 9,435 7,913 149,159 Other operating 61,808 1,915 2,401 66,124 Rent 8,194 431 1,438 10,063 Depreciation and amortization 9,263 87 811 10,161 Interest 244 - - 244 Total costs and expenses 211,320 11,868 12,563 235,751 Income/(loss) from operations 14,769 1,745 (1,292 ) 15,222 Non-operating income - - 6,260 6,260 Unrealized gains on marketable equity securities - - 7,059 7,059 Income before income taxes$ 14,769 $ 1,745 $ 12,027 $ 28,541
Non-GAAP Financial Presentation
The Company is providing certain non-GAAP financial measures as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. Therefore, the Company believes this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
Specifically, the Company believes the presentation of non-GAAP financial
information that excludes the unrealized gains or losses on our marketable
equity securities, operating results for the newly constructed healthcare
facilities not at full capacity, and share-based compensation expense is helpful
in allowing investors to assess the Company’s operations more accurately.
The operating results for the newly constructed healthcare facilities not at full capacity for the three months endedMarch 31, 2022 include facilities that began operations from 2020 to 2022, which is two behavioral health hospitals that will be licensed and operating during the second quarter of 2022. For the three months endedMarch 31, 2021 , included are facilities that began operations from 2019 to 2021, which is one memory care facility.
The tables below provide reconciliations of GAAP to non-GAAP items (dollars in
thousands, except per share data):
Three Months Ended
March 31
2022 2021
Net income attributable to National Healthcare
Corporation $ 15,318 $
21,267
Non-GAAP adjustments: Unrealized gains on marketable equity securities (3,126 )
(7,059 )
Operating results for newly opened facilities not at
full capacity
743
245
Share-based compensation expense 712
496
Provision of income taxes on non-GAAP adjustments 434 1,643 Non-GAAP Net income$ 14,081 $ 16,592 GAAP diluted earnings per share $ 0.99 $
1.38
Non-GAAP adjustments: Unrealized gains on marketable equity securities (0.15 )
(0.33 )
Operating results for newly opened facilities not at
full capacity
0.04
0.01
Share-based compensation expense 0.03
0.02
Non-GAAP diluted earnings per share $ 0.91$ 1.08 29
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Table of Contents Results of Operations The following table and discussion set forth items from the interim condensed consolidated statements of operations as a percentage of net operating revenues and grant income for the three months endedMarch 31, 2022 and 2021. Percentage of Net Operating Revenues and Grant Income Three Months Ended March 31 2022 2021 Net operating revenues and grant income 100.0 % 100.0 % Costs and expenses: Salaries, wages, and benefits 61.2 59.4 Other operating 26.6 26.3 Facility rent 3.5 4.0 Depreciation and amortization 3.5 4.1 Interest 0.1 0.1 Total costs and expenses 94.9 93.9 Income from operations 5.1 6.1 Non-operating income 1.2 2.5 Unrealized gains on marketable equity securities 1.1 2.8 Income before income taxes 7.4 11.4 Income tax provision (1.9 ) (2.9 ) Net income 5.5 8.5
Net income attributable to noncontrolling interest 0.0 0.0
Net income attributable to stockholders of
5.5 % 8.5 %
Three Months Ended
Results for the quarter endedMarch 31, 2022 compared to the first quarter of 2021 include an 11.2% increase in net operating revenues and grant income and a 6.6% decrease in income from operations. For the quarter endedMarch 31, 2022 , GAAP net income attributable toNHC was$15,318,000 compared to net income of$21,267,000 for the same period in 2021. Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter endedMarch 31, 2022 was$14,081,000 compared to$16,592,000 for the same period in 2021. The decrease in adjusted net income for the first quarter of 2022 compared to the first quarter of 2021 was primarily due to less government stimulus income recorded during the current quarter, as well as higher inflationary pressures on labor costs.
Net operating revenues and grant income
Net patient revenues increased
period last year.
The total census at owned and leased skilled nursing facilities for the quarter averaged 82.7%, compared to an average of 76.8% for the same quarter a year ago. Overall, the composite skilled nursing facility per diem increased 2.9% compared to the same quarter a year ago. Our Medicare per diem rates increased 1.2% and managed care per diem rates increased 6.9% compared to the same quarter a year ago. Medicaid and private pay per diem rates increased 4.8% and 9.2%, respectively, compared to the same quarter a year ago. For the three months endedMarch 31, 2022 and 2021, respectively,$5,538,000 and$3,955,000 have been included in our net patient revenues for these supplemental COVID-19 Medicaid payments.
In
which resulted in net patient revenues increasing
months ended
Other revenues increased
year, as further detailed in Note 5 to our interim condensed consolidated
financial statements.
During the three months ended
received from the
Pandemic for additional information.
30
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Table of Contents Total costs and expenses Total costs and expenses for the three months endedMarch 31, 2022 compared to the same period of 2021 increased$29,015,000 , or 12.3% to$264,766,000 from$235,751,000 . Salaries, wages, and benefits increased$21,535,000 , or 14.4%, to$170,694,000 from$149,159,000 . Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 61.2% compared to 59.4% for the three months endedMarch 31, 2022 and 2021, respectively. Our Caris acquisition increased salaries, wages, and benefits$10,224,000 in the first quarter of 2022 compared to the same quarter a year ago. We continue to face tremendous workforce and labor shortages within all of our operations, which increases wage pressure and inflation in regard to retaining and attracting qualified healthcare partners (employees). With the workforce environment being so challenging, the largest expense increase from a labor standpoint is in our agency nurse staffing. Our agency nurse staffing expense increased$12,435,000 for the first quarter of 2022 compared to the same quarter a year ago. Other operating expenses increased$7,961,000 , or 12.0%, to$74,085,000 for the 2022 period compared to$66,124,000 for the 2021 period. Other operating expenses as a percentage of net operating revenues and grant income was 26.6% and 26.3% for the three months endedMarch 31, 2022 and 2021, respectively. Our Caris acquisition increased other operating expenses$5,104,000 in the first quarter of 2022 compared to the same quarter a year ago. We continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies. Other income
Non-operating income decreased by
year, as further detailed in Note 6 to our interim condensed consolidated
financial statements.
Income taxes The income tax provision for the three months endedMarch 31, 2022 is$5,193,000 (an effective income tax rate of 25.3%). Excluding certain items, we expect our corporate (federal and state) income tax rate for 2022 to be approximately 26.0%. Noncontrolling interest The noncontrolling interest in subsidiaries is presented within total equity of the Company's consolidated balance sheets. The company presents the noncontrolling interest and the amount of consolidated net income attributable toNHC in its consolidated statements of operations. The Company's earnings per share is calculated based on net income attributable toNHC's stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of subsidiary earnings based on ownership interest.
Liquidity, Capital Resources, and Financial Condition
Our primary sources of cash include revenues from the operations of our
healthcare and senior living facilities, management and accounting services,
rental income, and investment income. Our primary uses of cash include salaries,
wages and other operating costs of our healthcare and senior living facilities,
the cost of additions to and acquisitions of real property, facility rent
expenses, and dividend distributions. These sources and uses of cash are
reflected in our interim condensed consolidated statements of cash flows and are
discussed in further detail below.
The following is a summary of our sources and uses of cash flows (dollars in
thousands):
Three Months Ended
March 31 Three Month Change
2022 2021 %
Cash, cash equivalents, restricted cash,
and restricted cash equivalents, at
beginning of period $ 119,743 $ 158,502 $
(38,759 ) (24.5 )
Cash (used in)/provided by operating activities (27,457 ) 12,589
(40,046 ) (318.1 )
Cash used in investing activities (5,920 ) (5,852 )
(68 ) (1.2 )
Cash used in financing activities (10,450 ) (9,148 )
(1,302 ) (14.2 )
Cash, cash equivalents, restricted cash, and restricted cash equivalents, at end of period$ 75,916 $ 156,091 $ (80,175 ) (51.4 ) 31
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Table of Contents Operating Activities Net cash used in operating activities for the three months endedMarch 31, 2022 was$27,457,000 as compared to cash provided by operating activities of$12,589,000 in the same period last year. Cash used in operating activities consisted of net income of$15,349,000 and adjustments for non-cash items of$9,444,000 . There was cash used for working capital needs in the amount of$52,250,000 for the three months endedMarch 31, 2022 compared to$16,899,000 for the same period a year ago. Included in the adjustments for non-cash items are depreciation expense, equity in earnings of unconsolidated investments, unrealized losses on our marketable equity securities, deferred taxes, and stock compensation. Investing Activities Net cash used in investing activities totaled$5,920,000 for the three months endedMarch 31, 2022 , compared to$5,852,000 for the three months endedMarch 31, 2021 . Cash used for property and equipment additions was$8,962,000 and$4,327,000 for the three months endedMarch 31, 2022 , and 2021, respectively. The two behavioral health hospitals that are opening during the second quarter of 2022 were$4,430,000 of the property additions for the first quarter of 2022. Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of$2,818,000 for the three months endedMarch 31, 2022 . For the three months endedMarch 31, 2021 , proceeds from the sale of marketable securities, net of purchases, resulting in cash used in investing activities of$1,780,000 . Financing Activities Net cash used in financing activities totaled$10,450,000 for the three months endedMarch 31, 2022 compared to$9,148,000 for the three months endedMarch 31, 2021 . We made principal payments under our finance lease obligations in the amount of$1,147,000 and$1,081,000 for the three months endedMarch 31, 2022 and 2021, respectively. Cash used for dividend payments to common stockholders totaled$8,493,000 in the current year period compared to$7,988,000 for the same period a year ago. Short-term liquidity We expect to meet our short-term liquidity requirements primarily from our cash flows from operating activities. In addition to cash flows from operations, our current cash on hand of$56,993,000 and our marketable equity and debt securities of$149,035,000 are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months. Long-term liquidity We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of$56,993,000 and our marketable equity and debt securities of$149,035,000 . We also have substantial value in our unencumbered real estate assets which could potentially be used as collateral in future borrowing opportunities. AtMarch 31, 2022 , we do not have any long-term debt. Our ability to meet our long-term contractual obligations, and to finance our operating requirements and growth plans will depend upon our future performance. Our future performance will be affected by business, economic, financial and other factors, including potential changes in state and federal government payment rates for healthcare, customer demand, success of our marketing efforts, pressures from competitors, and the state of the economy, including the state of financial and credit markets, as well as many unforeseen factors.
Commitment and Contingencies
Governmental Regulations
Laws and regulations governing the Medicare, Medicaid and other federal
healthcare programs are complex and subject to interpretation. Management
believes that it is following all applicable laws and regulations in all
material respects. However, compliance with such laws and regulations can be
subject to future government review and interpretation as well as significant
regulatory action including fines, penalties, and exclusions from the Medicare,
Medicaid, and other federal healthcare programs. There have been several enacted
and proposed federal and state relief measures as a result of COVID-19 which
should provide support to us during this pandemic; however, the full benefit of
any such programs would not be realized until these payments are fully
implemented, government agencies issue applicable regulations, or guidance and
such relief is provided.
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