10-K: National HealthCare Reports Strong 2025 Growth

National HealthCare Corporation reported a significant increase in net operating revenues and net income for fiscal year 2025, driven by strategic acquisitions and improved skilled nursing census.

Summary

• Net operating revenues and stimulus income increased 16.1% to $1,517,781,000 for the year ended December 31, 2025, compared to $1,307,382,000 in 2024.
• GAAP net income attributable to National HealthCare Corporation rose 17.7% to $120,015,000 in 2025 from $101,927,000 in 2024.
• Adjusted net income (non-GAAP) increased to $104,067,000 for the year ended December 31, 2025, compared to $76,862,000 for the same period a year ago.
• Overall skilled nursing facility census for owned and leased facilities improved to 89.7% in 2025, up from 88.6% in 2024 and 87.9% in 2023.
• The acquisition of White Oak Management, Inc. on August 1, 2024, significantly contributed to revenue growth, attributing $227,545,000 in net patient revenues for 2025.
• Agency nurse staffing expenses decreased by $9,335,000, or approximately 66.6%, in 2025 compared to the prior year.
• The company operates or manages 80 skilled nursing facilities, 26 assisted living facilities, 9 independent living facilities, 3 behavioral health hospitals, 34 homecare agencies, and 33 hospice agencies across 9 states.
• 62.5% of skilled nursing facilities are rated 4 or 5 stars by CMS, significantly above the industry average of 38.6%.
• The average CMS 5-star rating for all skilled nursing facilities is 3.83, compared to the industry average of 2.95.
• Supplemental Medicaid payments received were $7,246,000 in 2025, a decrease from $12,749,000 in 2024 and $20,214,000 in 2023.
• The company paid down $97,000,000 of long-term debt in 2025.
• Dividends declared per common share increased to $2.53 in 2025 from $2.42 in 2024 and $2.34 in 2023.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, reflecting robust financial growth, improved operational efficiencies, and superior quality ratings compared to industry averages, despite ongoing industry challenges and a lease dispute.

Positives

• Net operating revenues and stimulus income increased by 16.1% in 2025, demonstrating strong top-line growth.
• GAAP net income attributable to National HealthCare Corporation increased by 17.7% in 2025, indicating improved profitability.
• Adjusted net income (non-GAAP) showed a substantial increase, reflecting stronger underlying operational performance.
• Overall skilled nursing facility occupancy rates improved to 89.7% in 2025, suggesting effective patient management and demand.
• Agency nurse staffing expenses decreased by 66.6% in 2025, highlighting successful cost control and workforce management.
• Achieved high CMS 5-star quality ratings, with 62.5% of facilities rated 4 or 5 stars, significantly exceeding the industry average of 38.6%.
• The White Oak Management acquisition was accretive to earnings, contributing significantly to net patient revenues in its first full year of operation.
• Per diem rates increased across all payor types (Medicare, Managed Care, Medicaid, Private Pay) in 2025.
• Maintained a consistent dividend policy, increasing dividends declared per common share to $2.53 in 2025.
• Effective internal controls over financial reporting were maintained as of December 31, 2025.

Negatives

• Accrued risk reserves for professional liability and workers compensation increased to $121,595,000 in 2025 from $103,616,000 in 2024, indicating unfavorable claims activity within the captive insurance company.
• Interest expense increased significantly to $6,371,000 in 2025 from $4,135,000 in 2024, primarily due to outstanding long-term debt from the White Oak acquisition.
• Unrealized gains on marketable equity securities decreased to $22,344,000 in 2025 from $30,958,000 in 2024.
• Supplemental Medicaid payments decreased from $12,749,000 in 2024 to $7,246,000 in 2025.
• An ongoing dispute with National Health Investors, Inc. (NHI) regarding alleged non-compliance with the Master Lease creates uncertainty and potential for significant legal expenses or loss of facilities.
• The company continues to face workforce and labor shortages within all operations, despite efforts to reduce agency staffing.
• Inflationary pressures persist in certain operating expense categories, such as food/dietary supplies and drugs/pharmaceutical supplies.

Risks

• Dependence on reimbursement from Medicare, Medicaid, and other third-party payors, with potential for reductions in rates or changes in payment methods.
• Medicare spending reductions of up to 2% per fiscal year, extended through 2030, will continue to impact revenues.
• Hospice agencies are subject to inpatient and aggregate payment caps, which could require reimbursement to Medicare if exceeded.
• The industry trend toward value-based purchasing may negatively impact revenues if quality performance standards are not met or if alternative payment models decrease overall reimbursement.
• Providing management, advisory, or financial services to other entities creates partial responsibility for their regulatory compliance and potential exposure to claims.
• Payments for management services may be subordinated to other expenditures of healthcare facilities, leading to uncollected revenue.
• Uncertainties and risks related to the Master Lease with National Health Investors, Inc. (NHI), including potential termination of occupancy rights or unfavorable renewal terms.
• The cost to replace or retain qualified nurses, healthcare professionals, and other key personnel may adversely affect financial performance and compliance with state staffing requirements.
• Federal minimum staffing mandates, despite being delayed, could adversely affect labor costs, patient census, and profitability if implemented in the future.
• Natural and man-made disasters, including those exacerbated by climate change, may seriously harm business operations, facilities, and increase costs.
• Future acquisitions or new developments may be difficult to complete, use significant resources, or be unsuccessful, exposing the company to unforeseen liabilities.
• Upkeep of healthcare properties is capital intensive, requiring continuous financial resources for maintenance and enhancement.
• Significant legal actions, particularly professional liability and workers' compensation claims, are commonplace and could result in increased operating costs and substantial uninsured liabilities.
• Failure to compete effectively with other healthcare providers could lead to declining revenues and profitability.
• Possible changes in the case mix of patients and payor mix, especially a significant increase in the Medicaid population, may significantly affect profitability.
• Private third-party payors continue efforts to reduce healthcare costs through direct contracts, utilization review, and managed care programs, potentially limiting reimbursement.
• Potential future pandemics, epidemics, or infectious disease outbreaks could adversely impact business operations, staffing, supply chains, census, and financial condition.
• The ability to incur substantially more debt could further exacerbate financial risks.
• Changes in, or violations of, extensive government regulations may result in increased costs or sanctions that reduce revenue and profitability.
• Healthcare reform efforts, including potential changes to the ACA or proposals for expanded government-funded coverage, may adversely affect business.
• Failure to comply with laws governing the transmission and privacy and security of health information (HIPAA, 21st Century Cures Act) could lead to substantial fines, penalties, and reputational damage.
• Employment-related laws and regulations could increase the cost of doing business and subject the company to significant awards, fines, and lawsuits.
• Environmental laws and regulations related to air/water quality, waste management, and hazardous materials could result in liabilities.
• Changes in federal and state income tax laws, regulations, or interpretations could adversely affect tax positions and estimated liabilities.
• Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could result in a restatement of financial statements and loss of investor confidence.
• Increasing costs of being a publicly owned company are likely to impact future consolidated financial position and results of operations.
• Provisions for losses in financial statements for self-insured programs may not be adequate, potentially affecting financial condition.
• Implementation of new information technology could cause business interruptions and negatively affect profitability and cash flows.
• Dependence on the proper function and availability of information systems, including cybersecurity risks, could harm the ability to operate effectively.
• Inability to meet all capital needs could hinder growth and operational requirements.
• The performances of fixed-income and equity investment portfolios are subject to a variety of investment risks, including interest rate, credit, concentration, and equity price risk.
• Stock price is volatile, and fluctuations in operating results, quarterly earnings, and other factors may result in declines in the price of common stock.
• Inability to pay or maintain dividends would adversely affect stock price.

Future Outlook

The company aims to expand its post-acute and senior healthcare operations while protecting existing markets. It is actively working to improve systems for referral sources and payors and to find creative initiatives to attract and retain qualified healthcare professionals. Partnerships with hospital systems, payors, and other post-acute alliances are being pursued to enhance its position in healthcare delivery. The company estimates an annual revenue increase of approximately $3,000,000 from Tennessee Medicaid increases and $4,200,000 from South Carolina Medicaid increases for fiscal year 2026. The implementation of federal minimum staffing rules for skilled nursing facilities has been prohibited until October 1, 2034, by the One Big Beautiful Bill Act, and parts of the rule were rescinded in December 2025, which may alter future labor cost impacts.

Management Comments

• 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, as well as find creative initiatives to retain and attract qualified healthcare professionals.
• Additionally, NHC is in various stages of partnerships with hospital systems, payors, and other postacute alliances to better position ourselves so we are an active participant in the delivery of post-acute healthcare services.
• The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance.
• We are working diligently to find solutions to reduce and eliminate agency nurse staffing expenses within our healthcare operations.
• Based on our present knowledge of the facts, we do not believe a material loss is probable regarding the NHI lease dispute.

Industry Context

StockSavvy.ai notes that National HealthCare Corporation's strong performance in 2025, particularly its increased occupancy and reduced agency staffing costs, reflects effective management in a challenging healthcare labor market. The strategic acquisition of White Oak Management aligns with broader industry trends of consolidation and expansion to achieve economies of scale and diversify service offerings. The company's high CMS 5-star ratings position it favorably against competitors in an environment increasingly focused on value-based care and quality outcomes. The legislative delay of federal minimum staffing mandates provides temporary relief from potential labor cost increases, a significant concern across the long-term care sector. However, the ongoing dispute with NHI highlights the complexities of real estate partnerships common in the healthcare REIT space.

Comparison to Industry Standards

• NHC's average CMS 5-star rating for skilled nursing facilities is 3.83, significantly higher than the industry average of 2.95.
• 62.5% of NHC's skilled nursing facilities achieved 4 or 5-star ratings, substantially exceeding the industry average of 38.6%.
• The reduction in agency nurse staffing expenses by 66.6% in 2025 demonstrates a stronger ability to manage labor costs compared to many industry peers still struggling with post-pandemic staffing shortages.
• The company's focus on attracting Medicare and private pay patients by providing rehabilitative and post-acute care services is a common strategy among leading providers to optimize revenue mix, as these typically offer higher reimbursement rates than Medicaid.

Legal Proceedings

• General and Professional Liability Claims: The company is subject to claims of resident injury or adverse effects, with an increasing trend in frequency and severity. It is largely self-insured, with accrued risk reserves totaling $121,595,000 at December 31, 2025.
• Civil Investigative Demand / Qui Tam Complaint: Caris Healthcare, L.P. (a wholly-owned subsidiary) received a CID in May 2024 regarding hospice billing. The U.S. and states declined intervention in the related qui tam case in June 2025, and the relators filed a Notice of Voluntary Dismissal in September 2025, concluding the matter.
• Indemnities: The company enters into contracts requiring indemnification against third-party claims, primarily real estate leases, operations transfer agreements, lending agreements, and agreements with officers/directors.

Related Party Transactions

• National Health Investors, Inc. (NHI) Lease: NHC leases 32 skilled nursing facilities and three independent living centers from NHI under a Master Lease. Mr. Robert G. Adams, non-executive Chairman of the NHC Board, also serves on the Board of Directors of NHI. There is an ongoing dispute with NHI regarding alleged non-compliance with non-monetary provisions of the Master Lease.
• National Health Corporation (National): National is NHC's administrative services affiliate and contractor, wholly owned by the National Health Corporation Leveraged Employee Stock Ownership Plan (ESOP). All NHC personnel, including executive management, are employees of National. NHC manages five skilled nursing facilities for National and pays National for payroll and related services, plus a 1% administrative fee on payroll costs. Unrecognized and unpaid management fees from National total $18,730,000 at December 31, 2025. National owns 1,030,887 shares (6.6%) of NHC's common stock.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, higher EPS, and increased dividends. However, the NHI lease dispute and increased risk reserves could introduce uncertainty.
• Employees (Partners): Positive impact from competitive total rewards, including wages, health benefits, 401(k) with matching, Employee Stock Purchase Plan, and educational tuition reimbursement programs. Continued workforce shortages remain a challenge.
• Patients/Residents: Positive impact from the company's focus on patient-centered care, quality outcomes, and high CMS 5-star ratings. Expansion of services and facilities aims to improve access to care.
• Customers (referral sources, payors): The company is working to improve responsiveness to referral sources and payors and is pursuing partnerships to enhance its role in post-acute healthcare delivery.
• Creditors: The company's ability to pay down long-term debt and maintain compliance with financial covenants under its credit facility indicates a stable financial position, which is positive for creditors.

Next Steps

• Continue negotiations with NHI regarding the Master Lease renewal and alleged non-compliance.
• Expand post-acute and senior healthcare operations.
• Improve systems to be more responsive to referral sources and payors.
• Implement creative initiatives to retain and attract qualified healthcare professionals.
• Pursue partnerships with hospital systems, payors, and other post-acute alliances.
• Monitor and adapt to evolving cybersecurity regulations and best practices.
• Continue to allocate aggressive capital spending within owned and leased facilities to address aging physical plant issues.

Key Dates

Recommendation

The company demonstrates strong financial performance with significant revenue and net income growth in 2025, driven by successful acquisitions and improved operational efficiencies, particularly in reducing agency staffing costs. Its superior CMS 5-star quality ratings indicate a competitive advantage in a value-based care environment. The increase in dividends and effective management of liquidity further support a positive outlook. While the NHI lease dispute and increased accrued risk reserves present some concerns, the overall trajectory of growth, operational improvements, and market positioning suggest a favorable investment opportunity.

Keywords

Healthcare, Skilled Nursing Facilities, Assisted Living, Homecare, Hospice, Behavioral Health, SEC Filing, 10-K, Financial Performance, Occupancy Rates, Medicare, Medicaid, Acquisition, White Oak Management, Dividend, Risk Factors, Cybersecurity, National HealthCare Corporation