Note 3 - Other Revenues

6 Months Ended

Jun. 30, 2012

Note 3 – Other Revenues

Other revenues are outlined in the table below. Revenues from management and accounting services include management and accounting fees provided to managed and other long–term health care centers. Revenues from rental income include health care real estate properties owned by us and leased to third party operators. Revenues from insurance services include premiums for workers’ compensation, health insurance, and professional liability insurance policies that our wholly–owned limited purpose insurance subsidiaries have written for certain long–term health care centers to which we provide management or accounting services. "Other" revenues include miscellaneous health care related earnings.

Other revenues include the following:

	Three Months Ended June 30				Six Months Ended June 30
	2012		2011		2012		2011
(in thousands)
Management and accounting services fees	$	5,018	$	4,731	$	9,979	$	10,623
Rental income		4,761		4,753		9,523		9,612
Insurance services		3,906		4,011		7,831		8,096
Other		343		444		668		1,003
	$	14,028	$	13,939	$	28,001	$	29,334

Management Fees from National

We manage five long–term care centers owned by National Health Corporation ("National"). During the six months ended June 30, 2012 and 2011, we recognized management fees and interest on management fees of $1,714,000 and $1,793,000, respectively, from these centers.

The unpaid fees from the five centers owned by National, because the amount collectable could not be reasonably determined when the management services were provided, and because we cannot estimate the timing or amount of expected future collections, will be recognized as revenues only when fixed or determinable and collectability of these fees can be reasonably assured. Under the terms of our management agreement with National, the payment of these fees to us may be subordinated to other expenditures of the five long–term care centers. We continue to manage these centers so that we may be able to collect our fees in the future and because the incremental savings from discontinuing services to a center may be small compared to the potential benefit. We may receive payment for the unrecognized management fees in whole or in part in the future only if cash flows from the operating and investing activities of the five centers or the proceeds from the sale of the centers are sufficient to pay the fees. There can be no assurance that such future improved cash flows will occur.

Management Fees from Other Nursing Centers

We continue to manage 15 long–term care centers (excluding the five National centers) for third–party owners where the management fees are recognized only when realized. During the six months ended June 30, 2012 and 2011, we recognized $3,442,000 and $3,640,000, respectively, of management fees and interest from these 15 long–term care centers.

The unpaid fees from these 15 centers, because of insufficient historical collections and the lack of expected future collections are recognized only when realized. Under the terms of the management agreements, the payment of these fees to us may be subordinated to other expenditures of each of the long–term care centers. Our affiliates continue to manage these centers so that we may be able to collect our fees in the future and because the incremental savings from discontinuing services to a center may be small compared to the potential benefit. We may receive payment for the unrecognized management fees in whole or in part in the future only if cash flows from operating and investing activities of the centers or the proceeds from the sale of the centers are sufficient to pay the fees. There can be no assurance that such future improved cash flows will occur.

Rental Income

The health care properties currently owned and leased to third party operators include nine skilled nursing facilities and four assisted living communities. The rental agreements continue for a five year period ending on December 31, 2015.