Note 16 - Equity Method Investment in Caris HealthCare, L.P.

12 Months Ended

Dec. 31, 2012

Cost and Equity Method Investments Disclosure [Text Block]

Note 16 – Equity Method Investment in Caris HealthCare, L.P.

As of December 31, 2012, we have a 75.1% non-controlling ownership interest in Caris, a business that specializes in hospice care services in NHC owned health care centers and in other settings.  The carrying value of our investment is $38,463,000 and $19,215,000 at December 31, 2012 and 2011, respectively.  The carrying amounts are included in investments in limited liability companies in the consolidated balance sheets.  Summarized financial information of Caris for the years ended December 31, 2012, 2011, and 2010 is provided below.

	December 31,
	2012		2011		2010
	( in thousands)
Current assets	$	30,894	$	18,219	$	20,257
Noncurrent assets		8,395		978		599
Liabilities		9,306		7,623		7,988
Partners’ capital		29,983		11,574		12,868
Revenue		57,824		44,454		43,896
Expenses		39,177		28,018		26,200
Net income		18,647		16,436		17,696

Increased Ownership Percentage

On January 1, 2012, we assigned our membership interest in Solaris Hospice to Caris in exchange for an additional 2.7% limited partnership interest.  At January 1, 2012, the carrying value of the assets and liabilities of the eight Solaris Hospice entities was $4,311,000.  In accordance with ASC 810, Consolidation, the carrying values have been reclassified to “investments in limited liability companies” in our December 31, 2012 consolidated balance sheet.  Of the carrying values that were reclassified, $2,945,000 was previously recorded goodwill.

On June 1, 2012, we acquired an additional 7.5% limited partnership interest in Caris for $7.5 million.

Consolidation Considerations

Due to our increased ownership percentage in Caris, we have considered whether Caris should be consolidated by NHC under the guidance provided in ASC Topic 810, Consolidation.  We do not consolidate Caris because (1) Caris’ equity at risk is sufficient to finance its activities without additional subordinated financial support, (2) the general partner of the Partnership has the power to direct the activities that most significantly impact the economic performance of Caris, and (3) the equity holders of Caris possess the characteristics of a controlling financial interest, including voting rights that are proportional to their economic interests.  Supporting the assertions above is the following:  (1) the ownership percentage of the general partner did not change and remains equally divided between NHC and another party, (2) the general partner manages and controls the Partnership with full and complete discretion, and (3) the limited partners have no right or power to take part in the control of the business of the Partnership, which is where our ownership percentage increases have occurred.