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Note 3 - Other Revenues

12 Months Ended

Dec. 31, 2014

Note 3 - Other Revenues

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

	Year Ended December 31,
	2014		2013		2012
	(in thousands)
Insurance services	$	7,215	$	15,143	$	15,671
Management and accounting service fees		15,184		18,160		20,042
Rental income		19,123		19,132		19,314
Other		874		685		589
	$	42,396	$	53,120	$	55,616

Management Fees from National

We have managed skilled nursing facilities for National since 1988, and we currently manage five centers. See Note 2 regarding our relationship with National.

During 2014, 2013 and 2012, National paid and we recognized approximately $3,544,000, $3,491,000, and $3,397,000, respectively, of management fees and interest on management fees, which amounts are included in management and accounting service fees. Unrecognized and unpaid management fees and interest on management fees from National total $21,338,000, $21,349,000, and $21,333,000 at December 31, 2014, 2013 and 2012, respectively. We have recognized approximately $41,165,000 of management fees and interest from these facilities since 1988.

The unpaid fees from these five facilities, 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 the 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 skilled nursing facilities. We continue to manage these facilities so that we may be able to collect our fees in the future and because the incremental savings from discontinuing services to a facility 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 centers or 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 and Financial and Accounting Services for Other Healthcare Centers

In February 2014, we assumed management of a 147-bed skilled nursing facility located in Des Peres, Missouri. In June 2014, we began managing an 83-unit assisted living facility located in Augusta, Georgia. As of December 31, 2014, we provide management services to six healthcare centers (other than the five National centers) operated by third party owners. For the year ended December 31, 2014, we recognized management fees of $2,205,000 from these centers. For the years ended December 31, 2013 and 2012, we recognized management fees of $4,413,000 and $6,999,000, respectively, from the 21 healthcare centers we managed during these years. The decrease in management services revenues is due to the discontinuation of management services to the non-profit entities SeniorTrust and ElderTrust that occurred in the second and third quarters of 2013. Effective September 1, 2013, we began leasing and operating the former ElderTrust facilities from National Health Investors, Inc. ("NHI"). Effective September 1, 2013 and thereafter, the revenues from these seven facilities have been included in net patient revenues in the consolidated statements of income.

Effective October 1, 2014, the Company no longer provides accounting and financial services to seven healthcare facilities. At December 31, 2014, we provided accounting and financial services to 20 healthcare facilities. No management services are provided for entities in which we provide accounting and financial services.

Insurance Services

For workers’ compensation insurance services, the premium revenues reflected in the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 were $4,434,000, $7,720,000, and $5,438,000, respectively. For the year ended December 31, 2013, there was a positive insurance settlement reached with one of the states in which we provide workers' compensation insurance in the amount of $2,769,000. Associated losses and expenses are reflected in the interim condensed consolidated statements of income as "Salaries, wages and benefits."

For professional liability insurance services, the premium revenues reflected in the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 were $2,781,000, $3,418,000, and $4,203,000, respectively. Associated losses and expenses including those for self-insurance are included in the interim condensed consolidated statements of income as "Other operating costs and expenses".

Rental Income

In 2007, NHC acquired all of the net assets of National Health Realty, Inc., which was a health care real estate investment trust. The properties acquired in the acquisition are the properties that have generated the majority of the rental income for NHC for the years ended December 31, 2014, 2013, and 2012. The health care properties currently owned and leased to third party operators include nine skilled nursing facilities and four assisted living communities. We renewed the rental agreements in 2011 for a five year period, which ends on December 31, 2015.