Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Basis of Accounting, Policy [Policy Text Block]

Principles of Consolidation and Basis of

Presentation

The consolidated financial statements which are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) include our wholly owned and controlled subsidiaries and affiliates. Variable interest entities (“VIEs”) in which we have an interest have been consolidated when we have been identified as the primary beneficiary. Investments in ventures in which we have the ability to exercise significant influence but do not have control over are accounted for using the equity method. Equity method investments are initially recorded at cost and subsequently are adjusted for our share of the venture’s earnings or losses and cash distributions. Our most significant equity method investment is a

75.1%

non–controlling ownership interest in Caris, a business that specializes in hospice care services. Investments in entities in which we lack the ability to exercise significant influence are included in the consolidated financial statements at cost unless there has been a decline in the market value of our investment that is deemed to be other than temporary. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Change in Accounting Principle, Policy [Policy Text Block]

Change in Accounting Principle

Effective

December

31,

2016,

the Company retrospectively adopted a change in accounting principle related to the early adoption of ASU No.

2016–18,

Statement of Cash Flows (Topic

230)—Restricted

Cash—a consensus of the FASB Emerging Issues Task Force

. This revised standard is an effort by the FASB to reduce diversification in practice by providing specific guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The updated guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. As such, amounts generally described as restricted cash and restricted cash equivalents should be included in the “beginning–of–period” and “end–of–period” total amounts shown on the statement of cash flows.

As described in the guidance for accounting changes under ASC Topic

250,

the comparative consolidated statements of cash flows of prior periods are adjusted to apply the new accounting method retrospectively. The following tables present the effect on the statements of cash flows of the accounting change that was retrospectively adopted on

December

31,

2016:

Consolidated Statements of Cash Flows

(

in thousands

)

	Year Ended December 31, 2015									Year Ended December 1, 2014
	As Previously Reported			Effect of Accounting Change			As Adjusted			As Previously Reported			Effect of Accounting Change			As Adjusted

Cash Flows from Operating Activities:
Restricted cash and cash equivalents	$	(9,392	)	$	9,392		$	-		$	(6,245	)	$	6,245		$	-
Net cash provided by operating activities		73,963			9,392			83,355			75,694			6,245			81,939

Cash Flows from Investing Activities:
Change in restricted cash and cash equivalents		8,937			(8,937	)		-			9,523			(9,523	)		-
Net cash used in investing activities		(63,847	)		(8,937	)		(72,784	)		(57,508	)		(9,523	)		(67,031	)

Net Decrease in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents		(31,559	)		455			(31,104	)		(11,938	)		(3,278	)		(15,216
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash, Equivalents, Beginning of Period		69,767			10,651			80,418			81,705			13,929			95,634
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash, Equivalents, End of Period	$	38,208		$	11,106		$	49,314		$	69,767		$	10,651		$	80,418

Revenue Recognition, Policy [Policy Text Block]

Net Patient Revenues and Accounts Receivable

Revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, hospice, assisted living and retirement and home health care services.

Revenues are recorded when services are provided based on established rates adjusted to amounts expected to be received under governmental programs and other

third–party

contractual arrangements based on contractual terms. These revenues and receivables are stated at amounts estimated by management to be at their net realizable value.

For private pay patients in skilled nursing, assisted living and independent living facilities, the Company bills for room and board charges, with the remittance being due on receipt of the statement and generally by the

10th

day of the month the services are performed. A portion of the episodic Medicare payments for home health services are also received in advance of the services being rendered. All advance billings are initially deferred and then are recognized as revenue when the services are performed.

We receive payments from the Medicare program under a prospective payment system ("PPS"). For skilled nursing services, Medicare pays a fixed fee per Medicare patient per day, based on the acuity level of the patient, to cover all post–hospital extended care routine service costs, ancillary costs and capital related costs.

Medicaid program payments for long–term care services are generally based on fixed per diem rates subject to program cost ceilings.

For homecare services, Medicare pays based on the acuity level of the patient and based on episodes of care. An episode of care is defined as a length of care up to

days with multiple continuous episodes allowed. The services covered by the episode payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit. We are allowed to make a request for anticipated payment at the start of care equal to

60%

of the expected payment for the initial episode. The remaining balance due is paid following the submission of the final claim at the end of the episode. Revenues are recognized when services are provided based on the number of days of service rendered in the episode. Deferred revenue is recorded for payments received for which the related services have not yet been provided.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs. We believe that we are in compliance with all applicable laws and regulations.

Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. The Medicare PPS methodology requires that patients be assigned to Resource Utilization Groups ("RUGs") based on the acuity level of the patient to determine the amount paid to us for patient services. The assignment of patients to the various RUG categories is subject to post–payment review by Medicare intermediaries or their agents. In our opinion, adequate provision has been made for any adjustments that

may

result from these reviews. Retroactive adjustments are estimated in the recording of revenues in the period the related services are rendered. Any differences between our original estimates of reimbursements and subsequent revisions are reflected in operations in the period in which the revisions are made often due to final determination or the period of payment no longer being subject to audit or review. We believe currently that any differences between the net revenues recorded and final determination will not materially affect the consolidated financial statements. We have made provisions of approximately

$17,019,000

and

$16,654,000

as of

December

31,

2016

and

2015,

respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

Revenue Recognition for Alternative Revenue Programs, Policy [Policy Text Block]

Other Revenues

As discussed in Note

other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income as earned over the related policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the long–term care center under contract. We generally record other revenues on the accrual basis based on the terms of our contractual arrangements. However, with respect to management and accounting services revenue from certain long–term care providers, including but not limited to National Health Corporation ("National") as discussed in Note

where collection is not reasonably assured based on insufficient historical collections and the lack of expected future collections, our policy is to recognize income only in the period in which collection is assured and the amounts at question are believed by management to be fixed or determined.

Certain management contracts, including, but not limited to contracts with National, subordinate the payment of management fees earned under those contracts to other expenditures of the long–term care center and to the availability of cash provided by the facility’s operations. Revenues from management services provided to the facilities that generate insufficient cash flow to pay the management fee, as prioritized under the contractual arrangement, are not recognized until such time as the amount of revenue earned is fixed or determinable and collectability is reasonably assured. This recognition policy could cause our reported revenues and net income from management services to vary significantly from period to period.

We recognize rental income based on the terms of our operating leases. Under certain of our leases, we receive contingent rent, which is based on the increase in revenues of a lessee over a base year. We recognize contingent rent annually or monthly, as applicable, when, based on the actual revenue of the lessee, receipt of such income is assured. We identify leased real estate properties as nonperforming if a required payment is not received within

days of the date it is due. Our policy related to rental income on non–performing leased real estate properties is to recognize rental income in the period when the income is received.

Premiums Receivable, Allowance for Doubtful Accounts, Estimation Methodology, Policy [Policy Text Block]

Provision for Doubtful Accounts

We evaluate the collectability of our accounts receivable based on factors such as payor type, historical collection trends and aging categories. We review these factors and determine an estimated provision for doubtful accounts. Historically, bad debts have resulted primarily from uncollectible private balances or from uncollectible coinsurance and deductibles. Receivables that are deemed to be uncollectible are written off against the allowance. The allowance for doubtful accounts balance is assessed on a quarterly basis, with changes in estimated losses being recorded in the consolidated statements of income in the period

first

identified.

The Company includes provisions for doubtful accounts in operating expenses in its consolidated statements of income. The provisions for doubtful accounts were

$5,967,000,

$6,583,000,

and

$6,228,000

for

2016,

2015

and

2014,

respectively.

Other Operating Expenses Policy [Policy Text Block]

Other Operating Expenses

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, professional insurance and licensing fees. The primary facility costs include utilities and property insurance.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

General and Administrative Costs

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, which were

$29.3

million,

$34.5

million, and

$34.9

million for the years ended

December

31,

2016,

2015,

and

2014,

respectively.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash equivalents include highly liquid investments with an original maturity of

three

months or less when purchased.

Cash and Restricted Cash and Cash Equivalents and Restricted Marketable Securities [Policy Text Block]

Restricted Cash

and Cash Equivalents and Restricted Marketable Securities

Restricted cash and cash equivalents and restricted marketable securities primarily represent assets that are held by our wholly–owned limited purpose insurance companies for workers' compensation and professional liability claims.

Marketable Securities, Policy [Policy Text Block]

Investments in Marketable Securities

and Restricted Marketable Securities

Our investments in marketable securities and restricted marketable securities include available for sale securities, which are recorded at fair value. Unrealized gains and losses on available for sale securities that are deemed temporary are recorded as a separate component of stockholders’ equity. If any adjustment to fair value reflects a significant decline in the value of the security, we consider all available evidence to evaluate the extent to which the decline is "other than temporary". Credit losses are identified when we do not expect to receive cash flows sufficient to recover the amortized cost basis of a security. In the event of a credit loss, only the amount associated with the credit loss is recognized in earnings, with the amount of loss relating to other factors recorded as a separate component of stockholders’ equity.

Inventory, Policy [Policy Text Block]

Inventories

Inventories consist generally of food and supplies and are valued at the lower of cost or market, with cost determined on a

first–in,

first–out

(FIFO) basis.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Mortgage and Other Notes Receivable

In accordance with Accounting Standards Codification ("ASC") Topic

310,

Receivables

, NHC evaluates the carrying values of its mortgage and other notes receivable on an instrument by instrument basis. On a quarterly basis, NHC reviews its notes receivable for recoverability when events or circumstances, including the non–receipt of contractual principal and interest payments, significant deteriorations of the financial condition of the borrower and significant adverse changes in general economic conditions, indicate that the carrying amount of the note receivable

may

not be recoverable. If necessary, impairment is measured as the amount by which the carrying amount exceeds the discounted cash flows expected to be received under the note receivable or, if foreclosure is probable, the fair value of the collateral securing the note receivable.

Property, Plant and Equipment, Policy [Policy Text Block]

Pro

perty and Equipment

Property and equipment are recorded at cost. Depreciation is provided by the straight–line method over the expected useful lives of the assets estimated as follows: buildings and improvements,

20–

years and equipment and furniture,

3–

years. Leasehold improvements are amortized over periods that do not exceed the non–cancelable respective lease terms using the straight–line method.

Expenditures for repairs and maintenance are charged to expense as incurred. Betterments, which significantly extend the useful life, are capitalized. We remove the costs and related allowances for accumulated depreciation or amortization from the accounts for properties sold or retired, and any resulting gains or losses are included in income.

In accordance with ASC Topic

360,

Property, Plant, and Equipment

, we evaluate the recoverability of the carrying values of our properties on a property by property basis. We review our properties for recoverability when events or circumstances, including significant physical changes in the property, significant adverse changes in general economic conditions, and significant deteriorations of the underlying cash flows of the property, indicate that the carrying amount of the property

may

not be recoverable. The need to recognize impairment is based on estimated future undiscounted cash flows from a property over the remaining useful life compared to the carrying value of that property. If recognition of impairment is necessary, it is measured as the amount by which the carrying amount of the property exceeds the estimated fair value of the property.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

The Company accounts for goodwill under ASC Topic

350,

Intangibles – Goodwill and Other

. Under the provisions of this guidance, goodwill and intangible assets with indefinite useful lives are not amortized but are subject to impairment tests based on their estimated fair value. Unamortized goodwill is continually reviewed for impairment in accordance with ASC. The Company performs its annual impairment assessment on the

first

day of the

fourth

quarter.

Liability Reserve Estimate, Policy [Policy Text Block]

Accrued Risk Reserves

We are principally self–insured for risks related to employee health insurance and utilize wholly–owned limited purpose insurance companies for workers’ compensation and professional liability claims. Accrued risk reserves primarily represent the accrual for risks associated with employee health insurance, workers’ compensation and professional liability claims. The accrued risk reserves include a liability for unpaid reported claims and estimates for incurred but unreported claims. Our policy with respect to a significant portion of our workers’ compensation and professional and general liability claims is to use an actuary to assist management in estimating our exposure for claims obligation (for both asserted and unasserted claims). Our health insurance reserve is based on our known claims incurred and an estimate of incurred but unreported claims determined by our analysis of historical claims paid. We reassess our accrued risk reserves on a quarterly basis, with changes in estimated losses being recorded in the consolidated statements of income in the period

first

identified.

Other Current Liabilities [Policy Text Block]

Other Current Liabilities

Other current liabilities primarily represent accruals for current federal and state income taxes, real estate taxes and other current liabilities.

Continuing Care Retirement Communities, Advance Fees, Policy [Policy Text Block]

Continuing Care Contracts and Refundable Entrance Fees

We have

one

continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center

may

enter into continuing care contracts with us. The contract provides that

10%

of the resident entry fee becomes non–refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lessor of the price at which the apartment is re–assigned or

90%

of the original entry fee, plus

40%

of any appreciation if the apartment exceeds the original resident’s entry fee. In each case, we amortize the non–refundable part of these fees into revenue over the actuarially determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees when residents relocate from our community and the apartment is re–occupied. Refundable entrance fees are classified as non–current liabilities and non–refundable entrance fees are classified as deferred revenue in the Company's consolidated balance sheets. The balances of refundable entrance fees as of

December

31,

2016

and

December

31,

2015

were

$9,924,000

and

$9,865,000,

respectively.

Obligation to Provide Future Services

We annually estimate the present value of the net cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non–refundable deferred revenue from entrance fees received. If the present value of the net cost of future services exceeds the related anticipated revenues, a liability is recorded (obligation to provide future services) with a corresponding charge to income. At

December

31,

2016

and

2015,

we have recorded a future service obligation in the amounts of

$3,236,000

and

$3,440,000,

respectively.

Income Tax Uncertainties, Policy [Policy Text Block]

Other Noncurrent Liabilities

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions (see Note

12).

Revenue Recognition, Deferred Revenue [Policy Text Block]

Deferred Revenue

Deferred revenue includes the deferred gain on the sale of assets to National (as discussed in Note

and entrance fees that have been and are currently being received upon reservation and occupancy in the independent living centers we operate. The non–refundable portion

(10%)

of the entrance fee is included in deferred revenue and is being recognized over the remaining life expectancies of the residents.

Income Tax, Policy [Policy Text Block]

Income Taxes

We utilize ASC Topic

740,

Income Taxes

, which requires an asset and liability approach for financial accounting and reporting for income taxes. Under this guidance, deferred tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. See Note

for further discussion of our accounting for income taxes.

Also under ASC Topic

740,

Income Taxes

, tax positions are evaluated for recognition using a more–likely–than–not threshold, and those tax positions requiring recognition are measured at the largest amount of tax benefit that is greater than

percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Liabilities for income tax matters include amounts for income taxes, applicable penalties, and interest thereon and are the result of the potential alternative interpretations of tax laws and the judgmental nature of the timing of recognition of taxable income.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock–

Based Compensation

Stock–based awards granted include stock options, restricted stock units, and stock purchased under our employee stock purchase plan. Stock–based compensation cost is measured at the grant date, based on the fair value of the awards, and is recognized as expense over the requisite service period only for those equity awards expected to vest.

The fair value of the restricted stock units is determined based on the stock price on the date of grant. We estimated the fair value of stock options and stock purchased under our employee stock purchase plan using the Black–Scholes model. This model utilizes the estimated fair value of common stock and requires that, at the date of grant, we use the expected term of the grant, the expected volatility of the price of our common stock, risk–free interest rates and expected dividend yield of our common stock. The fair value is amortized on a straight–line basis over the requisite service periods of the awards.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risks

Our credit risks primarily relate to cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, marketable securities, restricted marketable securities and notes receivable. Cash and cash equivalents are primarily held in bank accounts and overnight investments. Restricted cash and cash equivalents is primarily invested in commercial paper and certificates of deposit with financial institutions and other interest bearing accounts. Accounts receivable consist primarily of amounts due from patients (funded through Medicare, Medicaid, other contractual programs and through private payors) and from other health care companies for management, accounting and other services. We perform continual credit evaluations of our clients and maintain allowances for doubtful accounts on these accounts receivable. Marketable securities and restricted marketable securities are held primarily in accounts with brokerage institutions. Notes receivable relate primarily to secured loans with health care facilities (recorded as notes receivable in the consolidated balance sheets) as discussed in Note

10.

At any point in time we have funds in our operating accounts and restricted cash accounts that are with

third

party financial institutions. These balances in the U.S.

may

exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor the cash balances in our operating accounts, these cash and restricted cash balances could be impacted if the underlying financial institutions fail or could be subject to other adverse conditions in the financial markets.

Our financial instruments, principally our notes receivable, are subject to the possibility of loss of the carrying values as a result of the failure of other parties to perform according to their contractual obligations. We obtain various collateral and other protective rights, and continually monitor these rights in order to reduce such possibilities of loss. We evaluate the need to provide reserves for potential losses on our financial instruments based on management's periodic review of the portfolio on an instrument by instrument basis. See Note

for additional information on the notes receivable.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

ASC Topic

220,

Comprehensive Income,

requires that changes in the amounts of certain items, including unrealized gains and losses on marketable securities, be shown in the consolidated financial statements as comprehensive income. We report comprehensive income in the consolidated statements of comprehensive income and also in the consolidated statements of stockholders’ equity.

Segment Reporting, Policy [Policy Text Block]

Segment Disclosures

ASC Topic

280,

Segment Reporting,

establishes standards for the way that public business enterprises report information about operating segments in annual and interim financial reports issued to stockholders. Management believes that substantially all of our operations are part of the post–acute health care industry segment. See Note

for a detail of other revenues provided by our operations within the post–acute health care industry segment. Information about the costs and expenses associated with each of the components of other revenues is not separately identifiable.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Guidance

November

2016,

the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016–18,

“Statement of Cash Flows (Topic

230)—Restricted

Cash—a consensus of the FASB Emerging Issues Task Force”. This revised standard is an effort by the FASB to reduce diversification in practice by providing specific guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The updated guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. As such, amounts generally described as restricted cash and restricted cash equivalents should be included in the “beginning–of–period” and “end–of–period” total amounts shown on the statement of cash flows. The effective date for this standard is for years beginning after

December

15,

2017,

with early adoption permitted. Effective

December

31,

2016,

the Company elected to early adopt this standard. The adoption of this standard represented a change in accounting principle which was applied retrospectively; see beginning of Note

under “

Change in Accounting Principle

” for further discussion on the adoption of ASU No.

2016–18.

November

2015,

the FASB issued ASU No.

2015–17,

“Income Taxes” which requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. Prior to the issuance of the standard, deferred tax liabilities and assets were required to be separately classified into a current amount and a noncurrent amount in the balance sheet. The new accounting guidance represents a change in accounting principle and the standard is required to be adopted in annual periods beginning after

December

15,

2016.

Early adoption is permitted and the Company elected to early adopt this guidance as of

December

31,

2015.

April

2015,

the FASB issued ASU

2015–03,

"Imputation of Interest (Sub–Topic

835.30):

Simplifying the Presentation of Debt Issuance Costs". ASU

2015–03

requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In

August

2015,

the FASB issued ASU

2015–15

clarifying the application of this guidance to line of credit arrangements. The amendments in the ASUs are effective retrospectively for fiscal years, and for interim periods within those fiscal years, beginning after

December

15,

2015.

This guidance did not have a material impact on our consolidated financial statements.

February

2015,

the FASB issued

ASU No.

2015–02

“Amendments to the Consolidation Analysis”. This update is in response to stakeholders that have expressed concerns that current generally accepted accounting principles (“GAAP”) might require a reporting entity to consolidate another legal entity in situations in which the reporting entity’s contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity’s voting rights, or the reporting entity is not exposed to a majority of the legal entity’s economic benefits or obligations. Thus, the update modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities. It eliminates the presumption that a general partner should consolidate a limited partnership, for limited partnerships and similar legal entities that qualify as voting interest entities; a limited partner with a controlling financial interest should consolidate a limited partnership. A controlling financial interest

may

be achieved through holding a limited partner interest that provides substantive kick–out rights. Finally, it requires consideration of the effects of fee arrangements and related parties on the primary beneficiary determination. The amendments in this update are effective for annual reporting periods beginning after

December

15,

2015.

This guidance did not have a material impact on our consolidated financial statements.

Recent Accounting Guidance Not Yet Adopted

March

2016,

the FASB issued ASU

2016–09,

“Compensation – Stock Compensation (Topic

718):

Improvements to Employee Share–Based Payment Accounting.” ASU

2016–09

simplifies the accounting for share–based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU

2016–09

is effective for fiscal years beginning after

December

15,

2016.

We are currently evaluating the requirements of ASU

2016–09,

but

believe the final result will be a decrease to our income tax expense and an increase in net cash provided by operating activities.

February

2016,

the FASB issued ASU

2016–02,

"Leases (Topic

842)."

The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after

December

15,

2018,

including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. We anticipate this standard will have a material impact on our consolidated financial statements and result in an increase to total assets and total liabilities. Additionally, we are currently evaluating the impact this standard will have on our policies and procedures and internal control framework.

January

2016,

the FASB issued ASU No.

2016–01,

“Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities

(Topic

825)”.

ASU No.

2016–01

revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU No.

2016–01

requires the change in fair value of many equity investments to be recognized in net income. ASU No.

2016–01

is effective for interim and annual periods beginning after

December

15,

2017,

with early adoption permitted. Adopting ASU No.

2016–

may

result in a cumulative effect adjustment to the Company’s retained earnings as of the beginning of the year of adoption. We are currently evaluating the potential effects of adopting the provisions of ASU No.

2016–01.

May

2014,

the FASB issued ASU No.

2014–09

“Revenue from Contracts with Customers”, also known as the “New Revenue Standard”. This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following

five

-step process:

Identify the contract(s) with a customer.

Identify the performance obligation in the contract.

Determine the transaction price.

Allocate the transaction price to the performance obligations in the contract.

Recognize revenue when (or as) the entity satisfies a performance obligation.

For a public entity, this update is effective for annual reporting periods beginning after

December

15,

2017,

including interim periods within that reporting period. The Company does not plan to early adopt the New Revenue Standard.

As we progress with our implementation efforts to adopt the New Revenue Standard, management continues to evaluate and refine its estimates of the anticipated impacts it will have on our revenue recognition policies, procedures, financial position, results of operations, cash flows, financial disclosures and control framework. Specifically, the Company is continuing to evaluate its population of revenue sources to determine the potential effects the New Revenue Standard will have on the amount or timing of certain industry-specific healthcare revenue sources, which at this time includes revenue recorded from our CCRC, settlements with

third

party payors, and our bundled and risk-sharing payments.