Allowance for Doubtful Accounts

3 Months Ended

Mar. 31, 2025

Note 4—Allowance for Doubtful Accounts

In making the Company’s credit evaluations, management considers the general collection risk associated with trends in the long-term care industry. The Company establishes credit limits through payment terms with customers, performs ongoing credit evaluations and monitors accounts on an aging schedule basis to minimize the risk of loss. Despite the Company’s efforts to minimize credit risk exposure, customers could be adversely affected if future industry trends change in such a manner as to negatively impact their cash flows. As a result, the Company’s future collection experience could differ significantly from historical collection trends. If the Company’s customers experience a negative impact on their cash flows, it could have a material adverse effect on the Company’s results of operations and financial condition.

The Company evaluates its accounts and notes receivable for expected credit losses quarterly. Accounts receivable are evaluated based on internally developed credit quality indicators derived from the aging of receivables. Notes receivable are evaluated based on internally developed credit quality indicators derived from management’s assessment of collection risk. At the end of each period, the Company sets a reserve for expected credit losses on standard accounts and notes receivable based on the Company’s historical loss rates. Accounts and notes receivable with an elevated risk profile, which are from customers who have filed bankruptcy or are subject to collections activity, are aggregated and evaluated to determine the total reserve for the class of receivable. Additionally, starting in the year ended December 31, 2024, for notes receivable management evaluates standard receivables based on whether the customer is current (paying within 60 days of terms) or delinquent (paying outside of 60 days of terms). As of March 31, 2025, the Genesis note receivable was classified as delinquent.

ASC 326 permits entities to make an accounting policy election not to measure an estimate for credit losses on accrued interest if those entities write off accrued interest deemed uncollectible in a timely manner. The Company follows an income recognition policy on all interest earned on notes receivable. Under such policy the Company accounts for all notes receivable on a non-accrual basis and defers the recognition of any interest income until receipt of cash payments. This policy was established based on the Company’s history of collections of interest on outstanding notes receivable, as we do not deem it probable that we will receive substantially all interest on outstanding notes receivable. Accordingly, the Company does not record a credit loss adjustment for accrued interest. Interest income from notes receivable for the three months ended March 31, 2025 and 2024 was $1.3 million and $1.1 million, respectively.

The following table presents the Company’s three tiers of notes receivable as of and for the three months ended March 31, 2025 further disaggregated by year of origination, as well as write-off activity:


	Notes receivable
	Amortized cost basis by origination year
	2025		2024		2023		2022		2021		Prior		Total
	(in thousands)
Notes receivable
Standard notes receivable	$	30,696	$	20,727	$	3,566	$	13,869	$	—	$	—	$	68,858
Delinquent notes receivable	$	—	$	173	$	1,641	$	1,810	$	671	$	21,876	$	26,171
Elevated risk notes receivable	$	—	$	—	$	1,538	$	—	$	—	$	1,491	$	3,029

Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current-period recoveries	—		(295)		—		—		—		—		(295)
Current-period net write-offs	$	—	$	(295)	$	—	$	—	$	—	$	—	$	(295)

The following table provides information as to the status of payment on the Company’s notes receivable which were past due as of March 31, 2025:


	Age analysis of past-due notes receivable as of March 31, 2025
	0 - 90 Days		91 - 180 Days		Greater than 181 Days		Total
	(in thousands)
Notes receivable
Standard notes receivable	$	349	$	—	$	—	$	349
Delinquent notes receivable1	608		382		23,791		24,781
Elevated risk notes receivable	150		225		2,654		3,029
	$	1,107	$	607	$	26,445	$	28,159

1.Included within the Delinquent notes receivable past-due balance is the entire balance of notes receivable due from Genesis.

The following tables provide a summary of the changes in the Company’s allowance for doubtful accounts on a portfolio segment basis for the three months ended March 31, 2025 and 2024, respectively:


	Allowance for doubtful accounts
Portfolio Segment:	December 31, 2024		Write-Offs1		Bad Debt Expense		March 31, 2025
	(in thousands)
Accounts receivable	$	87,520	$	(2,328)	$	1,906	$	87,098

Notes receivable
Standard notes receivable	$	5,096	$	295	$	(805)	$	4,586
Delinquent notes receivable	6,026		—		(13)		6,013
Elevated risk notes receivable	2,140		—		—		2,140
Total notes receivable	$	13,262	$	295	$	(818)	$	12,739
Total accounts and notes receivable	$	100,782	$	(2,033)	$	1,088	$	99,837

1.Write-offs are shown net of recoveries. During the three months ended March 31, 2025, the Company collected $0.3 million of accounts and notes receivable which had previously been written-off as uncollectible.


	Allowance for doubtful accounts
Portfolio segment:	December 31, 2023		Reclassifications1		Write-Offs2		Bad Debt Expense		March 31, 2024
	(in thousands)
Accounts receivable	$	80,819	$	—	$	(1,033)	$	4,301	$	84,087

Notes receivable
Standard notes receivable	$	6,125	$	(2,615)	$	—	$	(463)	$	3,047
Delinquent notes receivable	—		2,615		—		1,083		3,698
Elevated risk notes receivable	4,755		—		—		—		4,755
Total notes receivable	$	10,880	$	—	$	—	$	620	$	11,500
Total accounts and notes receivable	$	91,699	$	—	$	(1,033)	$	4,921	$	95,587

1.Delinquent notes receivable were identified as a new loss pool during the year ended December 31, 2024.

2.Write-offs are shown net of recoveries. During the three months ended March 31, 2024, the Company collected less than $0.1 million of accounts and notes receivable which had previously been written-off as uncollectible.