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2. PROPERTY AND EQUIPMENT

6 Months Ended

Sep. 30, 2012

Property And Equipment

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

		September 30,				March 31,
		2012				2012

Buildings		$	36,536			$	35,376
Land and improvements			13,523				13,523
Equipment			23,021				18,268
Construction in progress			–				1,160
Assets under capital leases			13,099				11,218
			86,179				79,545
Less accumulated depreciation			(25,888	)			(24,016	)

Property and equipment, net		$	60,291			$	55,529

Equipment at September 30 and March 31, 2012 includes $10.7 million and $4.6 million, respectively, relating to the Company’s ongoing development of its new electronic health record technology, which has not been placed into service (Note 12).

The Hospitals are located in an area near active and substantial earthquake faults. The Hospitals carry earthquake insurance with a policy limit of $50.0 million. A significant earthquake could result in material damage and temporary or permanent cessation of operations at one or more of the Hospitals.

The State of California has imposed hospital seismic safety requirements. Under these requirements, the Hospitals must meet stringent seismic safety criteria in the future. In addition, there could be other remediation costs pursuant to this seismic retrofit.

The State of California has a seismic review methodology known as HAZUS. The HAZUS methodology may preclude the need for some structural modifications. All four Hospitals requested HAZUS review and received a favorable notice pertaining to structural reclassification. All Hospital buildings, with the exception of one (an administrative building), have been deemed compliant until January 1, 2030 for both structural and nonstructural retrofit. The Company does not have an estimate of the cost to remediate the seismic requirements for the administrative building as of September 30, 2012.

There are additional requirements that must be complied with by 2030. The costs of meeting these requirements have not yet been determined. Compliance with seismic ordinances will be costly and could have a material adverse effect on the Company's cash flow. In addition, remediation could possibly result in certain environmental liabilities, such as asbestos abatement.

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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