Business Development

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS DEVELOPMENT

BUSINESS

Diversicare Healthcare Services, Inc. (together with its subsidiaries, “Diversicare Healthcare Services” or the “Company”) provides long-term care services to nursing center patients in nine states, primarily in the Southeast, Midwest, and Southwest. The Company’s centers provide a range of health care services to their patients and residents that include nursing, personal care, and social services. In addition to the nursing, personal care and social services usually provided in long-term care centers, the Company’s nursing centers also offer a variety of comprehensive rehabilitation services, as well as nutritional support services. The Company's continuing operations include centers in Alabama, Florida, Indiana, Kansas, Kentucky, Ohio, Tennessee, Texas, and West Virginia.

As of March 31, 2014, the Company’s continuing operations consist of 48 nursing centers with 5,449 licensed nursing beds. The Company owns 14 and leases 34 of its nursing centers. The nursing center and licensed bed count includes the following recent business development activity:

• The 135-bed facility in Huntsville, Alabama, for which the Company entered into a lease agreement and assumed operations effective March 1, 2014. The Medicaid and Medicare certification processes for this facility are currently underway, and are expected to be completed in the second quarter of 2014.

• The 442 licensed nursing beds at the four recently leased skilled nursing centers, three in Ohio and one in Indiana, which we have operated since October 1, 2013. The Medicaid and Medicare certification processes were completed for these four leased facilities in the first quarter of 2014, and billing of these receivables are expected to begin in the second quarter of 2014. In addition to the licensed nursing beds, these four centers also include 270 licensed assisted living beds which are not included in the licensed nursing bed count.

• The 107-bed facility in Louisville, Kentucky, for which the Company entered into a lease agreement in August 2013. The Medicare certification processes for this facility was completed in the first quarter of 2014, and billing of these receivables are expected to begin in the second quarter of 2014. The Medicaid certification process is currently underway, and is expected to be completed in the second quarter of 2014.

• The Kansas centers acquired in May 2013, which comprise five skilled nursing centers and 418 licensed beds. The Medicaid certification process was completed for these facilities during the second quarter of 2013, and the Medicare certification process was completed for these facilities during the third quarter of 2013.

BUSINESS DEVELOPMENT

Acquisitions

On March 6, 2013, the Company entered into an asset purchase agreement ("the Agreement") with Cumberland & Ohio Co. of Texas, as receiver of the assets of SeniorTrust of Florida, Inc. to acquire certain land, improvements, furniture, fixtures and equipment, and personal property of five facilities, all located in Kansas, for an aggregate purchase price of $15,500,000. The purchase of the Kansas facilities was completed on May 1, 2013. The Company also incurred $338,000 in acquisition-related expenses associated with this transaction. The five facilities acquired under the Agreement include the following:

• 77-bed skilled nursing facility known as Chanute HealthCare Center

•80 -bed skilled nursing facility known as Council Grove HealthCare Center

• 119-bed skilled nursing facility known as Haysville HealthCare Center

• 80-bed skilled nursing facility known as Larned HealthCare Center

• 62-bed skilled nursing facility known as Sedgwick HealthCare Center

As a result of the consummation of the Agreement, the Company allocated the purchase price of $15,500,000 between the assets associated with the transaction based on the fair value of the acquired net assets. In addition to the assets acquired in the transaction, the Company also assumed liabilities of $758,000 which resulted in total cash outlay of $14,742,000. The allocation of the purchase price was determined with the assistance of HealthTrust LLC, a third-party real estate valuation firm. The allocation for the net assets acquired is as follows:

	As of May 1, 2013
Purchase Price	$	15,500,000
Land	$	2,130,000
Buildings	12,127,000
Furniture, fixtures, and equipment	1,200,000
Inventory	43,000
Less: Liabilities assumed	$	758,000
Total cash paid	$	14,742,000

Lease Agreements

On March 1, 2014, the Company assumed operations at Diversicare of Big Springs, an existing 135-bed facility in Huntsville, Alabama. The nursing center is owned by an unrelated third-party and the lease provides for an initial 10-year lease term with two additional 5-year renewal options. The additional skilled nursing center increases the Company's footprint in Alabama to seven centers, and the third center in the Huntsville market. The center was already operating and treating patients on the transition date. There was no purchase price paid to enter into the lease agreement for this skilled nursing center.

On August 1, 2013, the Company assumed operations at Seneca Place, an existing 107-bed facility in Louisville, Kentucky.  The nursing center is owned by a real estate investment trust ("REIT"), and the lease provides for an initial 15-year lease term with a 5-year renewal option. This additional skilled nursing center increases the Company's footprint in Kentucky to nine nursing centers. The center was already operating and treating patients on the transition date. There was no purchase price paid to enter into the lease agreement for this skilled nursing center.

Additionally, on October 1, 2013, the Company assumed operations at four existing nursing centers, three in Ohio and one in Indiana. The nursing centers are owned by a REIT and the lease of these centers provides for an initial 15-year lease term with a 5-year renewal option. This transaction represents an increase in the Company's footprint in the Midwest, expanding into one new state, Indiana, and increasing our presence in Ohio to four nursing centers. All four of the centers were operating and treating patients on the transition date. There was no purchase price paid to enter into the lease agreement for these skilled nursing centers.