Business Development

6 Months Ended

Jun. 30, 2012

Business Development [Abstract]

BUSINESS DEVELOPMENT

9. BUSINESS DEVELOPMENT

Lease Agreement

In April 2012, the Company entered into a lease agreement to operate an 88-bed skilled nursing center in Clinton, Kentucky. The center is subject to a mortgage insured through the United States Department of Housing and Urban Development. The current annual lease payments are approximately $373,000. The lease has an initial ten year term with two five year renewal options and contains an option to purchase the property for $3.3 million during the first five years. The center has not had residents since April 2011 after being de-certified by Medicare and Medicaid. The lease may be terminated if the center does not obtain certifications under the Medicare and Kentucky Medicaid programs by October 15, 2012.

Pharmacy Partnership

The Investment in nonconsolidated affiliate reflected on the interim consolidated balance sheet relates to a pharmacy joint venture partnership in which the Company owns a 50 percent interest. The joint venture partnership is accounted for using the equity method. An equity method investment is the Company’s investment in an entity in which the Company lacks control of but it has the ability to exercise significant influence over operating and financial policies. Under the equity method, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of the net earnings or losses of the affiliate as they occur. During the second quarter of 2012 the Company and its partner provided the initial funding and the joint venture began operations. The pharmacy joint venture will initially provide pharmacy services to certain of the Company’s nursing centers and eventually expand to nursing centers not affiliated with the Company.