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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: July 31, 1995. Commission File Number
0-12927
NATIONAL HOME HEALTH CARE CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2981141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 WHITE PLAINS ROAD, SCARSDALE, NEW YORK 10583
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-722-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge in
definitive proxy or information statements, incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of October 25, 1995, the aggregate market value of the Common
Stock of the Registrant, its only class of voting securities, held
by non-affiliates of the Registrant was approximately $10,258,540,
calculated on the basis of the average closing bid and asked
prices of such stock on the National Association of Securities
Dealers Automated Quotation System on that date, as reported by
the National Association of Securities Dealers, Inc.
The number of shares outstanding of the Registrant's Common Stock
on October 25, 1995 was 4,722,576.
Portions of the Registrant's Proxy Statement for its 1995 Annual
Meeting of Stockholders (which Proxy Statement will be filed with
the Securities and Exchange Commission on or before November 28,
1995) are incorporated by reference in Part III hereof.
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PART I
ITEM 1. BUSINESS
GENERAL
National Home Health Care Corp. ("the Registrant") is a
Delaware corporation which was incorporated on July 27, 1983 under
the name of Family Medical Treatment Centers of America, Inc.
Effective December 14, 1984, the Registrant changed its name to
National HMO Corp. and effective December 20, 1991, the Registrant
changed its name to National Home Health Care Corp. The Registrant
completed its initial public offering in December 1983. The
Registrant is a provider of home health care and outpatient
medical services.
The Registrant has four operating subsidiaries:
- HEALTH ACQUISITION CORP., formerly Allen Health
Care Services, Inc., a New York corporation, of
which Allen Health Care Services ("Allen Health
Care") is the sole operating division. The
operations of Hitech Home Care, formerly another
operating division of Health Acquisition Corp.,
were discontinued during the fiscal year ended July
31, 1993. Accordingly, all operations relating to
Hitech Home Care are shown as discontinued opera-
tions in the financial statements and notes thereto
appearing elsewhere herein.
- BREVARD MEDICAL CENTER, INC., a Delaware
corporation ("Brevard Medical Center"), which
conducts business in Brevard County, Florida. Boro
Medical Corp., a Florida corporation, is a wholly-
owned subsidiary of Brevard Medical Center.
- FIRST HEALTH, INC., a Florida corporation ("First
Health"), which conducts business in Volusia
County, Florida.
- NEW ENGLAND HOME CARE, INC., a Connecticut
corporation ("New England"), which conducts
business in the State of Connecticut.
HEALTH ACQUISITION CORP.
Allen Health Care Services
Allen Health Care maintains its principal administrative
office in Jamaica, New York and has satellite offices in New York
City, Farmingdale and Hempstead, New York. The company provides
personal home health care services, including registered nurses,
licensed practical nurses, personal care aides, home health aides
and homemakers in the following counties in the State of New York:
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Nassau, Suffolk, Queens, Kings, New York and the Bronx. All
personnel are licensed or are agency certified under a New York
State approved program and can be engaged on a full-time,
part-time or live-in basis. Allen Health Care is a participating
provider in both the Nassau and Suffolk Counties Department of
Social Services Medicaid Programs. The Public Health Council of
the State of New York Department of Health has approved the
application for licensure of Health Acquisition Corp. d/b/a Allen
Health Care with no limited life restrictions.
Allen Health Care received Joint Commission on Accreditation
of Healthcare Organizations (JCAHO) status in New York State.
JCAHO, which is the accrediting body for all health care
providers, is associated with providing quality services. This
status is required by many of the certified home health care
agencies that Allen Health Care currently services. The company's
accreditation expires in May 1996, at which time a resurvey will
be commenced. Reimbursement for the division's services is
primarily provided by the Department of Social Services of both
Nassau and Suffolk Counties, New York, as well as by certified
home health care agencies and long term health care provider
programs which contract with the division. In addition, in April
1995, services of this subsidiary were expanded to include home
care pediatric skilled nursing for medically fragile children and
their families.
Allen Health Care provides home health care services to its
clients, twenty-four hours per day, seven days per week. Although
the company's offices are open during normal business hours,
personnel are available twenty-four hours per day to respond to
emergencies and to provide other service requests. The registered
nurses of Allen Health Care, in accordance with New York State
Department of Health Regulations and Contract Requirements, visit
patients regularly and review the records of service which are
completed by home health and personal care aides daily. These
records are maintained by Allen Health Care. In addition, the
home care coordinator ensures that appropriate coverage is
maintained for all patients and acts as the liaison among family
members, aides and the professional staff.
To a large extent, Allen Health Care's growth potential
depends upon its ability to recruit and maintain qualified
personnel. The company's training programs for home health aides
and personnel care aides have been approved by the New York State
Department of Health. The company believes that it offers
competitive salaries and fringe benefits and has been able to keep
its home health aides working on a steady basis.
Hitech Home Care
In May 1992, Health Acquisition Corp. purchased substantially
all of the assets of Hitech Registered Nurses of New Jersey, Inc.
( "Hitech"), a licensed nursing agency that provided home
intravenous infusion therapy and skilled nursing in the adult,
pediatric and high risk maternity areas in the State of
New Jersey. In addition, Health Acquisition Corp. entered
into a three-year employment agreement with each of the
two former shareholders of Hitech. Each employment
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agreement called for compensation to the employee during the
three-year period in the aggregate amount of $255,000, with an
additional signing bonus of $225,000 to each employee.
In July 1993, the Registrant discontinued the operations of
Hitech Home Care after determining that the time and financial
commitment required to expand its operations and to make it
profitable would be too great to pursue. In connection with such
discontinuation, Health Acquisition Corp. entered into agreements
relating to the termination of the employment agreements of each
of the two key Hitech Home Care employees and the termination of
the lease of Hitech Home Care's office in Valhalla, New York. The
agreements required the payment of $30,000 in accrued bonuses and
severance to one employee of approximately $13,000. The lease
termination required the one-time payment of $75,000 and the
forfeiture of a $30,000 security deposit in order to terminate the
lease, which would have required monthly payments of $5,687 per
month until April 1995. See "Notes to Financial Statements -
Discontinued Operations".
NEW ENGLAND HOME CARE
On August 4, 1995, the Registrant consummated the acquisition
of 100% of the capital stock of Nurse Care, Inc. ("Nurse Care"),
the parent company of New England Home Care, Inc. ("New England")
for $3,150,000 in cash. In addition, one of the two former
shareholders entered into a one-year employment contract as the
Administrator of New England with a base salary of $125,000. The
other former shareholder entered into a one-year consulting
agreement to provide certain consulting services with respect to
the operations of New England in consideration of $20,000 in
consulting fees.
New England is a Medicare certified and licensed home health
care company in the State of Connecticut. The company provides a
wide variety of home health care services consisting of home
health aides, skilled nursing, physical therapy, speech therapy,
occupational therapy and social work. New England maintains its
principal administrative office in Milford, Connecticut and has
branch offices in Norwalk, Hamden, Waterbury, Seymour and Danbury,
Connecticut. Although the company is currently undertaking the
necessary steps to achieve JCAHO status in the State of
Connecticut, there can be no assurance that this status will be
obtained. Reimbursement for New England's services are primarily
provided by the Federal Medicare Program and the State of
Connecticut Medicaid Programs. Additional sources of revenue are
from managed care programs, hospices and commercial insurance
carriers.
BREVARD MEDICAL CENTER
Brevard Medical Center provides out-patient multi-specialty
and primary medical care through its five outpatient medical
offices located throughout Brevard County, Florida. The company
maintains its principal administrative office in Melbourne,
Florida.
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The services of the company include primary and specialty
physician care, diagnostic testing, laboratory and x-ray services,
minor office surgery, follow-up care relating to specific
treatments as well as continuous care to patients.
The company enters into contracts with primary care physi-
cians who are either Board Certified or Board Eligible in their
primary care discipline. The physician is also required to obtain
and maintain local hospital admitting privileges to provide
continuity of care to Brevard Medical Center's patients, both in
and out of the hospital. The physicians render services in
accordance with quality assurance standards set by the American
Medical Association and are monitored by the company's Quality
Improvement Committee. In addition, Brevard Medical Center enters
into agreements with specialty physicians to provide Brevard
Medical Center's patients with in-house consultations,
consultations in their own offices as well as acute care in the
hospital for advanced diagnostic testing and major surgery.
Brevard Medical Center contracts with employer groups, health
plans, preferred provider organizations and community health
purchasing alliances consisting of local health maintenance
organizations. The company also participates with various
indemnity coverage programs.
In addition, Brevard Medical Center provides out-patient
medical services for its wholly-owned subsidiary, Boro Medical
Corp. Boro Medical Corp. is the holder of a prepaid cost reim-
bursement contract with the Health Care Financing Administration
of the Federal Government to provide certain out-patient medical
services to Medicare subscribers. In addition, Boro Medical Corp.
is the holder of a prepaid health clinic license (PHC), which is a
certificate of authority issued by the Florida Department of
Insurance to provide certain outpatient medical services to sub-
scribers.
Although Brevard Medical Center has been able to recruit
physicians, there can be no assurance that it will successfully
continue to do so. If it is unsuccessful, it will then be
necessary for the company to use temporary medical personnel,
which will increase the company's costs for physicians, the
Company believes, by approximately fifty (50%) percent.
FIRST HEALTH, INC.
First Health, which was incorporated in the State of Florida
in April 1994, provides outpatient medical services through its
three outpatient medical offices in Volusia County, Florida. In
1994, First Health purchased certain fixed and intangible assets
of Healthmark, P.A. and Atlantic Medical Associates, P.A., which
were engaged in providing outpatient medical services in Volusia
County.
First Health is a preferred provider for a health maintenance
organization under both medicare and commercial provider
agreements in all three of its outpatient medical centers. The
company contracts with primary care physicians who are either
Board Certified or Board Eligible in their primary care
discipline. The physician is also required to obtain and maintain
local hospital admitting privileges to provide continuity of care
to First Health's patients, both in and out of the hospital. The
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physicians render services in accordance with quality assurance
standards set by the American Medical Association and are
monitored by the company's Quality Improvement Committee.
Although First Health has been able to recruit physicians,
there can be no assurance that it will successfully continue to do
so. If it is unsuccessful, it will then be necessary for the
company to use temporary medical personnel, which will increase
the company's costs for physicians, the Company believes, by
approximately fifty (50%) percent.
NATIONAL HMO (NEW YORK), INC.
On April 30, 1994, Boro Medical, P.C. and Boro Health Care of
Union, P.C. (collectively "Boro Medical"), a medical provider to
which National HMO (New York), Inc. ("National New York") and
National HMO Corp. of Elizabeth, Inc. ("National Elizabeth")
provided non-medical and administrative management services,
terminated its relationship with National New York and National
Elizabeth. In addition, on April 30, 1994, National New York and
National Elizabeth entered into an asset purchase agreement with
Boro Medical. Under the terms of the agreement, as consideration
for the sale by National New York and National Elizabeth of
certain assets, Boro Medical agreed to pay a purchase price of
$750,000, as well as all outstanding management fees due to
National New York through April 30, 1994 in the aggregate amount
of $500,000. Boro Medical delivered at closing five-year and
three-year promissory notes in the aggregate amounts of $750,000
and $500,000, respectively, each at an interest rate of seven
percent. The leases at all of the medical offices subject to the
former relationship were assumed by Boro Medical and National New
York and National Elizabeth were released from any further
obligations under the applicable lease agreements. In addition,
National New York, National Elizabeth and certain of its officers
and Boro Medical and certain of its officers delivered mutual
releases with respect to all prior claims that may have existed
between them relating to their former relationship and further
agreed not to compete with one another in certain operations and
in specific areas relating to their respective businesses.
For the fiscal year ended July 31, 1993, the revenue
associated with Boro Medical represented approximately 21% of the
Registrant's consolidated revenues from continuing operations for
such year. In addition, in July 1994, National New York
terminated its management agreement with the dental practitioner
to which it also provided administrative and management services.
Accordingly, the Registrant has reclassified its financial
statements to show separately the results of the discontinued
operations. See "Notes to Financial Statements - Discontinued
Operations".
INSURANCE
The Registrant maintains professional malpractice liability
coverage on professionals employed in the rendering of health care
services in addition to coverage for the customary risks inherent
in the operation of businesses in general. Health Acquisition
Corp. and New England carry corporate malpractice insurance
policies providing coverage in an amount of up to $1,000,000
per occurrence and up to $6,000,000 in the aggregate.
Both Brevard Medical Center and First Health carry a
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corporate malpractice insurance policy providing coverage in an
amount of $1,000,000 per occurrence and $3,000,000 in the
aggregate. Recent market conditions with respect to liability
insurance have caused wide fluctuations in the cost and
availability of coverage. While the Registrant believes its
insurance policies are adequate in the amount and coverage for its
current operations, there can be no assurance that coverage will
continue to be available in adequate amounts or at a reasonable
cost.
EMPLOYEES
As of October 27, 1995, the Registrant employed approximately
1,600 full and part-time employees of whom 18 were employed in
various management capacities and 3 were employed in marketing
activities.
Health Acquisition Corp., New England, Brevard Medical Center
and First Health recruit health service personnel principally
through referral from existing personnel and through newspaper
advertisements. The Registrant has standardized procedures for
recruiting, interviewing and reference checking prospective health
care personnel. All nurses and physicians must be licensed by the
appropriate licensing authorities. Employees receive instruction
in the procedures and policies of the respective subsidiary
corporations.
The Registrant's ability to attract a staff of highly trained
personnel is a material element of its business. There currently
is intense competition for qualified personnel and there can be no
assurance that the Registrant will be successful in maintaining or
in securing additional qualified personnel. The Registrant has no
union contracts with any of its employees and believes that its
relationship with its employees is satisfactory.
COMPETITION
The home health care field is highly competitive. The
Registrant is competing with numerous other licensed as well as
certified home health care agencies. In addition, the Registrant
competes with companies that, in addition to providing health aid
and skilled nursing services, also, unlike the Registrant, provide
pharmaceutical products and other home care services that generate
additional referrals.
The out-patient medical field is highly competitive as well.
The Registrant faces competition in securing patients and in
recruiting qualified personnel from hospitals, health maintenance
organizations and other medical providers. Many of the
Registrant's competitors are larger and have greater experience
and financial resources which facilitates their ability to secure
patients and recruit personnel.
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CUSTOMERS
One or more customers have each accounted for more than 10%
of the Registrant's revenues. For the fiscal years ended July 31,
1995, 1994 and 1993, VNS Home Care, a non-profit, Medicare
certified home health care agency, accounted for 40%, 39% and 34%,
respectively, and the Department of Social Services accounted for
13%, 17% and 21%, respectively, of the Registrant's consolidated
revenues from continuing operations. The total loss of any of the
foregoing customers would have a material adverse effect on the
Registrant.
GOVERNMENT REGULATIONS
General
The health care industry is highly regulated, and the regu-
latory environment in which the Registrant operates may change
significantly in the future, particularly in light of many
proposed changes of the current administration.
Significant aspects of the Registrant's businesses are sub-
ject to local, state and federal statutes and regulations gov-
erning, among other areas, licensing, fee splitting, reimbursement
under federal and state medical assistance programs, financial
relationships between healthcare providers and potential referral
sources, workplace health and safety and other matters. The
Registrant's businesses may also be affected by changes in ethical
guidelines and operating standards of professional and trade
associations.
Many states require regulatory approval, including certifi-
cates of need, before establishing certain types of health care
facilities, offering certain health care services or making
expenditures in excess of statutory thresholds for health care
equipment, facilities or programs.
The ability of the Registrant to operate profitably will
depend in part upon the Rrite-offs.
See accompanying notes to financial statements.
F-22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL HOME HEALTH CARE CORP.
By:/S/ ROBERT P. HELLER
Robert P. Heller
Vice President of Finance and
Chief Financial Officer
Dated: October 26, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ FREDERICK H. FIALKOW Chairman of the October 26, 1995
Frederick H. Fialkow Board of Directors,
President, Chief
Executive Officer
/S/ ROBERT P. HELLER Vice President of October 26, 1995
Robert P. Heller Finance and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
/S/ STEVEN FIALKOW Secretary and Director October 26, 1995
Steven Fialkow
/S/ IRA GREIFER, M.D. Director October 26, 1995
Ira Greifer, M.D.
/S/ BERNARD LEVINE, M.D. Director October 26, 1995
Bernard Levine, M.D.
/S/ LEON PORDY, M.D. Director October 26, 1995
Leon Pordy, M.D.