<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported):
October 30, 1998
NEW AMERICAN HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 001-14397 62-1750169
- ------------------------------- ---------------- ----------------------
(State or other jurisdiction of (Commission File (Employer
incorporation) Number) Identification Number)
109 Westpark Drive, Suite 440, Brentwood, Tennessee 37027
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(615) 221-5070
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address,
if changed since last report)
<PAGE> 2
Item 7 (Financial Statements and Exhibits) of the Current Report on
Form 8-K filed on November 16, 1998, are amended and restated in their entirety
as follows:
(a) Financial Statements of Business Acquired
(i) Unaudited balance sheet of Lucius O. Crosby Memorial Hospital
as of September 30, 1998, and unaudited statements of
operations and cash flows for the Nine months ended
September 30, 1998 and 1997.
(ii) Audited balance sheets of Lucius O. Crosby Memorial Hospital
as of December 31, 1997 and 1996, and the related audited
statements of operations, changes in net assets and cash flows
for the years then ended.
(b) Pro Forma Condensed Combined Financial Information
(i) Introductory information.
(ii) Unaudited pro forma condensed combined balance sheet of New
American Healthcare Corporation as of September, 1998.
(iii) Unaudited pro forma condensed combined statement of operations
of New American Healthcare Corporation for the year ended
March 31, 1998 and the six months ended September 30,
1998.
(c) Exhibits. The exhibits filed as a part of this Report are listed in the
Index to Exhibits immediately following the signature page.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements 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.
NEW AMERICAN HEALTHCARE CORPORATION
By: /s/ Dana C. McLendon, Jr.
--------------------------------------
Name: Dana C. McLendon, Jr.
Title: Chief Financial Officer
Date: January 14, 1999
3
<PAGE> 4
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Condensed Balance Sheet (Unaudited)
September 30, 1998
Assets
<TABLE>
<S> <C>
Current Assets
Cash and cash equivalents $ 380
Patient accounts receivable, net 5,892
Other receivables 40
Inventories 176
Current portion of prepaid expenses 667
-----------
Total Current Assets 7,155
Assets whose use is limited 250
Property and equipment, net 3,431
Other assets 222
-----------
Total Assets $ 11,058
===========
Liabilities and Net Assets
Current Liabilities
Current maturities of long-term debt $ 446
Accounts payable 1,543
Accrued expenses 692
Estimated third-party payor settlements --
-----------
Total Current Liabilities 2,681
-----------
Long-Term Debt 716
-----------
Net Assets, Unrestricted 7,661
-----------
Total Liabilities and Net Assets $ 11,058
===========
</TABLE>
See accompanying note.
<PAGE> 5
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Condensed Statements of Operations (Unaudited)
Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Unrestricted Revenues, Gains and Other Support
Net patient service revenue $ 15,095 $ 14,480
Other revenue 380 345
----------- -----------
Total Revenues, Gains and Other Support 15,475 14,825
----------- -----------
Expenses
Salaries benefits 6,447 6,073
Purchased services 2,877 2,432
Supplies and other 2,838 3,109
Depreciation and amortization 466 370
Interest expense 78 101
Provision for uncollectible accounts 2,424 2,271
----------- -----------
Total Expenses 15,130 14,356
----------- -----------
Excess of Revenues, Gains and Other Support
Over Expenses 345 469
Other Income
Investment income 20 20
----------- -----------
Increase in Unrestricted Net Assets $ 365 $ 489
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 6
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Change in unrestricted net assets $ 365 $ 489
Adjustments to reconcile change in unrestricted net
assets to net cash provided by operating activities
Depreciation and amortization 466 370
Provision for uncollectible accounts 2,424 2,271
(Increase) decrease in patient accounts receivable (2,775) (2,939)
(Increase) decrease in inventories, other current
assets and other assets (156) 194
Increase (decrease) in accounts payable, and other
accrued expenses (96) 459
Increase (decrease) in estimated third-
party payor settlements 385 (140)
----------- -----------
Net Cash Provided by Operating Activities
and Gains and Losses 613 704
----------- -----------
Cash Flows from Investing Activities
Capital expenditures (119) (201)
----------- -----------
Cash Flows from Financing Activities
Payments on long-term debt (314) (343)
Proceeds from issuance of long-term debt 100 --
----------- -----------
Net Cash Used by Financing Activities (214) (343)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 280 160
Cash and Cash Equivalents, Beginning of Period 100 277
----------- -----------
Cash and Cash Equivalents, End of Period $ 380 $ 437
=========== ===========
Supplemental Information
Noncash investing and financing activities
Capital lease obligations incurred by the
Hospital in connection with the acquisition of
property and equipment $ 120 $ 148
=========== ===========
Cash paid for interest $ 78 $ 121
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 7
Lucius O. Crosby Memorial Hospital
Notes to Financial Statements
Nine Months Ended September 30, 1998 and 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results are not necessarily indicative of results
that may be expected for the full year.
In the opinion of management, the accompanying unaudited interim financial
statements contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position, results of
operation and cash flows of Crosby Memorial Hospital for the interim periods
presented.
For further information, refer to the financial statements and footnotes
thereto as of and for the year ended December 31, 1997 and 1996, included
herein.
<PAGE> 8
CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Independent Auditor's Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Net Assets 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 15
</TABLE>
<PAGE> 9
INDEPENDENT AUDITOR'S REPORT
Board of Trustees
Lucius O. Crosby Memorial Hospital
Picayune, Mississippi
We have audited the accompanying balance sheets of Lucius O. Crosby Memorial
Hospital as of December 31, 1997 and 1996, and the related statements of
operations, changes in net assets, and cash flows for the years then ended.
These financial statements are the responsibility of Lucius O. Crosby Memorial
Hospital's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lucius O. Crosby Memorial
Hospital as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
Manual Firm Signature
HORNE CPA GROUP
Laurel, Mississippi
March 10, 1998
-1-
<PAGE> 10
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Balance Sheets
December 31, 1997 and 1996
Assets
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 99,503 $ 276,650
Patient accounts receivable, net 5,478,030 4,088,103
Other receivables 12,821 1,696
Inventories 206,281 202,524
Current portion of prepaid expenses 232,674 378,661
Estimated third-party payor settlements, net 385,274 --
----------- ----------
Total Current Assets 6,414,583 4,947,634
Assets whose use is limited 250,000 250,000
Patient notes receivable, net 62,534 665,846
Prepaid expenses, less current portion 275,780 211,848
Property and equipment, net 3,658,323 3,578,325
Other assets 221,655 223,737
----------- ----------
Total Assets $10,882,875 $9,877,390
=========== ==========
Liabilities and Net Assets
Current Liabilities
Current maturities of bonds payable $ -- $ 270,000
Current maturities of notes payable 213,678 151,143
Current maturities of capital lease
obligations 232,481 263,818
Accounts payable 1,693,290 1,251,884
Accrued expenses 636,395 469,862
Estimated third-party payor settlements -- 140,000
----------- ----------
Total Current Liabilities 2,775,844 2,546,707
----------- ----------
Long-Term Debt
Notes payable, less current maturities 173,548 280,843
Capitalized lease obligations, less current
maturities 636,555 630,432
----------- ----------
Total Long-Term Debt 810,103 911,275
----------- ----------
Net Assets, Unrestricted 7,296,928 6,419,408
----------- ----------
Total Liabilities and Net Assets $10,882,875 $9,877,390
=========== ==========
</TABLE>
See accompanying notes.
- 2 -
<PAGE> 11
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Statements of Operations
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Unrestricted Revenues, Gains and Other Support
Net patient service revenue $19,299,011 $16,368,351
Other revenue 456,865 425,835
----------- -----------
Total Revenues, Gains and Other Support 19,755,876 16,794,186
----------- -----------
Expenses
Salaries and wages 6,904,997 6,543,700
Employee benefits 1,110,808 937,216
Purchased services 3,170,530 1,756,142
Supplies and other 4,128,133 3,958,027
Depreciation and amortization 540,182 557,105
Interest expense 156,030 127,979
Provision for uncollectible accounts 2,895,204 2,463,857
----------- -----------
Total Expenses 18,905,884 16,344,026
----------- -----------
Excess of Revenues, Gains and Other Support
Over Expenses 849,992 450,160
Other Income
Investment income 27,528 29,845
----------- -----------
Increase in Unrestricted Net Assets $ 877,520 $ 480,005
=========== ===========
</TABLE>
See accompanying notes.
- 3 -
<PAGE> 12
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Statements of Changes in Net Assets
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Unrestricted Net Assets
Net Assets at Beginning of Year $6,419,408 $5,939,403
Increase in Unrestricted Net Assets 877,520 480,005
---------- ----------
Net Assets at End of Year $7,296,928 $6,419,408
========== ==========
</TABLE>
See accompanying notes.
- 4 -
<PAGE> 13
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Statements of Cash Flows
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Change in unrestricted net assets $ 877,520 $ 480,005
Adjustments to reconcile change in unrestricted net
assets to net cash provided by operating activities
Depreciation and amortization 540,182 557,105
Provision for uncollectible accounts 2,895,204 2,463,857
(Increase) decrease in patient accounts and notes
receivable (3,681,819) (3,538,601)
(Increase) decrease in inventories, other current
assets and other assets 69,255 445,470
Increase (decrease) in accounts payable, accrued
salaries and wages, accrued vacation, and other
accrued expenses 607,939 390,780
Increase (decrease) in amounts due to/from third-
party payors (525,274) 236,000
----------- -----------
Net Cash Provided by Operating Activities
and Gains and Losses 783,007 1,034,616
----------- -----------
Cash Flows from Investing Activities
Capital expenditures (429,312) (666,747)
----------- -----------
Cash Flows from Financing Activities
Payment on long-term debt (630,842) (565,537)
Proceeds from issuance of long-term debt 100,000 202,060
----------- -----------
Net Cash Used by Financing Activities (530,842) (363,477)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (177,147) 4,392
Cash and Cash Equivalents, Beginning of Year 276,650 272,258
----------- -----------
Cash and Cash Equivalents, End of Year $ 99,503 $ 276,650
=========== ===========
Supplemental Information
Noncash investing and financing activities
Capital lease obligations incurred by the
Hospital in connection with the acquisition of
property and equipment $ 190,868 $ 410,468
=========== ===========
Cash paid for interest $ 160,991 $ 137,911
=========== ===========
</TABLE>
See accompanying notes.
- 5 -
<PAGE> 14
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 1: NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
- - Organization:
Lucius O. Crosby Memorial Hospital (the Hospital), located in
Picayune, Mississippi, is a not-for-profit acute care hospital. The
Hospital provides health care services to residents of Pearl River
County, Mississippi, and the surrounding area.
- - Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
- - Cash and Cash Equivalents:
Cash and cash equivalents include certain investments in highly
liquid debt instruments with original maturities of three months or
less.
- - Inventories:
Inventories are stated at the lower of cost (first-in,
first-out) or replacement market.
- - Assets Whose Use is Limited:
Assets limited as to use primarily include assets held by
trustees under indenture agreements and designated assets set aside by
the Board of Trustees for future capital improvements, over which the
Board retains control and may at its discretion subsequently use for
other purposes.
- - Property and Equipment:
Property and equipment are recorded at cost, or if donated, at
fair value at the date of receipt. Equipment under capital leases is
stated at the lower of the present value of minimum lease payments at
the beginning of the lease term or fair value at the inception of the
lease.
Depreciation of property, plant and equipment is calculated
using the straight-line method over the estimated useful lives of the
assets. Equipment under capital leases is amortized using the
straight-line method over the lease term or estimated useful life of the
equipment. Such amortization is included in depreciation and
amortization in the financial statements.
- 6 -
<PAGE> 15
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 1: (CONTINUED)
- - Excess of Revenues Over Expenses:
The statements of operations include excess of revenues, gains,
and other support over expenses.
- - Net Patient Service Revenue:
The Hospital has agreements with third-party payors that provide
for payments to the Hospital at amounts different from its established
rates. Payment arrangements include prospectively determined rates per
discharge, reimbursed costs, discounted charges, and per diem payments.
Net patient service revenue is reported at the estimated net realizable
amounts from patients, third-party payors, and others for services
rendered, including estimated retroactive adjustments under
reimbursement agreements with third-party payors. Retroactive
adjustments are accrued on an estimated basis in the period the related
services are rendered and adjusted in future periods as final
settlements are determined.
- - Charity Care:
The Hospital provides care to patients who meet certain criteria
under its charity care policy without charge or at amounts less than its
established rates. Because the Hospital does not pursue collection of
amounts determined to qualify as charity care, they are not reported as
revenue.
- - Income Taxes:
The Hospital is a not-for-profit corporation as described in
Section 501(c)(3) of the Internal Revenue Code and is exempt from
federal and state income taxes on related income pursuant to Section
501(a) of the Code.
NOTE 2: PATIENT ACCOUNTS AND NOTES RECEIVABLE
Patient accounts and notes receivable consists of the following at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
ACCOUNTS NOTES ACCOUNTS NOTES
RECEIVABLE RECEIVABLE RECEIVABLE RECEIVABLE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gross Patient Receivables $10,113,868 $634,718 $6,888,190 $723,352
Less: Allowance for Medicare and
Medicaid adjustments 2,996,972 -- 1,686,000 --
Less: Allowance for doubtful accounts 1,638,866 572,184 1,114,087 57,506
----------- -------- ---------- --------
Net Patient Receivables $ 5,478,030 $ 62,534 $4,088,103 $665,846
=========== ======== ========== ========
</TABLE>
- 7 -
<PAGE> 16
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 2: (CONTINUED)
The allowances for doubtful accounts and contractual adjustments
represent approximately 48 percent of the balance of patient accounts and notes
receivable at December 31, 1997, and in management's opinion, is adequate to
cover any losses sustained on these accounts.
The allowance for Medicare and Medicaid adjustments represents the
estimated adjustments on claims filed for the year ended December 31, 1997 and
1996, for which payments will be received in the following year. These amounts
are the estimated excess credits allowed over the actual cash to be received on
these claims.
NOTE 3: PREPAID EXPENSES
Included in prepaid expenses are amounts advanced to physicians under
various recruiting contracts which are being expensed according to the terms of
the contracts. A summary of prepaid expenses at December 31, 1997 and 1996,
follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Physician Contract Advances $488,640 $569,347
Other Prepaid Expenses 19,814 21,162
-------- --------
508,454 590,509
Less Amounts Representing Current Assets 232,674 378,661
-------- --------
Long-Term Portion of Prepaid Assets $275,780 $211,848
======== ========
</TABLE>
Amounts expensed for prepaid physician recruitment contracts totaled
$447,961 and $493,386 at December 31, 1997 and 1996, respectively.
NOTE 4: ASSETS WHOSE USE IS LIMITED
The composition of assets whose use is limited at December 31, 1997 and
1996, is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Internally Designated for Future
Acquisitions
Certificate of Deposit $250,000 $250,000
======== ========
</TABLE>
- 8 -
<PAGE> 17
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 4: (CONTINUED)
Investment income is comprised of earnings on assets whose use is
limited and cash and cash equivalents for the years ending December 31, 1997 and
1996, and amounted to $27,528 and $29,845, respectively.
NOTE 5: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land $ 154,573 $ 154,573
Land Improvements 117,112 117,112
Buildings 5,168,490 5,042,059
Fixed Equipment 985,496 843,651
Equipment 3,312,554 3,260,524
Equipment Under Capital Leases 1,533,244 1,334,412
----------- -----------
11,271,469 10,752,331
Less accumulated depreciation and
amortization 7,874,952 7,334,770
----------- -----------
3,396,517 3,417,561
Construction in Progress 261,806 160,764
----------- -----------
Total $ 3,658,323 $ 3,578,325
=========== ===========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1997 and 1996, amounted to approximately $540,182 and $557,105. Accumulated
amortization for equipment under capital lease obligations was $625,656 and
$440,496 at December 31, 1997 and 1996, respectively.
NOTE 6: BONDS PAYABLE
A summary of bonds payable at December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
-------------- --------
<S> <C> <C>
9.15 percent to 9.25 percent hospital
mortgage bonds maturing annually in
varying amounts with a final payment
due on December 1, 1997. Principal and
interest are payable semiannually
on June 1 and December 1 $ -- $270,000
Less current maturities -- 270,000
-------------- --------
Long-Term Bonds Payable $ -- $ --
============== ========
</TABLE>
- 9 -
<PAGE> 18
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 6: (CONTINUED)
The total amount representing long-term bonds payable at December 31,
1995, is scheduled to mature during 1997.
NOTE 7: NOTES PAYABLE
A summary of notes payable at December 31, 1997 and 1996, follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Line of credit with bank, 7.15 percent interest, due July 7, 1998, secured by
certificate of deposit classified as an asset whose use is limited $100,000 $ --
Bank note dated December 19, 1991, payable in monthly installments of $5,045,
including interest at 2 percent above the prime rate (effective rates of 7.15
percent and 10.5 percent as of December 31, 1996 and 1995, respectively), due
October 19, 2001, secured by real estate, equipment, and $250,000 certificate of
deposit classified as an asset whose use is limited 202,906 244,858
Bank note dated April 25, 1996, and extended on September 24, 1996, payable in
monthly Installments of $3,152, including interest at a fixed rate of 7.15
percent, due June 25, 1999, secured by real estate, equipment, and $250,000
certificate of deposit classified as an asset whose use is limited 53,037 87,582
Bank note dated April 26, 1996, payable in monthly Installments of $4,599,
including interest at a fixed rate of 7.5 percent, due May 2, 1998, secured by
equipment 17,950 72,879
Note payable to husband and wife, dated November 5, 1996, payable in an annual
installment of $15,467 due November 5, 1997, and a final installment of $14,401
due November 5, 1998, including interest of 8 percent, secured by real estate 13,333 26,667
-------- --------
387,226 431,986
Less current maturities 213,678 151,143
-------- --------
Long-Term Notes Payable $173,548 $280,843
======== ========
</TABLE>
- 10 -
<PAGE> 19
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 7: (CONTINUED)
A summary of note maturities follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
<S> <C>
1998 $ 213,678
1999 69,480
2000 54,961
2001 49,107
----------
Total $ 387,226
==========
</TABLE>
NOTE 8: LEASE OBLIGATIONS
The Hospital has leases on medical and computer equipment which are
classified as capital leases. The equipment is recorded as equipment under
capital lease subject to amortization. Capital lease obligations are secured by
the respective equipment leased.
At December 31, 1997, the present value of future minimum lease payments
due under capital leases was as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
<S> <C>
1998 $ 319,664
1999 199,682
2000 180,133
2001 158,958
Thereafter 215,603
----------
Total Minimum Lease Payments 1,074,040
Less amounts representing interest
rates ranging from 4.3 percent
to 16.5 percent) 205,004
----------
Present Value of Minimum Lease
Payments 869,036
Less amounts maturing within one year 232,481
----------
Amounts Due After One Year $ 636,555
==========
</TABLE>
Total rental expense for operating leases for the years ended December
31, 1997 and 1996, was $149,997 and $147,889, respectively.
- 11 -
<PAGE> 20
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 9: NET PATIENT SERVICE REVENUE
The Hospital has agreements with third-party payors that provide for
payments to the Hospital at amounts different from its established rates. A
summary of the payment arrangements with major third-party payors follows:
- - Medicare:
Inpatient acute care services rendered to Medicare program
beneficiaries are paid at prospectively determined rates per discharge.
These rates vary according to a patient classification system that is
based on clinical, diagnostic, and other factors. Inpatient non-acute
services, certain outpatient services, and defined capital and medical
education costs related to Medicare beneficiaries are paid based on a
cost reimbursement methodology. The Hospital is reimbursed for cost
reimbursable items at a tentative rate with final settlement determined
after submission of annual cost reports by the Hospital and audits
thereof by the Medicare fiscal intermediary. The Hospital's
classification of patients under the Medicare program and the
appropriateness of their admission are subject to an independent review
by a peer review organization under contract with the Hospital.
- - Medicaid:
Inpatient services rendered to Medicaid program beneficiaries
are reimbursed based upon a cost reimbursement methodology. The Hospital
is reimbursed at a prospective rate which is adjusted annually based on
the annual cost reports as submitted by the Hospital and audits by the
Medicaid fiscal intermediary.
- - Blue Cross:
Inpatient services rendered to Blue Cross subscribers are
reimbursed at prospectively determined rates per day of hospitalization.
The prospectively determined per diem rates are not subject to
retroactive adjustment.
- - Managed Care:
The Hospital has also entered into payment agreements with
certain commercial insurance carriers, health maintenance organizations,
and preferred provider organizations. The basis for payment to the
Hospital under these agreements includes prospectively determined rates
per discharge, discounts from established charges, and prospectively
determined daily rates.
- 12 -
<PAGE> 21
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 9: (CONTINUED)
A summary of gross and net patient revenue for the years ended December
31, 1997 and 1996, follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Gross Patient Service Revenue $35,222,639 $27,473,125
Less provisions for:
Contractual adjustments under third-
party reimbursement programs and other
deductions 15,923,628 11,104,774
----------- -----------
Net Patient Service Revenue $19,299,011 $16,368,351
=========== ===========
</TABLE>
NOTE 10: PATIENT SERVICE REVENUE UNDER CONTRACT
A summary of revenue for patient services rendered under contract with
major third party cost reimbursers follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------- -------------------------------
PERCENT OF PERCENT OF
TOTAL NET TOTAL NET
PATIENT PATIENT
AMOUNT REVENUE AMOUNT REVENUE
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Medicare $11,045,557 57.2% $10,315,832 63.0%
Medicaid 1,414,311 7.3 3,323,253 20.3
</TABLE>
NOTE 11: CHARITY CARE
The amount of charges foregone for services and supplies furnished under
the Hospital's charity care policy aggregated approximately $360,000 in 1997 and
1996, respectively.
- 13 -
<PAGE> 22
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 12: MEDICAL BENEFIT PLAN
The Hospital is self-insured for employee health benefits. Employees of
the Hospital who participate in this plan and the Hospital make payments each
payroll period to the Mississippi Hospital Employee Benefit Trust (MHEBT) based
on actuarial estimates of the amount needed to pay prior and current year
claims. The Hospital recorded total medical benefit expense for the years ended
December 31, 1997 and 1996, was $272,550 and $188,094, respectively. Adjustments
representing the write-off of charges applicable to claims incurred for
hospitalization at the Hospital for employees and their dependents for the years
ended December 31, 1997 and 1996, were $199,609 and $171,790, respectively.
NOTE 13: RETIREMENT PLAN
The Crosby Memorial Hospital Tax Sheltered Annuity Plan (the Plan) is a
defined contribution plan established and administered by the Hospital, which
retains the right to amend the Plan. The Plan covers all employees who meet the
established eligibility requirements. The Hospital contributes 2 percent of the
participant's gross salary each year, as stipulated by the plan agreement. The
retirement benefits the participant receives will depend upon the accumulated
value of the employee's account and vesting status upon termination. The
Hospital recorded pension expense of $45,577 and $45,000 for 1997 and 1996,
respectively. The unfunded contribution amounts for each year are included in
accrued expenses.
NOTE 14: CONCENTRATIONS OF CREDIT RISK
The Hospital, which is located in Picayune, Mississippi, grants credit
without collateral to its patients, most of whom are area residents and are
insured under third-party payor agreements. The mix of receivables from patients
and third-party payors for the years ended December 31, 1997 and 1996, was as
follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Self-Pay 35.2% 38.6%
Medicare 48.3 35.7
Medicaid 5.0 14.2
Commercial Insurance 11.5 11.5
------ ------
Total 100.0% 100.0%
====== ======
</TABLE>
At December 31, 1997 and 1996, the Hospital had cash balances on deposit
in a local financial institution. These bank balances exceeded the Federal
Deposit Insurance Corporation insurance limitation by $526,775 and $487,510 at
December 31, 1997 and 1996, respectively.
- 14 -
<PAGE> 23
LUCIUS O. CROSBY MEMORIAL HOSPITAL
Notes to Financial Statements
NOTE 15: FUNCTIONAL EXPENSES
The Hospital's functional expenses are enumerated in the following
table:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Program Services $14,773,447 $12,322,698
Support Services 4,132,437 4,021,328
----------- -----------
Total Expenses $18,905,884 $16,344,026
=========== ===========
</TABLE>
NOTE 16: YEAR 2000 ISSUE
The Hospital is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the Year 2000 Issue,
and is developing an implementation plan to resolve the Issue.
The Issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Hospital is dependent on computer processing in the conduct
of its business activities.
Based on the review of the computer systems, management does not believe
the cost of implementation will be material to the Hospital's financial
statements.
NOTE 17: COMMITMENTS AND CONTINGENCIES
The Hospital is involved in various litigation and potential claims
which management believes, based in part upon discussion with counsel, will not
have an adverse effect on the results of operations or the financial position of
the Hospital.
NOTE 18: SUBSEQUENT EVENTS
The Hospital is in the process of issuing a request for proposal for an
interested party to become a capital partner of the Hospital to enable the
institution to enhance its services to the community.
- 15 -
<PAGE> 24
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The "New American Combined" column set forth in the unaudited pro forma
condensed combined balance sheet of the Company as of September 30, 1998 assumes
that the Lucius O. Crosby Memorial Hospital (Crosby Memorial Hospital) and
Memorial Hospital of Adel acquisitions had occurred on September 30, 1998.
The "New American as Adjusted" column set forth in the unaudited pro forma
condensed combined statement of operations for the six months ended September
30, 1998 assumes that the Puget Sound Hospital Acquisition and the application
of the net proceeds of the Company's initial public offering ("Offering")
received by the Company had occurred on April 1, 1998. The "New American as
Adjusted" column for the year ended March 31, 1998 assumes that the Memorial
Hospital of Center, Delta Medical Center-Memphis, Dolly Vinsant Memorial
Hospital, Davenport Medical Center, Lander Valley Medical Center, Woodland Park
Hospital, Eastmoreland Hospital and Puget Sound Hospital Acquisitions ("Hospital
Acquisitions") and the application of the net proceeds of the Offering received
by the Company had occurred on April 1, 1997. The "New American Combined" column
set forth in the unaudited pro forma condensed combined statement of operations
for the six months ended September 30, 1998 assumes that the Crosby Memorial
Hospital Acquisition, the Memorial Hospital of Adel Acquisition, the Puget Sound
Hospital Acquisition and the application of the net proceeds of the Offering
received by the Company had occurred on April 1, 1998. The "New American
Combined" column for the year ended March 31, 1998 assumes that the Hospital
Acquisitions, the application of the net proceeds of the Offering received by
the Company, the Memorial Hospital of Adel Acquisition and the Crosby Memorial
Hospital Acquisition had occurred on April 1, 1997. Crosby Memorial Hospital and
Memorial Hospital of Adel have December 31 and June 30 fiscal year ends,
respectively. For purposes of the March 31, 1998 pro forma presentation, the
fiscal years of Crosby Memorial Hospital and Memorial Hospital of Adel have been
combined with the Company's fiscal year. For the six months ended September 30,
1998, the same six month periods for each hospital have been combined with the
Company. Therefore, the three months ended March 31, 1998 have been excluded
from pro forma presentation for Crosby Memorial Hospital and the three months
ended June 30, 1998 have been included in both periods presented for Memorial
Hospital of Adel.
The unaudited pro forma condensed combined financial information presented
herein are not necessarily indicative of the Company's combined financial
position or the results of operations that actually would have occurred if the
transactions had been consummated on such dates. In addition, they are not
intended to be a projection of results of operations that may be obtained in the
Company's future. The pro forma results of operations, which do not take into
account certain operational changes instituted by the Company upon acquisition
of its hospitals, are not necessarily indicative of the results that may be
expected from such hospitals. The unaudited pro forma condensed combined
financial information should be read in conjunction with the Company's audited
financial statements, including the notes thereto.
<PAGE> 25
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
----------------------------------------------------------
MEMORIAL NEW
NEW CROSBY HOSPITAL PRO FORMA AMERICAN
AMERICAN MEMORIAL OF ADEL ADJUSTMENTS COMBINED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 1,714 $ 380 $ 1,491 $ (355)(1) $ 2,850
(380)(2)
Patient accounts receivable............................. 28,325 5,892 3,016 (1,918)(1) 35,315
Prepaid expenses and other current assets............... 7,113 883 489 -- 8,485
-------- ------- ------- ------- --------
Total current assets.................................. 37,152 7,155 4,996 (2,653) 46,650
Property and equipment, net............................... 105,153 3,431 3,242 3,097(1) 114,923
Goodwill, net............................................. 21,029 -- -- 19,419(1) 40,448
Other assets, net......................................... 1,413 472 -- 300(1) 1,935
(250)(2)
-------- ------- ------- ------- --------
Total assets.......................................... $164,747 $11,058 $ 8,238 $19,913 $203,956
======== ======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................... $ 16,423 $ 2,235 $ 1,153 $ (134)(2) $ 19,677
Estimated third-party payor settlements................. 6,048 -- -- -- 6,048
Current portion of capital lease obligations............ 284 232 30 -- 546
Current portion of long-term debt....................... -- 214 -- (214)(2) --
-------- ------- ------- ------- --------
Total current liabilities............................. 22,755 2,681 1,183 (348) 26,271
-------- ------- ------- ------- --------
Capital lease obligations, less current portion........... 4,769 632 36 -- 5,437
Long-term debt............................................ 53,550 84 -- (84)(2) 88,575
35,025(1)
Deferred income taxes..................................... 1,339 -- -- -- 1,339
Stockholders' equity:
Non-voting common stock................................. 14 -- -- -- 14
Common stock............................................ 156 -- 30 (30)(1) 156
Additional paid-in capital.............................. 82,088 -- 141 (141)(1) 82,088
Common stock warrants................................... 235 -- -- -- 235
Deferred compensation................................... (561) -- -- -- (561)
Retained earnings....................................... 402 7,661 6,848 (14,509)(1) 402
-------- ------- ------- ------- --------
Total stockholders' equity............................ 82,334 7,661 7,019 (14,680) 82,334
-------- ------- ------- ------- --------
Total liabilities and stockholders' equity............ $164,747 $11,058 $ 8,238 $19,913 $203,956
======== ======= ======= ======= ========
</TABLE>
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
(1) To record the Crosby Memorial Hospital Acquisition for approximately $19,400
and the Memorial Hospital of Adel Acquisition for approximately $16,585
financed by $35,025 of long-term debt and $355 of cash. The total purchase
adjustments were allocated as follows: accounts receivable of ($1,918);
property and equipment of $3,097; goodwill of $19,419; prepaid rent of $300
common stock of $30 additional paid-in capital of $141 and retained earnings
of $14,509.
(2) To exclude certain assets and liabilities that were not acquired or assumed
by New American primarily related to cash of $380; assets whose use is
limited of $250 accrued expenses of $134; current portion of long-term debt
of $214 and long-term debt of $84.
<PAGE> 26
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1998
---------------------------------------------------------------------------------------------------
NEW MEMORIAL NEW
NEW PUGET PRO FORMA AMERICAN CROSBY HOSPITAL PRO FORMA AMERICAN
AMERICAN SOUND(1) ADJUSTMENTS AS ADJUSTED MEMORIAL OF ADEL ADJUSTMENTS COMBINED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net patient service
revenue.................... 71,726 11,520 -- 83,246 10,149 8,265 -- 101,660
Other revenue................ 2,134 315 -- 2,449 233 504 -- 3,186
------ ------ ------ ------ ------ ------ ------ -------
Net operating
revenues............ 73,860 11,835 -- 85,695 10,382 8,769 -- 104,846
------ ------ ------ ------ ------ ------ ------ -------
Expenses:
Salaries and benefits........ 33,146 5,673 -- 38,819 4,478 3,800 -- 47,097
Professional fees............ 9,628 968 -- 10,596 2,096 309 -- 13,001
Supplies..................... 7,939 1,687 -- 9,626 1,246 1,160 -- 12,032
Provision for doubtful
accounts................... 6,098 349 -- 6,447 1,572 1,220 -- 9,239
Other........................ 7,881 2,203 (399)(2) 9,685 478 1,188 (102)(8) 11,244
50(9)
(55)(10)
General and administrative... 1,432 -- -- 1,432 -- -- -- 1,432
Depreciation and
amortization............... 2,634 391 495(3) 3,129 314 307 (621)(11) 3,701
(391)(3) 572 (11)
Interest expense............. 3,098 -- 881(4) 2,556 47 2 1,390(12) 3,979
(1,423)(5) (16)(12)
------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses............ 71,856 11,271 (837) 82,290 10,231 7,986 1,218 101,725
------ ------ ------ ------ ------ ------ ------ -------
Income before
income taxes........ 2,004 564 837 3,405 151 783 (1,218) 3,121
Income taxes................... 802 -- 560(6) 1,362 -- 298 (412)(6) 1,248
------ ------ ------ ------ ------ ------ ------ -------
Net income................... 1,202 564 277 2,043 151 485 (806) 1,873
Cumulative preferred
dividends.................... 710 -- (710)(7) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ -------
Net income available
to common stockholders..... 492 564 987 2,043 151 485 (806) 1,873
====== ====== ====== ====== ====== ====== ====== =======
Pro forma net income per common
share:
Basic........................ $ .14 $ .13
Diluted...................... .11 .10
====== ======
Weighted average shares
outstanding:
Basic........................ 14,350 14,350
Diluted...................... 18,110 18,110
====== ======
</TABLE>
<PAGE> 27
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
(1) To record the historical operations of the Puget Sound Hospital Acquisition
for the period April 1, 1998 through August 31, 1998, the date of
acquisition by the Company.
(2) To eliminate management fees in the amount of $399 that would not have been
incurred had the Puget Sound Hospital Acquisition been consummated on April
1, 1998.
(3) To record depreciation and amortization for the Puget Sound Acquisition in
the amount of $495 as if it had been acquired on April 1, 1998 and
elimination of historical depreciation and amortization in the amount of
$391 recorded prior to the date of acquisition.
(4) To record interest expense for the Puget Sound Acquisition in the amount of
$881 relating to acquisition debt of approximately $24,000 at 8.8% as if
it had been incurred on April 1, 1998.
(5) To record the elimination of interest expense in the amount of $1,423 on
average acquisition debt of approximately $37,950 at a weighted average
interest rate of 9.5% that was paid off with a portion of the net proceeds
of the Offering, as if the Offering had occurred on April 1, 1998.
(6) To record tax expense at the expected combined income tax rate of 40%.
(7) To record the elimination of cumulative preferred dividends in the amount
of $710 on Series A Preferred Stock that were repaid in the Company's
reincorporation in August 1998.
(8) To eliminate management fees in the amount of $102 that would not have been
incurred had Crosby Memorial Hospital been acquired on April 1, 1998.
(9) To record lease expense in the amount of $50 on the Crosby Memorial
Hospital Acquisition as if it had been acquired on April 1, 1998.
(10) To eliminate costs incurred at Crosby Memorial Hospital to consummate the
sale process in the amount of $55.
(11) To record depreciation and amortization for the Crosby Memorial Hospital
and Memorial Hospital of Adel Acquisitions in the amount of $572 as if it
had been acquired on April 1, 1998 and elimination of historical
depreciation and amortization in the amount of $621 recorded prior to the
date of acquisition which had been recorded on a higher cost basis.
(12) To record interest expense for the Crosby Memorial Hospital Acquisition in
the amount of $1,390 relating to acquisition debt of approximately $35,025
at a weighted average interest rate of 7.9% as if it had been incurred on
April 1, 1998 and elimination of historical interest expense in the amount
of $16 recorded prior to the date of acquisition for debt not assumed.
<PAGE> 28
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
----------------------------------------------------------------------------------------------------------
NEW MEMORIAL NEW
NEW ACQUIRED PRO FORMA AMERICAN CROSBY HOSPITAL PRO FORMA AMERICAN
AMERICAN HOSPITALS(1) ADJUSTMENTS AS ADJUSTED MEMORIAL OF ADEL ADJUSTMENTS COMBINED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net patient service
revenue........... $73,725 $94,817 $ -- $168,542 $19,299 $15,189 $ -- $203,030
Other revenue....... 1,924 2,880 -- 4,804 485 892 -- 6,181
------- ------- -------- -------- ------- ------- ------- --------
Net operating
revenues........ 75,649 97,697 -- 173,346 19,784 16,081 -- 209,211
------- ------- -------- -------- ------- ------- ------- --------
Expenses:
Salaries and
benefits.......... 31,276 47,094 -- 78,370 8,016 7,310 -- 93,696
Professional fees... 8,608 11,941 -- 20,549 3,171 583 -- 24,303
Supplies............ 8,314 9,253 -- 17,567 3,053 2,257 -- 22,877
Provision for
doubtful
accounts.......... 7,837 6,968 -- 14,805 2,895 1,463 -- 19,163
Other............... 9,286 15,545 (2,131)(2) 22,700 1,075 2,086 (415)(9) 25,546
100(10)
General and
administrative.... 3,484 -- 905(3) 4,389 -- -- -- 4,389
Depreciation and
amortization...... 2,836 4,614 (4,614)(4) 6,510 540 681 (1,221)(11) 7,653
3,674(4) 1,143(11)
Interest expense.... 2,637 3,011 (2,651)(5) 4,533 156 4 2,781(12) 7,443
5,489(5) (31)(12)
(3,953)(6)
------- ------- -------- -------- ------- ------- ------- --------
74,278 98,426 (3,281) 169,423 18,906 14,384 2,357 205,070
------- ------- -------- -------- ------- ------- ------- --------
Income (loss)
before income
taxes........... 1,371 (729) 3,281 3,923 878 1,697 (2,357) 4,141
Income taxes.......... 579 89 902(7) 1,570 -- 662 (576)(7) 1,656
------- ------- -------- -------- ------- ------- ------- --------
Net income (loss)... 792 (818) 2,379 2,353 878 1,035 (1,781) 2,485
Cumulative preferred
dividends........... 617 -- (617)(8) -- -- -- -- --
------- ------- -------- -------- ------- ------- ------- --------
Net income (loss)
attributable to
common
stockholders...... $ 175 $ (818) $ 2,996 $ 2,353 $ 878 $ 1,035 $(1,781) $ 2,485
======= ======= ======== ======== ======= ======= ======= ========
Pro forma net income
per common share:
Basic............... $ 0.13 $ .14
Diluted............. 0.13 .14
======== ========
Weighted average
shares outstanding:
Basic............... 17,595 17,595
Diluted............. 17,707 17,707
======== ========
</TABLE>
<PAGE> 29
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1998
(IN THOUSANDS)
(1) To record the historical operations of the Hospital Acquisitions for the
period April 1, 1997 through March 31, 1998 or the date of acquisition by
the Company.
(2) To eliminate management fees in the amount of $2,131 that would not have
been incurred had the Hospital Acquisitions been consummated on April 1,
1997.
(3) To record estimated additional administrative salaries in the amount of
$905, representing the total additional incremental costs to manage
acquired and to be acquired hospitals, that would have been incurred had
the Hospital Acquisitions been consummated on April 1, 1997.
(4) To record depreciation and amortization for the Hospital Acquisitions in
the amount of $3,674 as if they had been acquired on April 1, 1997 and
elimination of historical depreciation and amortization in the amount of
$4,614 recorded prior to the date of acquisition which had been recorded on
a higher cost basis.
(5) To record interest expense for the Hospital Acquisitions in the amount of
$5,489 relating to acquisition debt of approximately $86,550 at a weighted
average interest rate of 7.94% (excluding previous interest recognized on
acquisition debt of $2,615) as if it had been incurred on April 1, 1997 and
elimination of historical interest expense in the amount of $2,651 recorded
prior to the date of acquisition for debt not assumed.
(6) To record the elimination of interest expense in the amount of $3,953 on
average acquisition debt of approximately $39,530 at a weighted average
interest rate of 10% that will be paid off with a portion of the net
proceeds of the Offering, as if the Offering had occurred on April 1, 1997.
(7) To record tax expense at the expected combined income tax rate of 40%.
(8) To record the elimination of cumulative preferred dividends in the amount
of $617 on Series A Preferred Stock that was converted into cash.
(9) To eliminate management fees in the amount of $415 that would not have been
incurred had Crosby Memorial Hospital been acquired on April 1, 1997.
(10) To record lease expense on the Crosby Memorial Hospital Acquisition in the
amount of $100 as if it had been acquired on April 1, 1997.
(11) To record depreciation and amortization for the Crosby Memorial Hospital
Acquisition in the amount of $1,143 as if it had been acquired on April 1,
1997 and elimination of historical depreciation and amortization in the
amount of $1,221 recorded prior to the date of acquisition.
(12) To record interest expense for the Crosby Memorial Hospital Acquisition in
the amount of $2,781 relating to acquisition debt of approximately $35,025
at 7.9% as if it had been incurred on April 1, 1997 and elimination of
historical interest expense in the amount of $31 recorded prior to the date
of acquisition for debt not assumed.
<PAGE> 30
Exhibit No. Exhibit Index
- ----------- -------------
2.1 Agreement to Lease and Purchase dated October 29, 1998 among Lucius O.
Crosby Memorial Hospital ("Seller") and NAHC of Mississippi, Inc.
("Buyer") and New American Healthcare Corporation ("Parent")
(incorporated by reference to the Registrant's Current Report on Form
8-K filed November 16, 1998).
23.1 Consent of Horne CPA Group.
<PAGE> 1
Exhibit 23.1
New American Healthcare Corporation
Brentwood, Tennessee
We hereby consent to the use in this Form 8-K of our report, dated March 10,
1998, relating to the financial statements of Lucius O. Crosby Memorial
Hospital.
Manual Firm Signature
HORNE CPA GROUP
Laurel, Mississippi
January 7, 1999
