Item 1. Business
Meridian Healthcare Growth and Income Fund Limited Partnership (the "Fund") was organized under the laws of the State of Delaware on December 8, 1987. The Fund will continue until December 31, 2037, unless sooner terminated under the provisions of the Partnership Agreement. The Fund was formed to acquire 98.99% of the limited partnership interests in seven limited partnerships, each of which owns and operates a single nursing center (the "Facilities").
The Fund's objectives are to (i) preserve Investors' capital; (ii) obtain capital appreciation through increases in the value of the Facilities; and (iii) provide quarterly cash distributions to Investors from income generated by the Facilities' operating income, the income taxation of a portion of which is anticipated to be deferred.
The General Partners of the Fund are Brown Healthcare, Inc., a Maryland corporation (the "Administrative General Partner") and Meridian Healthcare Investments, Inc., a Maryland corporation (the "Development General Partner").
A maximum of 1,540,000 assignee units of limited partnership interests ("Units") were registered under the Securities and Exchange Act of 1933, as amended. During 1988 all 1,540,000 Units were sold, and the Fund's net proceeds available for investment aggregated $31,878,000 (gross proceeds of $38,500,000 less public offering expenses and acquisition fees of $6,622,000). The Assignor Limited Partner also acquired 40 units of limited partnership interests in 1988.
The Fund acquired 98.99% limited partnership interests (the "Operating Partnership Interests") in the operating limited partnerships which own and operate seven nursing center facilities. The Facilities include four nursing centers located in Maryland; two nursing centers located in North Carolina and one facility in New Jersey. Each operating partnership owns the real and personal property of its nursing center facility. (See Note 1, "Organization and Operations", in Item 8, Financial Statements and Supplementary Data, and Item 2.
Item 2. Properties
The Fund owns Operating Partnership Interests in operating partnerships that own four nursing facilities in the State of Maryland, two nursing facilities in the State of North Carolina, and one nursing facility in New Jersey. The Facilities are described below:
Item 2. Properties (continued)
Item 2. Properties (continued)
Item 3.
Item 3. Legal Proceedings
The Fund is a party to litigation arising in the ordinary course of business. The Fund does not believe the results of such litigation, even if the outcome is unfavorable to the Fund, would have a material adverse effect on its consolidated financial position or results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the security holders for a vote during the last quarter of the fiscal year covered by this report.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
An established public trading market for the Units does not exist and the Fund does not anticipate that a public market will develop. Transfer of Units by an investor and purchase of Units by the Fund may be accommodated under certain terms and conditions. The Partnership Agreement imposes certain limitations on the transfer of Units and may restrict, delay or prohibit a transfer primarily if:
o the transfer of Units would result in 50% or more of all Units having been transferred by assignment or otherwise within a 12-month period;
o such a transfer would be a violation of any federal or state securities laws that may cause the Fund to be classified other than as a partnership for federal income tax purposes;
o such transfers would cause the Fund to be treated as a "publicly traded partnership" under Sections 7704 and 469(k) of the Internal Revenue Code; and
o the transfer of Units would cause a technical termination of the Partnership within meaning of Section 708(b)(1)(A) of the Internal Revenue Code.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters (continued)
As of December 31, 2000, there were 1,712 holders of Units of the registrant, owning an aggregate of 1,540,040 Units, including 40 Units held by the Assignor Limited Partner. The Fund made four quarterly distributions totaling approximately $3,306,000 in each of the years in the three-year period ended December 31, 2000. See Note 5, "Distributions to Partners and Allocation of Net Earnings", in Item 8. Financial Statements and Supplementary Data, herein.
Item 6.
Item 6. Selected Financial Data
**Capital costs include depreciation, amortization and interest expense.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
The Fund closed its mortgage loan refinancing with a new bank for loans totaling $24,000,000 on June 12, 2000. The renewal terms became effective on June 12, 2000 and provide for a term of five years at an interest rate of 9.75%. Monthly payments are based on a 25-year amortization schedule with a balloon payment due at the end of the 5-year term. Following the repayment of the original loan and transaction costs, the new loan resulted in refinancing proceeds of approximately $1,225,000 which were designated to fund certain improvements to the nursing facilities.
The Fund also replaced its $4,000,000 line of credit facility with the same lender under terms similar to the mortgage loan terms described above.
The Fund's working capital (excluding the current portion of long-term debt) increased $525,000 to $5,442,000 at December 31, 2000 as compared to $4,917,000 at December 31, 1999. The Fund has sufficient liquid assets and other available credit resources to satisfy its operating expenditures and anticipated routine capital improvements at each of the seven nursing home facilities.
Cash flow from operating activities was $2,640,000 for the year ended December 31, 2000 as compared to $5,193,000 during 1999. The decrease in cash flow was due primarily to increased receivables and estimated third-party payor settlements, net, of $2,873,000 during 2000.
Cash used from investing activities during 2000 was $1,421,000 and included improvements to the Fund's seven operating facilities. Similar improvements of $1,458,000 and $535,000 were made during 1999 and 1998, respectively.
Cash flows from financing activities during 2000 included proceeds from the issuance of the Fund's new long-term debt of $24,000,000, repayment of long term debt of $22,829,000, new loan acquisition costs of $429,000 and distributions to partners and minority interests totaling $3,364,000.
The Fund believes that the short-term liquidity needs will be met through expected cash flow from operations and available working capital from the existing line of credit.
Between 1988 and 1999 the Development General Partner loaned the Fund $597,000 to support operating deficits generated by the Mooresville, Salisbury and Woodlands nursing centers during each centers' first two years of operation. Loans outstanding under this arrangement, including interest at 9% per annum, were $1,188,000 at December 31, 2000.
On February 15, 2001 the Fund made its fourth quarter 2000 distribution to partners of $826,410. This distribution was funded by fourth quarter 2000 operations and reserves of approximately $403,000. During 2000 operations funded approximately 80% of the distributions to partners while the balance was funded by reserves provided by the refinancing of the Fund's long-term debt. Review of the 2001 budget suggests operations from the seven nursing centers will be sufficient to fund a similar distribution in 2001.
The major challenge to the Fund in the foreseeable future is to control operating expenses in light of Medicare's conversion to the Prospective Payment System, to maintain a quality mix of patients and to increase the overall census at each of the facilities.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Results of Operations
December 31, 2000 versus December 31, 1999
Overall 2000 revenues of $55,764,000 increased $4,486,000 or 8.7% from the same period in 1999.
Revenues of $44,514,000 from Medicaid and Medicare patients for the twelve months ended December 31, 2000 increased $3,483,000 or 8.5% from the same period in the prior year. This increase is primarily the result of Medicaid rate increases and an increase in the number of Medicare days. Medicaid revenue increased $1,978,000 primarily due to overall rate increases of approximately 11.1% driven primarily by the four Maryland centers. The Maryland centers received a rate adjustment in October 1999, which was implemented to reflect a modification to the state reimbursement program, and their annual rate adjustment was received in July 2000. Medicare revenue increased $1,505,000 relating to growth in Medicare census. In fiscal year 2000 Medicare census made up 12.8% of the overall census as compared to 11.5% in fiscal year 1999.
Revenues from private and other patients increased $995,000 to $10,960,000 as compared to $9,965,000 in 1999. This increase is a result of higher insurance census and rates and higher private rates. In fiscal year 2000, insurance census made up 3.1% of the overall census as compared to 2.8% in fiscal year 1999. Insurance rates increased 14.8% and private rates increased 6.3% resulting in additional revenue of approximately $395,000 and $386,000, respectively.
Operating expenses increased $4,109,000 or 10.2% from the same period in the prior year. This increase is primarily due to the increased cost of nursing services and ancillary costs. Nursing costs increased $1,937,000 for the twelve months ended December 31, 2000 as compared to the same period in 1999. This increase is primarily due to increases in salary and wages and the increased utilization of temporary nurse staffing. Salary and wage expense for nurses increased $575,000, and temporary nurse staffing expense increased $1,078,000 for the twelve months ended December 31, 2000 compared to the same period in the prior year. The increase in nursing salary and wages and utilization of temporary nurse staffing is a result of an overall shortage of nurses within the healthcare industry. Ancillary expenses increased $1,395,000 or 24.9% for the twelve months ended December 31, 2000 as compared to the same period in 1999. This increase is primarily due to the increase in the Medicare census and the increased utilization of Part B ancillary services. The remaining increase in operating costs is due to increased health insurance costs, and general inflationary cost increases.
Management and administrative fees increased $261,000 or approximately 7.7% in 2000 as compared to 1999. This increase is due to fees paid to the Fund's manager, which are calculated as a percentage of net revenues, and are reflective of the revenues increase in fiscal year 2000 as compared to 1999.
Depreciation and amortization expense increased $203,000 in fiscal year 2000 as compared to fiscal year 1999. This increase is due primarily to the amortization of fees incurred of $134,000 for the extension of the existing mortgage and fees associated with refinancing of the mortgage.
Interest expense increased $478,000 in fiscal year 2000 as compared to fiscal year 1999. This increase is the result of higher variable interest rates during the year coupled with the refinancing which resulted in a larger principal balance $24,000,000 and a higher interest rate. The refinancing became effective June 12, 2000.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Results of Operations (continued)
December 31, 1999 versus December 31, 1998
Overall 1999 revenues of $51,278,000 decreased $2,830,000 or 5.2% from the same period in 1998.
Revenues of $41,031,000 from Medicaid and Medicare patients for the twelve months ended December 31, 1999 decreased $1,610,000 or 3.7% from the same period in the prior year. This decrease is primarily due to the settlement of a Maryland Medicaid reimbursement issue which resulted in the recognition of approximately $2,100,000 in revenue in fiscal year 1998 which related to cost report years 1994 through 1997. The Maryland Medicaid auditors proposed audit adjustments disallowing a portion of the fees paid to the Fund's managers as the state took the position that the manager was a related party. Upon appeal by the Fund the State of Maryland determined that the Fund's manager was not a related party and the fees paid to the manager were reimbursable under the Medicaid program, subject to the applicable cost center ceilings. Partially offsetting the decrease in Medicaid revenue was growth in Medicare revenue of approximately $870,000 relating to growth in Medicare census. In fiscal year 1999 Medicare census made up 11.5% of the overall census as compared to 9% in fiscal year 1998.
Revenue from private and other patients decreased $1,156,000 to $9,965,000 in 1999 as compared to $11,121,000 in 1998. This decrease resulted from lower private and veterans administration census and lower insurance and assisted living rates. The average daily Private census decreased ten patients to 105 in 1999 as compared to 115 in 1998. Additionally, the Veterans Administration (VA) average daily census decreased six patients to two in 1999 as compared to eight in 1998. Revenue from Private and VA sources decreased approximately $725,000 from 1998 to 1999. Overall rates for insurance residents decreased approximately 12% as insurance revenue decreased approximately $200,000 in 1999 as compared to 1998. Assisted living revenue declined approximately $230,000 primarily due to a decrease in the applicable Medicaid rates.
Operating expenses increased $214,000 or less than one percent in fiscal year 1999 as compared to 1998. Salaries wages and benefits increased $960,000 or approximately 3.6% in fiscal year 1999 as compared to the prior year primarily driven by annual cost of living increases. Additionally, overall inflationary increases and higher bad debt charges added additional operating expense of approximately $1,334,000 or 3.3%. Offsetting these increases was a decrease in the cost of ancillary services of $2,080,000 in fiscal 1999 compared to the same period in the prior year. This decrease is primarily due to a decrease in the cost of Physical, Speech, Occupational and Respiratory therapies. In response to Medicare's conversion to the Prospective Payment System contracts with therapy providers were re-negotiated to reduce cost.
Management and administrative fees decreased $154,000 or approximately 4.3% in 1999 as compared to 1998. This decrease is due to fees paid to the Fund's manager, which are calculated based on net revenues, and are reflective of the revenue decrease in fiscal year 1999 as compared to 1998 previously described.
General and administrative costs increased $92,000 in fiscal year 1999 as compared to 1998. This increase is primarily due to an increase in the cost of purchased services in the dietary and administrative departments, an increase in the costs of licenses and certifications and increased professional fees incurred related to the potential sale of the Fund's nursing centers.
Interest expense decreased $125,000 in 1999 as compared to 1998. This decrease is the result of mortgage refinancing at lower interest rates and the effect of principal amortization. The refinancing was completed on February 28, 1998.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Legislative and Regulatory Issues
Congress has enacted three major laws during the past five years that have significantly altered payment for nursing home services. The Balanced Budget Act of 1997 ("the 1997 Act"), signed into law on August 5, 1997, reduced federal spending on the Medicare and Medicaid programs. The Medicare Balanced Budget Refinement Act ("BBRA"), enacted in November 1999 addressed a number of the funding difficulties caused by the 1997 Act. A second enactment, the Benefits Improvement and Protection Act of 2000 ("BIPA"), was enacted on December 15, 2000, further modifying the law and restoring additional funding.
Under the 1997 Act, participating skilled nursing facilities are reimbursed under a prospective payment system ("PPS") for inpatient Medicare covered services. The PPS system commenced with a facility's first cost reporting period beginning on or after July 1, 1998. Under PPS, nursing facilities are paid a predetermined amount per patient, per day ("per diem") based on the anticipated costs of treating patients. The per diem rate is determined by classifying each patient into one of forty-four resource utilization groups ("RUG") using the information gathered during the minimum data set ("MDS") assessment. There is a separate per diem rate for each of the RUG classifications. The per diem rate also covers rehabilitation and non-rehabilitation ancillary services. The law phased in PPS over a three-year period. PPS reimbursement is based largely on a nursing facility's costs for the services it provided to Medicare beneficiaries in the 1994-1995 base year.
As implemented by HCFA, PPS has had an adverse impact on the Medicare revenues of many skilled nursing facilities. There have been three primary problems. First, the base year calculations understate costs. Second, the market basket index used to trend payments forward does not adequately reflect market experience. Third, the RUGs case mix allocation is not adequately predictive of the costs of care for patients, and does not equitably allocate funding, especially for non-therapy ancillary services.
In November 1999, the BBRA was passed in Congress. This enactment provided relief for certain reductions in Medicare reimbursement caused by the 1997 Act. For covered skilled nursing facility services furnished on or after April 1, 2000, the federal per diem rate was increased by 20% for 15 RUG payment categories. While this provision was initially expected to adjust payment rates for only six months, HCFA withdrew proposed RUG refinement rules. These payment add-ons will continue until HCFA completes certain mandated recalculations of current RUG weightings. For fiscal years 2001 and 2002, the BBRA mandated federal per diem rates for all RUG categories be increased by an additional 4% over the required market basket adjustment. The law provided that certain specific services (such as prostheses and chemotherapy drugs) would be reimbursed separately from and in addition to the federal per diem rate. A provision was included that provided that for cost report years beginning on or after January 1, 2000, skilled nursing facilities could waive the PPS transition period and elect to receive 100% of the federal per diem rate. The enactment also lifted for two years the $1,500 cap on rehabilitation therapy services provided under Medicare Part B.
On December 15, 2000 Congress passed BIPA that, among other provisions, increases the nursing component of Federal PPS rates by approximately 16.7% for the period from April 1, 2001 through September 30, 2002. The legislation will also change the 20% add-on to 3 of the 14 rehabilitation RUG categories to a 6.7% add-on to all 14 rehabilitation RUG categories beginning April 1, 2001. The Part B consolidated billing provision of BBRA will be repealed except for Medicare Part B therapy services and, the moratorium on the $1,500 therapy caps will be extended through calendar year 2002. The Fund has not yet evaluated what effect BIPA will have on its operating results.
The 1997 Act included several provisions affecting Medicaid. The 1997 Act repealed the "Boren Amendment" federal payment standard for Medicaid payments to nursing facilities effective October 1, 1997. The Boren Amendment required that Medicaid payments to certain health care providers be reasonable and adequate in order to cover the costs of efficiently and economically operated healthcare facilities. Under the 1997 Act, states must now use a public notice
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Legislative and Regulatory Issues (continued)
and comment period in order to determine rates and provide interested parties a reasonable opportunity to comment on proposed rates and the justification for and the methodology used in calculating such rates. With the repeal of the Federal payment standards, there can be no assurances that budget constraints or other factors will not cause states to reduce Medicaid reimbursement to nursing facilities and pharmacies or that payments to nursing facilities and pharmacies will be made on timely basis. The 1997 Act also grants greater flexibility to states to establish Medicaid managed care projects without the need to obtain a federal waiver. Although these projects generally exempt institutional care, including nursing facilities, no assurances can be given that these projects ultimately will not change the reimbursement methodology for nursing facility services from fee-for-service to managed care negotiated or capitated rates. We anticipate that federal and state governments will continue to review and assess alternative health care delivery systems and payment methodologies.
Congress and state governments continue to focus on efforts to curb spending on health care programs such as Medicare and Medicaid. We cannot at this time predict the extent to which these proposals will be adopted or, if adopted and implemented, what effect, if any, such proposals will have on the Fund. Efforts to impose reduced allowances, greater discounts and more stringent cost controls by government and other payors are expected to continue.
Our business is subject to extensive federal, state and, in some cases, local regulation with respect to, among other things, licensure, certification and health planning. These regulations relate, among other things, to the adequacy of physical plant and equipment, qualifications of personnel, standards of care and operational requirements. Compliance with such regulatory requirements, as interpreted and amended from time to time, can increase operating costs and thereby adversely affect the financial viability of our business. Failure to comply with current or future regulatory requirements could also result in the imposition of various remedies including fines, restrictions on admission, the revocation of licensure, decertification, imposition of temporary management or the closure of the facility.
In July 1998, the Clinton administration issued a new initiative to promote the quality of care in nursing homes. Following this pronouncement, it has become more difficult for nursing facilities to maintain licensing and certification. We have experienced and expect to continue to experience increased costs in connection with maintaining our licenses and certifications as well as increased enforcement actions.
All of our Facilities, to the extent required, are licensed under applicable law and are certified or approved as providers under one or more of the Medicaid and Medicare programs. Licensing, certification and other applicable standards vary from jurisdiction to jurisdiction and are revised periodically. State and local agencies survey all skilled nursing centers on a regular basis to determine whether such centers are in compliance with governmental operating and health standards and conditions for participation in government sponsored third party payor programs. We believe that our Facilities are in substantial compliance with the various Medicare, Medicaid and state regulatory requirements applicable to them. However, in the ordinary course of our business, we receive notices of deficiencies for failure to comply with various regulatory requirements. The Fund reviews such notices and takes appropriate corrective action. In most cases, the Fund and the reviewing agency will agree upon the measures to be taken to bring the center into compliance with regulatory requirements. In some cases or upon repeat violations, the reviewing agency may take various adverse actions against a provider, including but not limited to:
o the imposition of fines;
o suspension of payments for new admissions to the center;
o in extreme circumstances, decertification from participation in the Medicare or Medicaid programs and revocation of a center's license.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Legislative and Regulatory Issues (continued)
These actions may adversely affect a nursing facility's ability to continue to operate, the ability to provide certain services, and / or eligibility to participate in the Medicare or Medicaid programs or to receive payments from other payors. Additionally, actions taken against one center may subject other centers under common control or ownership to adverse remedies.
Outlook
The major challenge to the Fund in the foreseeable future is to control operating expenses in light of Medicare's conversion to the Prospective Payment System, to maintain a quality mix of patients and to increase the overall census at each of the facilities.
On June 22, 2000, Genesis Health Ventures, Inc. (Genesis) and certain of its subsidiaries and affiliates filed petitions for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court in Wilmington, Delaware. Meridian Healthcare Inc. which manages the Fund's nursing centers under the terms of the management agreements, is a wholly-owned subsidiary of Genesis and was named as a debtor affiliate in the bankruptcy filing. Certain other subsidiaries of Genesis which supply the Fund's nursing centers with drugs, medical supplies, and other services were also included in the bankruptcy filing. The Genesis bankruptcy filing has not had an impact on the Fund's operations, results of operations or financial position.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosures About Market Risks
The Fund has exposure to changing interest rates and is currently not engaged in hedging activities. Interest on the Fund's $23.8 million mortgage is at a fixed rate of 9.75%.
Item 8.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements: Page(s) Annual Report
Independent Auditors' Report 3 Consolidated Balance Sheets 4 Consolidated Statements of Earnings 5 Consolidated Statements of Partners' Capital 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8-15
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of Registrant
The General Partners of the Fund are Meridian Healthcare Investments, Inc., the Development General Partner, and Brown Healthcare, Inc., the Administrative General Partner. The Fund's principal executive offices are located at 225 East Redwood Street, Baltimore, Maryland 21202. The General Partners had primary responsibility for the selection and negotiation of terms concerning the acquisition of the Operating Partnership Interests, selecting a manager for the interim investments and the structure of the Offering and the Fund. The General Partners have primary responsibility for overseeing the performance of those who contract with the Fund as well as making decisions with respect to the financing, sale and liquidation of the Fund's or the operating partnerships' assets. The General Partners are responsible for all reports to and communications with investors and others, all distributions and allocations to investors, the administration of the Fund's business and all filings with the Securities and Exchange Commission and other Federal or State regulatory authorities. The Fund's Partnership Agreement provides certain rights for investors, which are incorporated herein by reference.
The Development General Partner
Meridian Healthcare Investments, Inc., the Development General Partner, is a Maryland corporation. On November 30, 1993, Genesis acquired substantially all the assets of Meridian, Inc., Meridian Healthcare (" MHC") and their affiliated entities, including all the stock of the Fund's Development General Partner. As part of the acquisition, MHC, the manager of the Fund's seven nursing centers, continues to operate the facilities pursuant to management agreements. Genesis operates primarily in five regional markets in which over 11,400,000 people over the age of 65 reside. The networks include 317 eldercare centers with approximately 39,400 beds; approximately 112 physicians, physician assistants and nurse practitioners; 23 medical supply distribution centers serving over 1,000 eldercare centers with over 80,000 beds; an integrated NeighborCareSM pharmacy operation with over $1,050,000,000 in annualized revenues, including 61 long-term care pharmacies serving approximately 253,000 institutional beds; 32 community-based pharmacies; infusion therapy services; and certified rehabilitation agencies providing services through over 600 contracts. The Company also provides diagnostic and hospitality services in selected markets and operates a group purchasing organization. Genesis has concentrated its eldercare networks in five geographic regions in order to achieve operating efficiencies, economies of scale and significant market share. The five geographic markets that Genesis principally serves are: New England Region (Massachusetts/Connecticut/New Hampshire/Vermont/Rhode Island); Midatlantic Region (Greater Philadelphia/Delaware Valley/New Jersey); Chesapeake Region (Southern Delaware/Eastern Shore of Maryland/Baltimore, Maryland/Washington D.C./Virginia); Southern Region (Central Florida);and Allegheny Region (West Virginia/Western Pennsylvania/Illinois/Wisconsin). The Company believes that it is the largest operator of eldercare center beds in the states of New Hampshire, Massachusetts, New Jersey, Pennsylvania, Maryland and West Virginia.
The following individuals are the directors and principal officers of Meridian Healthcare Investments, Inc.:
Michael R. Walker, age 52, is President and a Director of the Development General Partner and is a co-founder of Genesis and has served as Chairman and Chief Executive Officer of Genesis since its inception in 1985. In 1998, Mr. Walker became the Chairman of the Board of Trustees of ElderTrustsm, a healthcare related real estate investment trust. In 1981, Mr. Walker co-founded Health Group Care Centers ("HGCC"). At HGCC, he served as Chief Financial Officer and, later, as President and Chief Operating Officer. Prior to its sale in 1985, HGCC operated nursing homes with 4,500 nursing beds in 12 states. From 1978 to 1981, Mr. Walker was the Vice President and Treasurer of AID Healthcare Centers, Inc. ("AID"). AID, which owned and operated 20 nursing centers, was co-founded in 1977 by Mr. Walker as the nursing home division of Hospital Affiliates International ("HAI"). Mr. Walker holds a Master of Business Administration degree from Temple University and a Bachelor of Arts in Business Administration from Franklin and Marshall College. Mr. Walker serves on the Board of Directors of Renal Treatment Centers, Inc. and the Board of Trustees of Universal Health Realty and Income Trust.
Item 10. Directors and Executive Officers of Registrant (continued)
The Development General Partner (continued)
Richard R. Howard, age 52, is a Director of the Development General Partner and has served as a Director of Genesis since its inception in 1985, as President from June 1986 to November 1998 and as Vice Chairman since November 1998. From June, 1986 through March, 1998, Mr. Howard served as President and Chief Operating Officer of Genesis. He joined Genesis in September, 1985 as Vice President of Development. Mr. Howard's background in healthcare includes two years as the Chief Financial Officer of HGCC. Mr. Howard's experience also includes over ten years with Fidelity Bank, Philadelphia, Pennsylvania and one year with Equibank, Pittsburgh, Pennsylvania. Mr. Howard is a graduate of the Wharton School, University of Pennsylvania, where he received a Bachelor of Science degree in Economics in 1971.
George V. Hager, Jr., age 45, is Vice President and Treasurer of the Development General Partner and is Executive Vice President and Chief Financial Officer of Genesis. Mr. Hager was previously partner in charge of the health- care practice for KPMG LLP in the Philadelphia office. Mr. Hager began his career at KPMG LLP in 1979 and has over eighteen years of experience in the healthcare industry. Mr. Hager received a Bachelor of Arts degree in Economics from Dickinson College in 1978 and a Master of Business Administration degree from Rutgers Graduate School of Management. He is a certified public accountant and a member of the AICPA and PICPA. Administrative General Partner
Brown Healthcare, Inc., the Administrative General Partner, is a Maryland corporation, and is wholly-owned by Alex. Brown Realty, Inc. The Administrative General Partner is responsible for administering the business of the Fund, including providing clerical services, communications, services and reports to investors, and making all reports and filings to securities regulatory authorities.
The following individuals are the directors and principal officers of the Administrative General Partner:
John M. Prugh, age 52, has been a Director and President of the Administrative General Partner since 1988, and of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1984. Mr. Prugh graduated from Gettysburg College in 1970, and was designated a Certified Property Manager by the Institute of Real Estate Management in 1979. He has worked in property management for H. G. Smithy Co., in Washington, D.C., and Dreyfus Bros., Inc. in Bethesda, Maryland. Since 1977, Mr. Prugh has been involved in managing, administering, developing and selling real estate investment projects sponsored by Alex. Brown Realty, Inc. and its subsidiaries.
Peter E. Bancroft, age 48, has been a Director and Vice President of the Administrative General Partner since 1988 and a Senior Vice President of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1983. Mr. Bancroft graduated from Amherst College in 1974, attended the University of Edinburgh, and received a J.D. degree from the University of Virginia School of Law in 1979. Prior to joining Alex. Brown Realty, Inc. in 1983, Mr. Bancroft held legal positions with Venable, Baetjer and Howard and T. Rowe Price Associates, Inc.
Terry F. Hall, age 54, has been the Secretary of the Administrative General Partner and a Vice President and Secretary of, and Legal Counsel for, Alex. Brown Realty, Inc. since 1989. Mr. Hall graduated from the University of Nebraska-Lincoln in 1968, and received a J.D. degree from the University of Pennsylvania Law School in 1973. Prior to joining Alex. Brown Realty, Inc. in 1986, Mr. Hall was a Partner at the law firm of Venable, Baetjer and Howard from 1981 to 1986 and an associate at the same firm from 1973 to 1981.
Item 10. Directors and Executive Officers of Registrant (continued)
The Administrative General Partner (continued)
Timothy M. Gisriel, age 44, has been the Treasurer of the Administrative General Partner and of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1990. He was Controller of Alex. Brown Realty, Inc. and Armata Financial Corp. from 1984 through 1990. Mr. Gisriel graduated from Loyola College in 1978 and received his Masters of Business Administration degree from the Robert G. Merrick School of Business, University of Baltimore in 1993. Prior to joining Alex. Brown Realty, Inc. in 1984, Mr. Gisriel was an audit supervisor in the Baltimore office of Coopers & Lybrand. He is a Maryland Certified Public Accountant.
There is no family relationship among the officers and directors of the General Partner.
Item 11.
Item 11. Executive Compensation
The officers and directors of the Administrative General Partner and Development General Partner received no compensation from the Fund.
The General Partners are entitled to receive a share of cash distributions and a share of profits and losses as described in the Agreement of Limited Partnership. (See Note 5, "Distributions to Partners and Allocation of Net Income" in Item 8. Financial Statements, herein.)
For a discussion of compensation and fees to which the General Partners are entitled, see Item 13. Certain Relationships and Related Transactions, herein.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person is known to the Fund to own beneficially more than 5% of the outstanding Units of the Fund.
The General Partners each have a .5% interest in the Fund as General Partners, but do not hold any Units.
The Assignor Limited Partner, Brown Healthcare Holding Co., Inc., an affiliate of the Administrative General Partner, owns for its benefit 40 Units. The Units held by the Assignor Limited Partner have all rights attributable to such Units under the Limited Partnership Agreement except that these Units are non-voting.
Item 13.
Item 13. Certain Relationships and Related Transactions
The General Partners and their affiliates have and are permitted to engage in transactions with the Fund. For a summarization of fees paid during 2000, 1999, and 1998, and to be paid to the General Partners and their affiliates at December 31, 2000, see Note 3, "Related Party Transactions" in Item 8. Financial Statements, herein.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements: see Index to Financial Statements and Supplementary Data in Item 8 on Page 13.
2. Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2000, 1999 and 1998. All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits:
(3, 4) Limited Partnership Agreement on pages 1 through 41 of Exhibit A to the Fund's Prospectus, and the Fund's Registration Statement on Form S-1 (File No. 33-19277) included herein by reference.
(13) Annual Report for 2000.
(b) Reports on Form 8-K: None.
INDEPENDENT AUDITORS REPORT
To the Partners of Meridian Healthcare Growth and Income Fund Limited Partnership
Under date of February 16, 2001, we reported on the consolidated balance sheets of Meridian Healthcare Growth and Income Fund Limited Partnership (the Fund) as of December 31, 2000 and 1999, and the related consolidated statements of earnings, partners' capital and cash flows for each of the years in the three-year period ended December 31, 2000, as contained in the annual report on Form 10K for the year 2000. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule in the Form 10K. This consolidated financial statement schedule is the responsibility of the Fund's management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audits. In our opinion, such schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Philadelphia, Pennsylvania February 16, 2001
Meridian Healthcare Growth and Income Fund Limited Partnership Valuation and Qualifying Accounts Years Ended December 31, 2000, 1999 and 1998 (Dollars in Thousands)
Schedule II
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
DATE: 3/15/01 By: /s/ John M. Prugh John M. Prugh President and Director Brown-Healthcare, Inc. Administrative General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, this report has been signed by the following in the capacities and on the dates indicated.
DATE: 3/15/01 By: /s/ John M. Prugh John M. Prugh President and Director Brown-Healthcare, Inc. Administrative General Partner
DATE: 3/23/01 By: /s/ Peter E. Bancroft Peter E. Bancroft Vice President and Director Brown-Healthcare, Inc. Administrative General Partner
DATE: 3/15/01 By: /s/ Terry F. Hall Terry F. Hall Secretary Brown-Healthcare, Inc. Administrative General Partner
DATE: 3/15/01 By: /s/ Timothy M. Gisriel Timothy M. Gisriel Treasurer Brown-Healthcare, Inc. Administrative General Partner
MERIDIAN HEALTHCARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
SIGNATURES (continued)
DATE: 3/26/00 By: /s/ Michael R. Walker Michael R. Walker President and Director Meridian Healthcare Investments, Inc. Development General Partner
DATE: 3/26/00 By: /s/ Richard R. Howard Richard R. Howard Director Meridian Healthcare Investments, Inc. Development General Partner
DATE: 3/26/00 By: /s/ George V. Hager, Jr. George V. Hager, Jr. Vice President and Treasurer Meridian Healthcare Investments, Inc. Development General Partner