What changed in this filing

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Item 1A. Risk Factors

2023-02-22 compared with 2022-02-15 · 67 added, 68 removed, 363 unchanged (27% of the section changed)

9 unchanged sentences

We cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on our business, results of operations, cash flow, liquidity, and stock price, and such impacts may be material and persist for some time.

Further, our response efforts may continue to delay or negatively impact our strategic initiatives, including plans for future growth.

Further, our response efforts may delay or negatively impact our strategic initiatives, including plans for future growth.

Due to the average age and prevalence of chronic medical conditions among our residents, they generally are at disproportionately higher risk of becoming severely ill from COVID-19.

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We may also restrict visitors at our communities, screen associates and permitted visitors, suspend group outings or programming, and modify communal dining as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction.

At the onset of the pandemic, substantial restrictions at our communities were in place across our portfolio.

We began easing restrictions on a community-by-community basis in July 2020 where regulatory requirements and guidance allowed.

As of December 31, 2020, 89% of our communities were open for new resident move-ins.

During 2021, various communities experienced restrictions on new resident move-ins, with a peak of such restrictions occurring in September 2021.

As of January 31, 2022, substantially all of our communities were open for new resident move-ins.

We may revert to more restrictive measures at our communities, including restrictions on visitors and move-ins, if the pandemic worsens, as a result of infections at a community, as necessary to comply with regulatory requirements, or at the direction of authorities having jurisdiction.

We may revert to more restrictive measures at our communities, including restrictions on visitors and move-ins as a result of infections at a community, as necessary to comply with regulatory requirements, or at the direction of authorities having jurisdiction.

We believe potential residents and their families have been more cautious, or temporarily delayed their decision, regarding moving into senior living communities during the pandemic, and such caution may persist for some time.

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We continue to execute on key initiatives to rebuild occupancy lost due to the pandemic.

In 2021, we achieved ten consecutive months of weighted average consolidated senior housing occupancy growth on a sequential b asis.

During the latter half of 2021, we believe the nationwide spread of the Delta variant caused some moderation in our sequential monthly occupancy growth rate as some potential residents and their families were more cautious, or temporarily delayed their decision regarding moving into senior living communities in certain areas as the Delta variant spread.

By December 31, 2022, we had recovered 760 basis points of weighted average consolidated senior housing occupancy.

We cannot predict with reasonable certainty when our occupancy will return to pre-COVID-19 pandemic levels or the extent to which the pandemic’s effect on occupancy may adversely affect the amount of resident fees we are able to collect from our residents.

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In addition, expanded use of telemedicine and home healthcare by seniors, for which regulatory barriers have been relaxed during the pandemic, may result in less demand for our services.

In the aggregate, for the years ended December 31, 2021 and 2020, and compared to our pre-pandemic expectations for 2020, we estimate the pandemic has resulted in $660.1 million of lost resident fee revenue, including $556.5 million in our consolidated senior housing portfolio.

In the aggregate, for the years ended December 31, 2021 and 2020, we have incurred $173.2 million of facility operating expense for incremental direct costs to respond to the pandemic, including $47.7 million for the year ended December 31, 2021.

In the aggregate, for the three years ended December 31, 2022, we estimate the pandemic resulted in $1.0 billion of lost resident fee revenue in our consolidated senior housing portfolio and former Health Care Services segment compared to our pre-pandemic expectations, including an estimated $0.4 billion of lost resident fee revenue for the year ended December 31, 2022.

In the aggregate, for the three years ended December 31, 2022, we have incurred $190.6 million of facility operating expense for incremental direct costs to respond to the pandemic, including $17.4 million for the year ended December 31, 2022.

The direct costs include those for:

acquisition of additional personal protective equipment ("PPE"), medical equipment, and cleaning and disposable food service supplies;

acquisition of additional personal protective equipment, medical equipment, and cleaning and disposable food service supplies;

enhanced cleaning and environmental sanitation;

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We are not able to reasonably predict the total amount of costs we will incur related to the pandemic, and such costs may continue to be substantial.

We have taken, and may take in future periods, significant impairment charges related to COVID-19 due to lower

than expected operating performance at communities.

For the years ended December 31, 2021 and 2020, we recorded $23.0 million and $105.6 million, respectively, of non-cash impairment charges in our operating results for our operating lease right-of-use assets and property, plant and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at certain communities.

We have taken, and may take in future periods, significant impairment charges related to COVID-19 due to lower than expected operating performance at communities.

We continue to seek opportunities to preserve and enhance our liquidity, including through increasing our RevPAR, maintaining expense discipline, continuing to evaluate our financing structure and the state of debt markets, monetizing non-strategic or underperforming owned assets, and seeking further government-sponsored financial relief related to the COVID-19 pandemic.

There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at all, or that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief.

Grants received from the Provider Relief Fund are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for, and respond to COVID-19 and will reimburse only for healthcare related expenses or lost revenues that are attributable to COVID-19 and have not been reimbursed from other sources or that other sources are not obligated to reimburse.

We cannot provide assurance that additional restrictions on the permissible uses or terms and conditions of the grants will not be imposed by HHS.

The program requires us to report to HHS on our use of the grants, and our reporting is subject to audit.

Additionally, there can be no assurance that we will qualify for, or receive, future grants in the amounts we expect or at all or the timing of any such grants.

There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at

all, or that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief.

The pandemic has also caused substantial volatility in the market prices and trading volumes in the equity markets, including our stock.

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government financial and regulatory relief efforts that may become available to business and individuals, including our ability to qualify for and satisfy the terms and conditions of financial relief;

restrictions on visitors and move-ins at our communities as a result of infections at a community or as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction;

perceptions regarding the safety of senior living communities during and after the pandemic;

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the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses;

potentially greater use of contract labor and overtime due to COVID-19 and general labor market conditions;

greater use of contract labor and other premium labor due to COVID-19 and general labor market conditions;

the impact of COVID-19 on our ability to complete financings and refinancings of various assets or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in our debt and lease documents;

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Business, Operations, and Strategy

Due to the dependency of our revenues on private pay sources, events which adversely affect the ability of seniors to afford our resident fees (including downturns in the economy, housing market, consumer confidence, or the equity markets and unemployment among resident family members) could cause our occupancy, revenues, results of operations, and cash flow to decline.

Due to the dependency of our revenues on private pay sources, events which adversely affect the ability of seniors to afford our resident fees (including downturns in the economy, housing market, consumer confidence, or the equity markets, increased inflation, and unemployment among resident family members) could cause our occupancy, revenues, results of operations, and cash flow to decline.

Costs to seniors associated with independent living, assisted living, and memory care communities are not generally reimbursable under government reimbursement programs such as Medicare and Medicaid.

For the year ended December 31, 2021, we generated 93.2% of our consolidated senior housing segments’ resident fee revenue from private pay customers.

For the year ended December 31, 2022, we generated 93.5% of our consolidated resident fee revenue from private pay customers.

Only seniors with income or assets meeting or exceeding the comparable median in the regions where our communities are located typically can afford to pay our monthly resident fees.

Economic downturns, softness in the housing market, higher levels of unemployment among resident family members, lower levels of consumer confidence, stock market volatility, and changes in demographics could adversely affect the ability of seniors to afford our resident fees.

Economic downturns, increased inflation, softness in the housing market, higher levels of unemployment among resident family members, lower levels of consumer confidence, stock market volatility, and changes in demographics could adversely affect the ability of seniors to afford our resident fees.

If we are unable to retain and attract seniors with sufficient income, assets, or other resources required to pay the fees associated with independent and assisted living services and other service offerings, our occupancy, revenues, results of operations, and cash flow could decline.

We have recently made the annual rate adjustment effective January 1, 2023 for our in-place private pay residents.

The increase was higher than our typical annual rate adjustment in order to help offset our recent increased costs as a result of labor pressures, high inflation, and increased interest rates.

Due to the competitive environment for new residents in our recovering industry, the higher rate adjustment could slow our occupancy recovery progress or result in a decrease in occupancy in our communities.

Any use of promotional or other discounting would offset a portion of such rate adjustments in our RevPAR and RevPOR results.

In addition, the rate adjustment may not be sufficient to offset our increased costs.

The higher rate increase we implemented in January 2023 (and any rate increases that we implement in future years) could also result in a higher amount of attrition among our residents, which could negatively impact our occupancy, revenues, results of operations and cash flows.

Changes in the reimbursement rates, methods, or timing of payment from government reimbursement programs could adversely affect our revenues, results of operations, and cash flow.

We rely on reimbursement from government programs for a portion of our revenues, primarily in our CCRCs segment.

For the year ended December 31, 2021, Medicare and Medicaid reimbursements represented 18.8% of our CCRCs segment’s resident fee revenue and 5.4% of our consolidated senior housing segments’ resident fee revenue.

For the year ended December 31, 2022, Medicare and Medicaid reimbursements represented 18.0% of our CCRCs segment’s resident fee revenue and 5.1% of our consolidated resident fee revenue.

We cannot provide assurance that reimbursement levels will not decrease in the future, which could adversely affect our revenues, results of operations, and cash flow.

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In general, regulatory and other barriers to competitive entry in the independent living, assisted living, and memory care sectors of the senior living industry are not substantial.

The industry has attracted additional investment resulting in increased construction and development of new senior housing supply.

The industry has attracted additional investment resulting in increased construction and development of new senior housing supply over the last several years.

In addition, the COVID-19 pandemic has resulted in additional occupancy pressure for our industry, and industry data shows that nearly all markets had fallen to record low occupancy by the first quarter of 2021.

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As a result of this concentration, the conditions of local economies and real estate markets, changes in governmental regulations, acts of nature, and other factors that may result in a decrease in demand for senior living services in these areas could have an adverse effect on our financial condition, revenues, results of operations, and cash flow.

Given the location of our communities, we are particularly susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as hurricanes, wildfires, earthquakes, or tornados.

Any significant loss due to a natural disaster may not be covered by insurance and may lead to an increase in the cost of insurance or unavailability on acceptable terms.

Given the location of our communities, we are particularly susceptible to revenue loss, cost increase, or damage caused by severe weather conditions including winter storms or natural disasters such as hurricanes, wildfires, earthquakes, or tornados.

Any significant loss due to such an event may not be covered by insurance and may lead to an increase in the cost of insurance or unavailability on acceptable terms.

Climate change may also have effects on our business by increasing the cost of property insurance or making coverage unavailable on acceptable terms.

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If multiple residents terminate their resident agreements at or around the same time, including as a result of the COVID-19 pandemic, our occupancy, revenues, results of operations, and cash flow could be adversely affected.

In addition, because of the demographics of our typical residents, including age and health, resident turnover rates in our communities are difficult to predict.

In addition, because of the demographics of our typical residents, including age and

health, resident turnover rates in our communities are difficult to predict.

As a result, the living spaces we lease may be unoccupied for a period of time, which could adversely affect our occupancy, revenues, results of operations, and cash flow.

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Such projects may be needed to ensure that our communities are in appropriate physical condition to support our strategy and to protect the value of our community portfolio.

In addition, our planned full-year 2022 development capital expenditure projects include those for expansion, repositioning, redeveloping, and major renovation of selected existing senior living communities.

Our capital projects are in various stages of planning and development and are subject to a number of factors over which we may have little or no control.

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failure of third-party contractors and subcontractors to perform under their contracts;

shortages of labor or materials that could delay projects or make them more expensive;

shortages of labor or materials that could delay projects or make them more expensive (including due to supply chain disruptions);

adverse weather conditions that could delay completion of projects;

increased costs resulting from general economic conditions or increases in the cost of materials;

increased costs resulting from general economic conditions or increases in the cost of materials or labor

(including as a result of inflation and general labor market conditions);

and increased costs as a result of changes in laws and regulations.

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Pending disposition transactions are, and any future disposition transactions will be, subject to various closing conditions, including the receipt of regulatory approvals where applicable, likely will result in reductions to our revenue, and may negatively impact our results of operations and cash flow.

During 2022, we expect to close on the disposition of two owned unencumbered communities classified as held for sale as of December 31, 2021 and the termination of our lease obligations on two communities for which we have provided notice of non-renewal.

In the near term, we expect to close on the disposition of one owned community planned for sale.

Over the longer term, we may dispose of owned or leased communities through asset sales and lease terminations and expirations.

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We may be required to pay significant amounts to restructure or terminate leases and we may be required to take charges in connection with such activity, which could adversely affect our financial condition and results of operations.

Completion of the dispositions of communities through sales or lease terminations, or the termination of our management arrangements, including pending transactions and those we enter into in the future, likely will result in reductions to our revenue and may negatively impact our results of operations and cash flow.

Completion of the dispositions of communities through sales or lease terminations, or the termination of our management arrangements, including pending transactions and those we enter into in the future, would result in reductions to our revenue and may negatively impact our results of operations and cash flow.

Further, if we are unable to reduce our general and administrative expense with respect to completed dispositions or management arrangement terminations in accordance with our expectations, we may not realize the expected benefits of such transactions, which could negatively impact our anticipated results of operations and cash flow.

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Disruptions in the financial markets or decreases in the appraised values or performances of our communities could affect our ability to obtain financing or to extend or refinance debt as it matures, which could negatively impact our liquidity, financial condition, and the market price of our common stock.

As of December 31, 2021, we had outstanding $3.8 billion principal amount of mortgage financing, $230.0 million of 2.00% convertible senior notes due 2026, and $86.2 million letters of credit.

As of December 31, 2022, we had outstanding $3.6 billion principal amount of mortgage financing, $230.0 million of 2.00% convertible senior notes due 2026, $25.6 million principal amount of the senior amortizing notes component of tangible equity units, and $86.5 million letters of credit.

If we are unable to extend or refinance our indebtedness prior to scheduled maturity dates, our liquidity and financial condition could be adversely impacted.

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In addition, our inability to satisfy underwriting criteria for individual communities may limit our access to our historical lending sources for such communities, including Fannie Mae and Freddie Mac.

Due to lower operating performance of our communities, generally, resulting from the COVID-19 pandemic, during 2021 we sought and obtained non-agency mortgage financings to partially refinance maturing Freddie Mac and Fannie Mae indebtedness.

Until our communities’ performance recovers, we plan to refinance maturities using non-agency financing, and we expect our loan proceeds from such financing generally will be insufficient to fully cover maturing mortgage indebtedness.

Due to lower operating performance for certain of our communities resulting from the COVID-19 pandemic, during 2021 and 2022 we sought and obtained non-agency mortgage financings to partially refinance maturing Freddie Mac and Fannie Mae indebtedness.

We cannot provide assurance that such non-agency mortgage financing will continue to be available as an alternative to Fannie Mae and Freddie Mac financing.

We have pre-paid substantially all of our 2022 maturities.

We have completed the refinancing of all of our debt maturities due in 2023, except for $29.7 million of mortgage debt secured by an asset planned for sale.

Our inability to obtain refinancing proceeds sufficient to cover 2024 and later maturing indebtedness could adversely impact our liquidity, and may cause us to seek additional alternative sources of financing, which may be less attractive or unavailable.

There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

In addition, the closing of the planned sale transaction is subject to the satisfaction of various closing conditions, including the receipt of regulatory approvals.

There can be no assurance that the transaction will close or, if it does, when the actual closing will occur.

Disruptions or prolonged downturns in the financial markets may cause us to seek alternative sources of potentially less attractive financing and may require us to further adjust our business plan accordingly.

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Disruptions in the financial markets could have an adverse effect on our business.

If we are not able to obtain additional financing on favorable terms, we also may have to forgo, delay, or abandon some or all of our planned capital expenditures or any development, investment, or acquisition opportunities that we identify, which could adversely affect our revenues, results of operations, and cash flow.

If we are not able to obtain additional financing on favorable terms, we also may have to forgo, delay, or abandon some or all of our planned capital expenditures, any potential lease restructuring opportunities

that we identify, or investments to support our strategy, which could adversely affect our revenues, results of operations, and cash flow.

If we are unable to generate sufficient cash flow to cover required interest, principal, and lease payments, this could result in defaults of the related debt or leases and cross-defaults under our other debt or lease documents, which would adversely affect our capital structure, financial condition, results of operations, and cash flow.

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Certain of our debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis.

Net worth is generally calculated as stockholders' equity, as calculated in accordance with accounting principles generally accepted in the United States, or GAAP, and in certain circumstances, reduced by intangible assets or liabilities or increased by deferred gains from sale-leaseback transactions and deferred entrance fee revenue.

Net worth is generally calculated as stockholders' equity, as calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), and in certain circumstances, reduced by intangible assets or liabilities or increased by deferred gains from sale-leaseback transactions and deferred entrance fee revenue.

The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment.

covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date and a requirement contained in certain of our lease documents for us to maintain stockholders' equity of at least $400.0 million at each quarter-end determination date.

As of December 31, 2022, our liquidity and our stockholders' equity were $452.6 million and $582.6 million, respectively.

In addition, our debt and lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

Our failure to comply with applicable covenants could constitute an event of default under the applicable debt or lease documents.

Many of our debt and lease documents

contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors).

Many of our debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors).

These restrictions and covenants may interfere with our ability to obtain financing or to engage in other business activities, which may inhibit our ability to pursue our strategy.

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Our leases generally provide for renewal or extension options and, in certain cases, purchase options.

We expect to renew, extend, or exercise purchase options with respect to our leases in the normal course of business;

We expect to renew, extend, or exercise purchase options with respect to certain leases in the normal course of business;

however, there can be no assurance that these rights will be exercised in the future or that we will be able to satisfy the conditions precedent to exercising any such rights.

The terms of any such purchase options that are based on fair market value are inherently uncertain and could be unacceptable or unfavorable to us depending on the circumstances at the time of exercise.

The terms of any such purchase options that are based on fair market value are inherently uncertain and could

be unacceptable or unfavorable to us depending on the circumstances at the time of exercise.

If we are not able to renew or extend our existing leases, or purchase the communities subject to such leases, at or prior to the end of the existing lease terms, or if the terms of such options are unfavorable or unacceptable to us, our business, results of operations, and cash flow could be adversely affected.

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Increases in prevailing interest rates will increase our payment obligations on our existing variable-rate obligations to the extent they are unhedged and may increase our future borrowing and hedging costs, which would negatively impact our results of operations and cash flow.

The interest rates for a significant majority of our variable-rate debt obligations are calculated based on the London Interbank Offer Rate ("LIBOR") plus a spread, and our interest rate cap agreements generally are indexed to LIBOR.

The Intercontinental Exchange ("ICE") ICE Benchmark Administration intends to phase out the LIBOR tenors by June 30, 2023.

The interest rates for a majority of our variable-rate debt obligations are calculated based on LIBOR plus a spread, and our interest rate cap agreements generally are indexed to LIBOR.

The administrator of LIBOR intends to phase out the LIBOR tenors by June 30, 2023.

Substantially all of our variable-rate debt agreements indexed to LIBOR provide that the lender may choose an alternative index based on comparable information, and our interest rate cap agreements provide that the calculation agent may choose an alternative index.

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Financing may not be available to us or may be available to us only on terms that are not favorable.

In addition, certain of our outstanding indebtedness and long-term leases restrict, among other things, our ability to incur additional debt.

In addition, certain of our outstanding indebtedness and long-term leases restrict, among other things, our (or our subsidiaries') ability to incur additional debt.

If we are unable to raise additional funds or obtain them on terms acceptable to us, we may have to delay or abandon some or all of our plans or opportunities.

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If we fail to attract and retain qualified associates, our ability to conduct our business operations effectively, our overall operating results, and cash flow could be harmed.

During 2021, we experienced pressures associated with the intensely competitive labor environment, including increased associate turnover and difficulty in timely filling open positions.

During 2021 and 2022, we experienced pressures associated with the intensely competitive labor environment, including increased associate turnover and difficulty in filling open positions timely.

Continued increased competition for, or a shortage of, nurses or other associates, including due to the COVID-19 pandemic, general labor market conditions, low levels of unemployment, or general inflationary pressures, have required and may require that we enhance our pay and benefits package to compete effectively for such associates.

In addition, we have experienced and may continue to experience wage pressures due to minimum wage and minimum salary threshold increases mandated by state and local laws.

Due to the intensively competitive labor market, our use of more expensive contract labor and overtime to cover open positions increased during 2021.

In addition, we have experienced and may continue to

experience wage pressures due to minimum wage and minimum salary threshold increases mandated by state and local laws.

Due to the intensively competitive labor market, our use of more expensive premium labor, primarily contract labor and overtime, to cover existing open positions increased during 2021 and remained elevated in 2022.

Third-party staffing agencies from which we source contract labor have increased the rates they charge which has resulted in, and may further result in, increases in the cost of contract labor.

If we are unable to timely fill open positions, our

reliance on more expensive contract labor and overtime may continue or increase.

Increases in wages and our increased use of contract labor and overtime would result in higher operating costs, and we may not be able to offset the added costs by increasing the rates we charge to our residents or our service charges, which would negatively impact our results of operations and cash flow.

If we are unable to fill open positions timely, our reliance on premium labor may continue or increase.

Increases in wages and our increased use of premium labor would result in higher operating costs, and we may not be able to offset the added costs by increasing the rates we charge to our residents or our service charges, which would negatively impact our results of operations and cash flow.

In addition, efforts by labor unions to organize any of our community personnel could divert management attention, lead to increased costs, and/or reduce our flexibility with respect to certain workplace rules.

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Building owners and those exercising control over a building's management may be subject to an increased risk of personal injury lawsuits.

Federal, state, and local laws and regulations also govern the removal, encapsulation, disturbance, handling, and/or disposal of asbestos-containing materials and potential asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation, or demolition of a building.

Such laws may impose liability for improper handling or a release to the environment of asbestos-containing materials and potential asbestos-containing materials and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with asbestos-containing materials and potential asbestos-containing materials.

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Changes in the environmental regulatory framework (including legislative or regulatory efforts designed to address climate change) could have a material adverse effect on our business.

Because environmental laws vary from state to state, expansion of our operations to states where we do not currently operate may subject us to additional restrictions on the manner in which we operate our communities.

Significant legal actions and liability claims against us, including class action and stockholder derivative complaints, could subject us to increased operating costs and substantial uninsured liabilities, which may adversely affect our financial condition and results of operations.

Significant legal actions and liability claims against us, including putative class action complaints, could subject us to increased operating costs and substantial uninsured liabilities, which may adversely affect our financial condition and results of operations.

We have been and are currently involved in litigation and claims incidental to the conduct of our business, which we believe are generally comparable to other companies in the senior living and healthcare industries, including, but not limited to, putative class action claims from time to time regarding staffing at our communities and compliance with consumer protection laws and the Americans with Disabilities Act.

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We use our wholly-owned captive insurance company for the purpose of insuring certain portions of our risk retention under our general and professional liability insurance programs.

Accordingly, we are, in effect, self-insured for claims that are less than the deductible amounts and for claims that exceed the funding level of our captive, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

Accordingly, we are, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of our wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

If we experience a greater number of losses than we anticipate, or if certain claims are not covered by insurance, our results of operations and financial condition could be adversely affected.

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We also have to renew our policies every year and negotiate terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases and changes in coverage and other terms.

There can be no assurance that we will be able to obtain liability insurance in the future or, if available, that such coverage will be available on acceptable terms.

can be no assurance that we will be able to obtain liability insurance in the future or, if available, that such coverage will be available on acceptable terms.

We face periodic and routine reviews, audits, and investigations by government agencies, and any adverse findings could negatively impact our business, financial condition, results of operations, and cash flow.

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In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities.

In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry.

An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, and damage to our business reputation.

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From time to time in the ordinary course of business, we receive survey reports from state or federal regulatory bodies citing deficiencies resulting from such inspections or surveys.

Although most inspection deficiencies are resolved through a plan of corrective action, the reviewing agency may have the authority to take further action against a licensed or certified community, which could result in the imposition of fines, imposition of a provisional or conditional license, suspension or revocation of a license, suspension or denial of admissions, loss of certification as a provider under federal reimbursement programs, or imposition of other sanctions, including criminal penalties.

Although most inspection deficiencies are resolved through a plan of corrective action, the reviewing agency may have the authority to take further action against a licensed or certified community, which could result in the imposition of fines, imposition of a provisional or conditional license, suspension or revocation of a license, suspension or denial of admissions or denial of payment for admissions, loss of certification as a provider under federal reimbursement programs, or imposition of other sanctions, including criminal penalties.

Furthermore, certain states may allow citations in one community to impact other communities in the state.

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Because of incentives allowing a private individual to bring a claim on behalf of the federal government, so-called "whistleblower" suits have become more frequent.

Additionally, since we operate communities that participate in federal and/or state healthcare reimbursement programs, we are subject to federal and state laws that prohibit anyone from presenting, or causing to be presented, claims for reimbursement

which are false, fraudulent, or are for items or services that were not provided as claimed.

Similar state laws vary from state to state.

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While we endeavor to comply with all laws that regulate the licensure and operation of our business, it is difficult to predict how our revenues could be affected if we were subject to an action alleging such violations.

We are subject to federal and state laws, regulations and executive orders relating to healthcare providers’ response to the COVID-19 pandemic.

These requirements vary based on provider type and jurisdiction but generally may include mandatory requirements vaccination of staff, testing of residents and/or staff, providing COVID-19 related paid leave, implementation of infection control standards and procedures, imposition of restrictions on new admissions or readmissions of residents, required screening of all persons entering a community, imposition of restrictions or limitations on who and how residents may be visited, and imposition of mandatory notification requirements to residents, families, staff, and regulatory bodies related to positive COVID-19 cases.

Enhanced or additional penalties may apply for violation of such requirements.

Compliance with the Americans with Disabilities Act and Fair Housing Act, safety and health standards of the Occupational Safety and Health Administration, and other fire, safety, health, and other regulations may require us to make unanticipated expenditures, which could increase our costs and therefore adversely affect our results of operations and financial condition .

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Legislation was adopted in the State of Florida in March 2018 that requires skilled nursing homes and assisted living communities in Florida to obtain generators and fuel necessary to sustain operations and maintain comfortable temperatures in the event of a power outage.

Our cost to comply with this legislation has been approximately $20 million without a corresponding increase in our revenues.

If other states or jurisdictions were to adopt similar legislation or regulation, the cost to comply with such requirements may be substantial and may not result in any additional revenues.

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We are subject to a wide variety of federal, state, and local employment-related laws and regulations which govern matters including, but not limited to, wage and hour requirements, equal employment opportunity obligations, leaves of absence and reasonable accommodations, employee benefits, the right of employees to engage in protected concerted activity (including union organizing), and occupational health and safety requirements.

Because labor represents such a large portion of our operating expenses, changes in federal, state, and local employment-related laws and regulations could increase our cost of doing business.

Because labor represents such a large portion of our

operating expenses, changes in federal, state, and local employment-related laws and regulations could increase our cost of doing business.

Furthermore, any failure to comply with these laws can result in significant protracted litigation, government investigation, penalties, or other damages which could have an adverse effect on our financial condition, results of operations, and cash flow.

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If the market price of our common stock declines significantly, stockholders may be unable to resell their shares at or above their purchase price.

The market price of our common stock may fluctuate or decline significantly in the future.

The market price

of our common stock may fluctuate or decline significantly in the future.

Some of the factors that could negatively affect our share price, result in fluctuations in the price, or trading volume of our common stock include:

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Upon liquidation, holders of our debt securities and preferred stock, and lenders with respect to other borrowings, would receive a distribution of our available assets prior to the holders of our common stock.

We may issue all of the shares of our common stock that are authorized but unissued (and not otherwise reserved for issuance under our stock incentive plan or purchase plans, outstanding warrants, or outstanding convertible senior notes) without any action or approval by our stockholders.

We may issue all of the shares of our common stock that are authorized but unissued (and not otherwise reserved for issuance under our stock incentive plan or purchase plans, outstanding warrants, outstanding convertible senior notes, or outstanding tangible equity units) without any action or approval by our stockholders.

Additional equity offerings may dilute the economic and voting rights of our existing stockholders or reduce the market price of our common stock, or both.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors