4 unchanged sentences
• Reforms to the U.S.
−Removed: healthcare system, including new regulations under the ACA, potential federal and state standards for minimum nurse staffing levels, continue to impose new requirements upon us that could materially impact our business.
−Removed: • The changes in Congress due to midterm elections in 2022 and actions in anticipation of the 2024 Presidential election, may result in significant changes to the regulatory framework, enforcement, and reimbursements in our industry.
+Added: healthcare system, including new regulations under the ACA, new transparency and disclosure requirements, potential federal and state standards for minimum nurse staffing levels, continue to impose new requirements upon us that could materially impact our business.
+Added: • Changes in the U.S.
+Added: political environment may result in significant changes to the regulatory framework, enforcement, and reimbursements in our industry.
• We are subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, loss of licensure, the imposition of fines and sanctions.
+Added: • We are subject to extensive and complex laws and government regulations.
+Added: If we are not operating in compliance with these laws and regulations or if these laws and regulations change, we could be required to make significant expenditures or change our operations in order to bring our facilities and operations into compliance.
• Public and government calls for increased enforcement efforts toward SNFs, potential rulemaking that may result in enhanced enforcement and penalties, and new guidance for surveyors regarding the review of SNFs and enforcement of their Requirements of Participation, could result in increased scrutiny by state and federal survey agencies, including sanctions that could negatively affect our financial condition and results of operations.
1 unchanged sentence
• Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient or resident capacity, and profitability.
−Removed: • Future cost containment initiatives undertaken by third-party payors may limit our revenue and profitability.
−Removed: • We face numerous risks related to the COVID-19 PHE's expiration and surrounding wind-down and uncertainty, which could individually or in the aggregate have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
−Removed: • We may be subject to increased investigation and enforcement activities related to HIPAA violations if we fail to adopt and maintain business procedures and systems designed to protect the privacy, security and integrity of patients’ individual health information.
+Added: • Future cost containment initiatives undertaken by payors may limit our revenue and profitability.
+Added: • Changes in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.
+Added: • We may be subject to increased investigation and enforcement activities related to HIPAA violations.
• Security breaches and other cyber-security incidents could violate security laws and subject us to significant liability.
−Removed: • If our independent operating subsidiaries are not fully reimbursed for all services for which each facility bills through consolidated billing, our revenue, financial condition and results of operations could be adversely affected.
+Added: • If our independent subsidiaries are not fully reimbursed for all services for which each facility bills through consolidated billing, our revenue, financial condition and results of operations could be adversely affected.
• Increased competition for, or a shortage of, nurses and other skilled personnel, could increase our staffing and labor costs and subject us to monetary fines resulting from a failure to maintain minimum staffing requirements, or may affect reimbursement.
• Annual caps, uncertainty regarding reimbursement and other cost-reductions for outpatient therapy services may reduce our future revenue and profitability or cause us to incur losses.
−Removed: • Increased scrutiny of our billing practices by the OIG or other regulatory authorities may result in an increase in regulatory monitoring and oversight, decreased reimbursement rates, or otherwise adversely affect our business, financial condition and results of operations.
+Added: • Increased scrutiny of our activities and billing practices by the OIG or other regulatory authorities may result in an increase in regulatory monitoring and oversight, decreased reimbursement rates, or otherwise adversely affect our business, financial condition and results of operations.
• State efforts to regulate or deregulate the healthcare services industry or the construction or expansion of healthcare facilities could impair our ability to expand our operations, or could result in increased competition.
−Removed: • Newly enacted legislation in the States where our independently operating entities are located may impact the volume of cases filed and the overall cost of those cases from a defense and indemnity standpoint.
+Added: • Newly enacted legislation in the States where our independent subsidiaries are located may impact the volume of cases filed and the overall cost of those cases from a defense and indemnity standpoint.
• Changes to federal and state employment-related laws and regulations could increase our cost of doing business.
1 unchanged sentence
• Compliance with federal and state fair housing, fire, safety, staffing, and other regulations may require us to incur unexpected expenses, which could be costly to us.
−Removed: • We depend largely upon reimbursement from third-party payors, and our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our affiliated facilities as well as payor mix and payment methodologies.
+Added: • Our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our independent subsidiaries as well as payor mix and payment methodologies.
• We are subject to litigation that could result in significant legal costs and large settlement amounts or damage awards.
Similarly, a change in the enforceability of arbitration provisions between SNFs and senior living facilities and residents and patients may affect the risks we face from claims and potential litigation.
−Removed: • If our regular internal investigations into the care delivery, recordkeeping and billing processes of our operating subsidiaries detect instances of noncompliance, efforts to correct such non-compliance could materially decrease our revenue.
−Removed: • We may be unable to complete future facility or business acquisitions at attractive prices or at all, or may elect to dispose of underperforming or non-strategic operating subsidiaries, either of which could decrease our revenue.
+Added: • If our regular internal investigations into the care delivery, recordkeeping and billing processes of our independent subsidiaries detect instances of noncompliance, efforts to correct such non-compliance could materially decrease our revenue.
+Added: • We may be unable to complete future facility or business acquisitions at attractive prices or at all, or may elect to dispose of underperforming or non-strategic independent subsidiaries, either of which could decrease our revenue.
• We may not be able to successfully integrate acquired facilities and businesses into our operations, or we may be exposed to costs, liabilities and regulatory issues that may adversely affect our operations.
+Added: • In undertaking acquisitions, we may be adversely impacted by costs, liabilities and regulatory issues that may adversely affect our operations.
• If we do not achieve or maintain competitive quality of care ratings from CMS or private organizations engaged in similar monitoring activities, our business may be negatively affected.
• If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected, and our self-insurance programs may expose us to significant and unexpected costs and losses.
−Removed: • The geographic concentration of our affiliated facilities could leave us vulnerable to economic downturn, regulatory changes or acts of nature in those areas.
+Added: • The geographic concentration of our independent subsidiaries could leave us vulnerable to economic downturn, regulatory changes or acts of nature in those areas.
• The actions of a national labor union that has pursued a negative publicity campaign criticizing our business in the past may adversely affect our revenue and our profitability.
−Removed: • The risks associated with leased property where our operating subsidiaries operate could adversely affect our business, financial position or results of operations.
−Removed: • Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt, mortgage or operating lease arrangements, which could harm our operating subsidiaries and cause us to lose facilities or experience foreclosures.
−Removed: • Move-in and occupancy rates may remain unpredictable even after the COVID-19 PHE's expiration.
+Added: • The risks associated with leased property where our independent subsidiaries operate could adversely affect our business, financial position or results of operations.
+Added: • Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt, mortgage or operating lease arrangements, which could harm our independent subsidiaries and cause us to lose facilities or experience foreclosures.
• A continued housing slowdown or housing downturn could decrease demand for senior living services.
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• If our referral sources fail to view us as an attractive skilled nursing provider, or if our referral sources otherwise refer fewer patients, our patient base may decrease.
−Removed: • We may need additional capital to fund our operating subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow.
−Removed: • The condition of the financial markets, including recent and expected future increases to the federal funds rate, inflation and the consumer price index, could limit the availability of debt and equity financing sources to fund the capital and liquidity requirements of our business, as well as negatively impact or impair the value of our current portfolio of cash, cash equivalents and investments.
+Added: • We may need additional capital to fund our independent subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow.
+Added: • The condition of the financial markets could limit the availability of debt and equity financing sources to fund the capital and liquidity requirements of our business.
• Delays in reimbursement may cause liquidity problems.
−Removed: • The continued use and growth of managed care organizations may contribute to delays or reductions in our reimbursement, including Managed Medicaid.
+Added: • The utilization and expansion of managed care organizations may contribute to delays or reductions in our reimbursement, including Managed Medicaid.
• Compliance with the regulations of the Department of Housing and Urban Development may require us to make unanticipated expenditures which could increase our costs.
• Failure to safeguard our patient trust funds may subject us to citations, fines and penalties.
−Removed: • We are a holding company with no operations and rely upon our multiple independent operating subsidiaries to provide us with the funds necessary to meet our financial obligations.
−Removed: Liabilities of any one or more of our subsidiaries could be imposed upon us or our other subsidiaries.
−Removed: • We may be exposed to liabilities as a result of the separation of Pennant, including if the spin-off is not tax-free for U.S.
−Removed: federal income tax purposes.
+Added: • We are a holding company with no operations and rely upon our multiple independent subsidiaries.
• Certain directors who serve on our Board of Directors also serve as directors of Pennant, and ownership of shares of Pennant common stock by our directors and executive officers may create, or appear to create, conflicts of interest.
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The rules of Medicare and Medicaid, including reductions of reimbursement rates, changes to spending requirements, data reporting, measurement and evaluation standards could have a material, adverse effect on our revenues, financial condition and results of operations.
−Removed: We derived 25.4% and 26.8% of our service revenue from the Medicare programs for the three and nine months ended September 30, 2023, respectively, and 27.6% and 27.7% for the three and nine months ended September 30, 2022, respectively.
+Added: We derived 26.4% and 28.1% of our service revenue from the Medicare programs for the three months ended March 31, 2024 and 2023, respectively.
In addition, many other payors may use published Medicare rates as a basis for reimbursements.
7 unchanged sentences
CMS often changes the rules governing the Medicare program, including those governing reimbursement.
−Removed: Changes to the Medicare program that could adversely affect our business include:
−Removed: • administrative or legislative changes to base rates or the bases for payment;
+Added: Changes to the Medicare program that could adversely affect our business could include, but are not limited to the following:
+Added: • administrative or legislative changes to base rates or the bases for payment, including changes to the rates at which Medicare will reimburse services;
• limits on the services or types of providers for which Medicare will provide reimbursement;
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Reductions in reimbursement rates or the scope of services being reimbursed could have a material, adverse effect on our revenue, financial condition and results of operations or even result in reimbursement rates that are insufficient to cover our operating costs.
−Removed: Congress’s budgetary planning has also resulted in a difficulty to financially forecast, as the Medicare conversion factor paid under the CAA 2023 was 2.5% greater than the conversion factor provided for in the CY 2023 PFS final rule.
−Removed: Nonetheless, the 2023 conversion factor for CY 2023 was lower than CY 2022 PFS's conversion factor.
−Removed: The CY 2024 PFS conversion factor is proposed to have a decrease of 3.34% from the CY 2023 PFS factor.
−Removed: This decrease takes into account the expiration of the 2.5% statutory payment increase for 2023, the addition of a 1.25% statutory payment increase for 2024, a 0% conversion factor update, and a 2.17% budget-neutrality adjustment.
−Removed: On July 31, 2023, the CMS released its final rule for the SNF PPS for fiscal year 2024 which will increase payments by a net 4.0% in FY 2024 relative to FY 2023.
−Removed: The final rule includes updates to the SNF Quality Reporting Program and SNF Value-based Purchasing Program that assess staff turnover, discharge success, res-hospitalization, and resident falls with injuries, which may adversely affect revenues obtained through the Medicare program.
−Removed: The final rule may result in an increase in payments relative to FY 2023 depending on the performance of our individual operating subsidiaries as evaluated by CMS.
−Removed: The final rule will also replaces the SNF 30-day All-cause Readmission measure with the SNF Within Stay Potentially Reasonable Readmissions standard beginning in fiscal year 2025, which may also reduce the compensation our independent operating subsidiaries may receive under the SNF VBP program.
−Removed: As discussed in more detail in Item 2., under Government Regulation , CMS implemented a final rule in October 2019 implementing a new case-mix classification system, PDPM, that focuses on the clinical condition of the patient.
−Removed: CMS may make future adjustments to reimbursement levels and underlying reimbursement formulae as it continues to monitor the impact of PDPM on patient outcomes and budget neutrality.
+Added: In addition, CMS may make future adjustments to reimbursement levels and underlying reimbursement formulae as it continues to monitor the impact of current payments system on patient outcomes and budget neutrality.
The Biden-Harris Administration continues to study the nursing home industry and for HHS to issue proposed rules based on those studies, including changes to SNF facility reimbursement, including the SNF-VBP Program, may also adversely affect our reimbursement.
These metrics potentially affecting our revenues and expenses in future government fiscal years include the SNF healthcare-associated infections (HAI) measurement, total nursing hours per resident day measures, and discharge to community - post acute care measure.
+Added: The Interoperability Final Rule’s implementation beginning in 2026, and to be completed by January 1, 2027, may also adversely affect our reimbursement paid through Medicare, specifically including Medicare Advantage.
Loss of Medicare reimbursement, or a delay or default by the government in making Medicare payments, would also have a material adverse effect on our revenue.
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A significant portion of reimbursement for skilled nursing services comes from Medicaid.
−Removed: In fact, Medicaid is our largest source of revenue, accounting for 46.7% and 46.0% of our revenue for the three and nine months ended September 30, 2023, respectively, and 46.1% and 45.8% for the three and nine months ended September 30, 2022, respectively.
+Added: In fact, Medicaid is our largest source of revenue, accounting for 45.2% of our revenue for both the three months ended March 31, 2024 and 2023, respectively.
Medicaid is a state-administered program financed by both state funds and matching federal funds.
Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets, which has led both the federal government and many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending.
−Removed: Since a significant portion of our revenue is generated from our skilled nursing operating subsidiaries in California, Texas and Arizona, any budget reductions or delays in these states could adversely affect our net patient service revenue and profitability.
−Removed: Despite present state budget surpluses in many of the states in which we operate, we can expect continuing cost containment pressures on Medicaid outlays for SNFs, and any such decline could adversely affect our financial condition and results of operations.
+Added: Since a significant portion of our revenue is generated from our skilled nursing independent subsidiaries in California, Texas and Arizona, any budget reductions or delays in these states could adversely affect our net patient service revenue and profitability.
+Added: Due to recent fluctuations in state budgets many of the states in which we operate (including those with current budget surpluses), are seeking to contain costs on Medicaid outlays for SNFs, and any such decline could adversely affect our financial condition and results of operations.
The Medicaid program and its reimbursement rates and rules are subject to frequent change at both the federal and state level, including through changes in laws, regulations, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which our services are reimbursed by state Medicaid plans or the amount of expense we incur.
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Any discontinuance or reduction in federal matching of provider tax-related Medicaid expenditures could have a significant and adverse effect on states' Medicaid expenditures, and as a result could have a material and adverse effect on our business, financial condition or results of operations.
−Removed: The CAA 2023 provided for the wind-down and termination of increased FMAP payments under the FFCRA, and also provided for the disenrollment of Medicaid beneficiaries who have participated in the program since early in the COVID-19 pandemic.
−Removed: CMS’s increased FMAP payments declined from 6.2% to 5% in the second quarter of 2023, 2.5% in the third quarter, and shall decline 1.5% in the fourth quarter before CMS’s increased FMAP spending ends entirely.
−Removed: The CAA 2023 grants CMS the authority to impose fines, penalties, and other sanctions upon states that do not comply with this law’s requirements for the unwinding of increased FMAP payments.
−Removed: As a result, these reductions may impose further burdens on the Medicaid programs in states where we operate in the form of fines and penalties, which may result in reduced payments.
−Removed: Beginning on April 1, 2023, states may begin disenrolling Medicaid beneficiaries.
−Removed: CMS guidance allowing for a return to Medicaid’s historical renewal, enrollment, and eligibility determination practices permits states up to 14 months to initiate and process traditional Medicaid renewals.
−Removed: The CAA 2023’s allowance of disenrollment and return to traditional Medicaid renewal processes, which will include pre-COVID eligibility determinations, may result in a reduction of the number of Medicaid beneficiaries and may result in a reduction of our current and potential patient population.
−Removed: As a result, there may be fewer current or potential patients able to pay for our operating subsidiaries’ services, and increased competition for Medicaid beneficiaries able to provide reimbursement for those services.
−Removed: CMS is concerned that states are terminating people without definitively establishing their eligibility due to state residents not receiving eligibility forms or understanding instructions.
−Removed: CMS is monitoring states' compliance with federal requirements and is working with the affected states to address issues related to renewal requirements.
−Removed: States risk losing federal Medicaid matching funds for non-compliance with CMS’s instructions, which could result in reduced Medicaid funds available for timely reimbursement of the Company’s operating subsidiaries for their operations.
−Removed: Estimates suggest that roughly 17 million people may lose Medicaid coverage during the redetermination process through their scheduled completion in May of 2024.
−Removed: Medicaid is an important source of funding for our independent operating subsidiaries.
−Removed: The Company may be adversely affected by the disenrollment of Medicaid beneficiaries, which may lead to a reduction in reimbursement that may adversely impact our revenue and profit.
−Removed: The temporary restoration of Medicaid benefits in states where redetermination has been paused can help relieve some of these economic concerns.
−Removed: The disruption caused by the temporary pauses and restoration of Medicaid coverage for beneficiaries can also create operational challenges for our independent operating subsidiaries, including adverse effects on cash flow, available funds to pay wages for staffing, and overall financial stability.
−Removed: The ultimate impact of Medicaid disenrollment on the Company’s finances and operations will depend on individual states' specific circumstances and actions.
+Added: State-Level Direct Spending Requirements could negatively impact our results of operations
+Added: Certain states where the Company operates have implemented direct spending requirements requiring SNFs to spend a portion of their revenue, particularly including Medicaid-derived revenue, on expenses directly relating to care.
+Added: These spending requirements could affect our operational results and place the Company at higher risk of suffering non-compliance consequences, such as penalties, pay-backs, restrict admissions and/or operational/financial penalties.
+Added: For example, Washington state incorporates the costs of direct care, indirect care, and capital expenditures for SNF services in computing the State’s Medicaid payments to nursing facilities.
+Added: Using periodically updated calculations that account for factors including case acuity, fair market value of capital expenditures, inflation, and facility performance, Washington sets facility compensation so that the majority of Medicaid reimbursement paid to a skilled nursing facility is used for care-related activities, with limitations on how much a facility’s reimbursement may increase from year to year.
+Added: Washington state first adopted this care-based payment model in 2015 and has periodically updated it since, including in 2020, 2022, and 2023;
+Added: it is expected that Washington will continue to amend this law in the future.
+Added: For state fiscal year 2024, Texas requires all nursing facilities must show that funds paid to SNFs by Texas’s Medicaid program, including both fee-for-service and managed care reimbursement, were expanded for direct care activities, including direct care staff wages and benefits.
+Added: In addition, California in the past has proposed bills that, if passed, would require nursing facilities to spend a stated percentage of revenue on direct patient-related services.
+Added: While the most recent attempt by the California Assembly (Bill 1537) to impose direct spending requirements on SNFs has been placed in suspense with no action has been taken on, similar legislation in the future may seek to impose identical or analogous funding requirements for SNFs operating in California.
Reforms to the U.S.
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The efficacy of the ACA is the subject of much debate among members of Congress and the public and it has been the subject of extensive litigation before numerous courts, including the United States Supreme Court, with varying outcomes — some expanding and others limiting the ACA.
−Removed: In the event that the ACA is repealed or any elements of the ACA that are beneficial to our business are materially amended or changed, such as provisions regarding the health insurance industry, reimbursement and insurance coverage by payers, our business, operating results and financial condition could be harmed.
+Added: If the ACA is repealed or any elements of the ACA that are beneficial to our business are materially amended or changed, such as provisions regarding the health insurance industry, reimbursement and insurance coverage by payers, our business, operating results and financial condition could be harmed.
Thus, the future impact of the ACA on our business is difficult to predict and its continued uncertain future may negatively impact our business.
−Removed: However, any material changes to the ACA or its implementing regulations may negatively impact our operations.
−Removed: While it is not possible to predict whether and when any such changes will occur, specific proposals discussed during and after the midterm election in 2022, including a repeal or material amendment of the ACA, could harm our business, operating results and financial condition.
+Added: While it is not possible to predict whether and when any such changes will occur, specific proposals discussed leading up to the 2024 presidential election, including a repeal or material amendment of the ACA, could harm our business, operating results and financial condition.
The ACA continues to be a salient political topic and proposed changes to it may become the subject of campaign promises, litigation, administrative action, or legislation leading up to or following the 2024 Presidential election.
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While it is difficult to determine whether the Nursing Home Improvement Act or an identical bill will even be reintroduced, if ultimately signed into law, this bill may negatively impact our business, with the scope and nature of its consequences unknown.
−Removed: On February 13, 2023, CMS issued a proposed rule that, if finalized and implemented, would require SNFs to disclose certain information regarding their ownership and managerial relationships, which is more invasive and comprehensive than the ownership information already disclosed through Medicare's Nursing Home Compare website.
−Removed: Refer to Item 2., under Government Regulation, for additional information and may be adverse to our business interests and detrimental to our operations, revenue, and profitability.
+Added: On November 15, 2023, CMS issued a final rule that, requires SNFs to disclose certain information regarding their ownership and managerial relationships, which is more invasive and comprehensive than the ownership information already disclosed through Medicare's Nursing Home Compare website.
+Added: Refer to Item 2., under Government Regulation, for additional information.
+Added: The breadth of disclosure required by this new rule may be adverse to our business interests and detrimental to our operations, revenue, and profitability and may have a chilling effect on investment due to the depth of the new reporting and transparency requirements.
We cannot predict what effect future reforms to the U.S.
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However, it is possible these new laws may lower reimbursement or increase the cost of doing business and adversely affect our business.
−Removed: The changes in Congress due to the most recent U.S.
−Removed: midterm elections in 2022 and actions in anticipation of the 2024 Presidential election may result in significant changes to regulatory framework, enforcements and reimbursements.
−Removed: The most recent midterm elections in 2022 and resulting change in control of the House of Representatives could result in significant changes in, and has resulted in uncertainty with respect to, legislation, regulation, implementation or repeal of laws and rules related to government health programs, including Medicare and Medicaid.
+Added: The changes in Congress due to the U.S.
+Added: midterm elections in 2022, changes in representation, and actions in anticipation of the 2024 Presidential election may result in significant changes to regulatory framework, enforcements and reimbursements.
+Added: The midterm elections in 2022 resulted in a change of control in the House of Representatives and representative departures that are expected in 2024 are anticipated to further narrow the margin of Republican control over the House of Representatives.
+Added: Both events could result in significant changes in, and have resulted in uncertainty with respect to, legislation, regulation, implementation or repeal of laws and rules related to government health programs, including Medicare and Medicaid.
Democratic proposals for Medicare for All or significant expansion of Medicare, could significantly impact our business and the healthcare industry if implemented, although the implementation of such proposals remains unlikely under the political party currently holding a majority within the House of Representatives.
−Removed: Additionally, Congress’s passage of the IRA in August of 2022, which expanded upon and continued certain provisions of the ACA, indicates that additional legislative changes to the ACA may be forthcoming.
+Added: Other legislation, such as the Protecting America’s Seniors’ Access to Care Act and Protecting America's Rural Seniors' Access Act, which seek to halt HHS and CMS from finalizing and enforcing its proposed rule for staffing requirements, indicates a bipartisan interest in restraining HHS’s ability to finalize, implement and enforce regulations that may be burdensome on our independent operating subsidiaries, creating still more uncertainty and unpredictability in the legislative process.
+Added: Congress’s passage of the IRA in August of 2022, which expanded upon and continued certain provisions of the ACA, indicates that additional legislative changes to the ACA may be forthcoming.
+Added: Similarly, the Consolidated Appropriations Act of 2024 and its increase in the Medicare conversion factor, resulting in increased Medicare reimbursement to providers, may have political implications if popular among Medicare beneficiaries and the providers paid through that program,and may yield further, similar legislation leading up to the November 2024 election.
If proposed policies specific to nursing facilities are implemented, these may result in significant regulatory changes, increased survey frequency and scope, and increased penalties for non-compliance.
−Removed: As both political parties begin their Presidential primaries and next congressional elections in 2024, each of them may seek to introduce or pass legislation that would either expand or reduce the scope of the ACA as a credential for future campaigning.
+Added: As both political parties have begun their Presidential and congressional campaigns in 2024, each of them may seek to introduce or pass legislation that would either expand or reduce the scope of the ACA.
Based on the IRA and inflationary pressures in the economy, the ACA and affordability of healthcare generally may be a campaign issue and lead to promises, administrative action, or legislation that could adversely affect our business.
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As discussed above, the Biden-Harris Administration has called for HHS and CMS to increase the level of scrutiny of SNF facilities and requested those agencies to adopt rules that would impose greater penalties upon non-compliant SNF operators.
−Removed: On February 17, 2023, CMS most recently updated the survey resources that CMS and state surveyors use in evaluating our SNFs’ compliance with federal Requirements for Participation, incorporating recent changes to CMS’s methods for surveying infection control procedures.
−Removed: On June 29, 2022, CMS announced updated guidance for Phase 2 and 3 of the requirements of participation, discussed in greater detail in Item 2., under Government Regulation .
−Removed: The application of CMS’s new guidance could result in more aggressive and stringent surveys, and potential fines, penalties, sanctions, or administrative actions taken against our independent operating subsidiaries.
+Added: On October 26, 2023, CMS updated the survey resources that CMS and state surveyors use in evaluating our SNFs’ compliance with federal Requirements for Participation, incorporating recent changes to CMS’s methods for surveying infection control procedures.
+Added: In 2022, CMS announced updated guidance for Phase 2 and 3 of the requirements of participation, discussed in greater detail in Item 2., under Government Regulation .
+Added: The application of CMS’s new guidance could result in more aggressive and stringent surveys, and potential fines, penalties, sanctions, or administrative actions taken against our independent subsidiaries.
+Added: Also described in Item 2., under Government Regulation , the Interoperability Final Rule and its changes intended to facilitate data exchange between and among patients, providers, and payors, will be implemented beginning in 2026 and must be fully implemented by January 1, 2027.
+Added: This rule and the greater access to and use of data between and among payors transmitting funds for state and federal healthcare programs, may also trigger additional scrutiny or review of facilities such as ours, and may adversely affect our reimbursement paid through state and federal programs including Medicaid.
CMS announced a new nationwide audit the “SNF 5-Claim Probe & Educate Review” in which the Medicare Administrative Contractors will review five claims from each of the facilities to check for compliance with PDPM billings, which could result in individual claim payment denials if errors are identified.
−Removed: All facilities that are not undergoing TPE reviews, or have not recently passed a TPE review, will be subject to the nationwide audit.
−Removed: Private pay sources also reserve the right to conduct audits.
+Added: All facilities that are not undergoing Targeted Probe and Educate (TPE) reviews, or have not recently passed a TPE review, will be subject to the nationwide audit.
+Added: Private payors also reserve the right to conduct audits.
We believe that billing and reimbursement errors and disagreements are common in our industry, and thus we are regularly engaged in reviews, audits and appeals of our claims for reimbursement due to the subjectivities inherent in the process related to patient diagnosis and care, record keeping, claims processing and other aspects of the patient service and reimbursement processes, and the errors and disagreements those subjectivities can produce.
4 unchanged sentences
• an increase in private litigation against us;
−Removed: • damage to our reputation in the geographies served by our independent operating subsidiaries.
+Added: • damage to our reputation in the geographies served by our independent subsidiaries.
Although we have always been subject to post-payment audits and reviews, more intensive “probe reviews” performed by Medicare administrative contractors in recent years appear to be a regular procedure with our fiscal intermediaries.
4 unchanged sentences
Ongoing failure to demonstrate improvement towards meeting all claim filing and documentation requirements could ultimately lead to Medicare decertification.
−Removed: As of September 30, 2023 and through the filing date of this report, 41 of our independent operating subsidiaries had reviews scheduled or in process, either pre- or post-payment.
+Added: As of March 31, 2024 and through the filing date of this report, 22 of our independent subsidiaries had reviews scheduled or in process, either pre- or post-payment.
We anticipate that these reviews could increase in frequency in the future.
4 unchanged sentences
and the medical necessity of rendered services.
−Removed: On May 31, 2018, we received a Civil Investigative Demand (CID) from the U.S.
−Removed: Department of Justice (DOJ) stating that it is investigating our company to determine whether we have violated the False Claims Act (FCA) or the Anti-Kickback Statute (AKS) with respect to the relationships between certain of our SNFs and persons who served as medical directors.
−Removed: As a general matter, our operating entities maintain policies and procedures to promote compliance with the FCA, the AKS, and other applicable regulatory requirements.
−Removed: We fully cooperated with the DOJ.
−Removed: In April 2020, we were advised that the DOJ declined to intervene in any subsequent action filed by a relator in connection with the subject matter of this investigation.
+Added: For example, refer to the matter discussed in Item 3.
+Added: Legal Proceedings .
If we should agree to a settlement of claims or obligations under Medicare statutes, the FCA, or similar federal or state statutes and related regulations, our business, financial condition and results of operations and cash flows could be materially and adversely affected, and our stock price could be adversely impacted.
1 unchanged sentence
If the government or a court were to conclude that errors and deficiencies constitute criminal violations and/or that such errors and deficiencies resulted in the submission of false claims to federal healthcare programs, or were to discover other problems in addition to the ones identified by the probe reviews that rose to actionable levels, we and certain of our officers might face potential criminal charges and civil claims, administrative sanctions and penalties for amounts that could be material to our business, results of operations and financial condition.
−Removed: In addition, we or some of the key personnel of our independent operating subsidiaries could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare.
−Removed: If any of our independently operated subsidiary facilities is decertified or loses its licenses, our revenue, financial condition or results of operations would be adversely affected.
−Removed: In addition, the report of such issues at any of our independently operated subsidiary facilities could harm our reputation for quality care and lead to a reduction in the patient referrals to and ultimately a reduction in occupancy at these facilities.
+Added: In addition, we or some of the key personnel of our independent subsidiaries could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare.
+Added: If any of our independent subsidiaries is decertified or loses its licenses, our revenue, financial condition or results of operations would be adversely affected.
+Added: In addition, the report of such issues at any of our independent subsidiaries could harm our reputation for quality care and lead to a reduction in the patient referrals to and ultimately a reduction in occupancy at these facilities.
Also, responding to auditing and enforcement efforts diverts material time, resources and attention away from our management team and our staff, and could have a materially detrimental impact on our results of operations during and after any such investigation or proceedings, regardless of whether we prevail on the underlying claim.
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• licensure and certification;
+Added: • disclosure of ownership and affiliated parties;
• adequacy and quality of healthcare services;
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As noted above, the Biden-Harris Administration has called upon HHS and CMS to study and propose new rules regarding staffing requirements and reimbursement for the nursing home industry, including tying reimbursement to staffing levels, salary, benefits, and retention.
−Removed: The recently proposed CMS rule over ownership transparency discussed above may provide an additional basis for further investigation, administrative action and ultimately fines, penalties, or sanctions if finalized.
+Added: CMS's recently finalized ownership transparency rule, discussed in Item 2., under Government Regulation , may provide an additional basis for further investigation, administrative action and ultimately fines, penalties, or sanctions if finalized, and may dissuade parties from working with us or our independent subsidiaries due to the reporting and disclosure obligations of being an Additional Disclosable Party under that final rule.
We believe that such regulations that may adversely affect our business, operation and profitability may increase in the future and we cannot predict the ultimate content, timing or impact on us of any healthcare reform legislation.
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While we do not believe we are in violation of these prohibitions, we cannot assure you that governmental officials charged with the responsibility for enforcing these prohibitions will not assert that we are violating the provisions of such laws and regulations.
−Removed: Our company is currently aware of litigation filed by an individual related to allegations that certain of our affiliated SNFs may have violated the FCA or the AKS with respect to the relationships between certain SNFs and persons who served as medical directors.
−Removed: While our operating entities maintain policies and procedures to promote compliance with the FCA, the AKS, and other applicable regulatory requirements, we cannot predict when the investigation will be resolved, the outcome of the investigation or its potential impact on our company.
−Removed: On September 1, 2023, CMS issued a proposed rule setting forth proposed minimum nurse staffing requirements for SNFs.
−Removed: As discussed in more detail in Item 2., under Government Regulation , this proposed rule contains three primary staffing proposals:
−Removed: 1) minimum nurse staffing standards of 0.55 HPRD for RNs and 2.45 HPRD for NAs;
−Removed: 2) a requirement to have a RN on-site 24 hours per day, seven days per week;
−Removed: and 3) requirements for enhanced facility assessments.
−Removed: The proposed rule features a staggered implementation of these requirements, with potential accommodations for facilities that can demonstrate financial hardship and a delayed implementation schedule for rural facilities.
−Removed: Within this proposed rule, CMS also seeks comments about other staffing models, including alternate, higher standards for imposing staffing minimums, which will have a potentially adverse effect on our operations and profitability, the extent of which currently is not known.
+Added: Our company is currently aware of litigation filed by an individual related to allegations that certain of our independent SNFs may have violated the FCA or the AKS with respect to the relationships between certain SNFs and persons who served as medical directors.
+Added: While our independent subsidiaries maintain policies and procedures to promote compliance with the FCA, the AKS, and other applicable regulatory requirements, we cannot predict when the investigation will be resolved, the outcome of the investigation or its potential impact on our company.
We are unable to predict the future course of federal, state and local regulation or legislation, including as it pertains to Medicare, Medicaid, or fraud and abuse laws, and how they are enforced.
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As CMS turns its attention to enhancing enforcement activities towards SNFs, as discussed in Item 2., under Government Regulation , state survey agencies will have more accountability for their survey and enforcement efforts.
−Removed: The Biden-Harris Administration’s fact sheet regarding enhanced penalties against SFFs, discussed in greater detail in Item 2., under Government Regulation , represents further federal calls for oversight and penalties for low-ranked and underperforming SNFs.
−Removed: This fact sheet precedes greater focus by CMS in obtaining oversight over SFFs, and continuing that oversight even after those SFFs improve, and subjecting them to more exacting and routine oversight.
−Removed: The likely result may be more frequent surveys of our affiliated facilities, with more substantial penalties, fines and consequences if they do not perform well.
+Added: Within the SNF PPS FY 2025 Proposed Rule, CMS seeks greater ability to impose monetary penalties upon SNFs for incident-based and day-based violations of CMS’s conditions of participation.
+Added: Further, the enhanced penalties against SFFs under the Biden-Harris Administration represents further federal calls for transparency, oversight and penalties for low-ranked and underperforming SNFs.
+Added: These enhanced penalties and enforcement activities precedes greater focus by CMS in obtaining oversight over SFFs, and continuing that oversight even after those SFFs improve, and subjecting them to more exacting and routine oversight.
+Added: The likely result may be more frequent surveys of our independent subsidiaries, with more substantial penalties, fines and consequences if they do not perform well.
For low-performing facilities in the SFF program, the standards for successfully emerging from that program and not being subject to ongoing and enhanced government oversight will be higher and measured over a longer period of time, prolonging the risks of monetary penalties, fines and potential suspension or exclusion from the Medicare and Medicaid programs.
−Removed: As discussed in Item 2., under Government Regulation , from time to time in the ordinary course of business, we receive deficiency reports from state and federal regulatory bodies resulting from such inspections or surveys.
−Removed: CMS's guidance to these surveyors was updated on February 17, 2023, incorporating recent changes to CMS’s methods for surveying infection control procedures.
−Removed: This guidance regarding SNFs has not been updated since February of 2023.
−Removed: Additionally, the recently proposed CMS rule requiring disclosure of ownership and financial relationships between nursing facilities and property owners or management entities, as well as other state rules over ownership transparency, may provide an additional basis for further investigation, administrative action, and ultimately fines, penalties, or sanctions if finalized.
+Added: From time to time in the ordinary course of business, we receive deficiency reports from state and federal regulatory bodies resulting from such inspections or surveys.
+Added: CMS's updated guidance to these surveyors incorporate recent changes to CMS’s methods for surveying infection control procedures.
+Added: Additionally, CMS's recently finalized rule requiring disclosure of ownership and financial relationships between nursing facilities and property owners or management entities, as well as other state rules over ownership transparency, may provide an additional basis for further investigation, administrative action, and ultimately fines, penalties, or sanctions and could dissuade individuals and businesses from doing business with us or our independent subsidiaries.
Although most inspection deficiencies are resolved through an agreed-upon plan of corrective action, the reviewing agency typically has the authority to take further action against a licensed or certified facility.
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In the past, we have experienced inspection deficiencies that have resulted in the imposition of a provisional license and could experience these results in the future.
−Removed: Furthermore, in some states, citation of one affiliated facility could negatively impact other affiliated facilities in the same state.
+Added: Furthermore, in some states, citation of one independent subsidiaries could negatively impact other independent subsidiaries in the same state.
Revocation of a license at a given facility could therefore impair our ability to obtain new licenses or to renew, or maintain, existing licenses at other facilities, which may also trigger defaults or cross-defaults under our leases and our credit arrangements, or adversely affect our ability to operate or obtain financing in the future.
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If we elect to voluntary close any operations in the future or to opt to stop accepting new patients pending completion of a state or federal survey, it could negatively impact our financial condition and results of operation.
−Removed: We have received notices of potential sanctions and remedies based upon alleged regulatory deficiencies from time to time, and such sanctions have been imposed on some of our affiliated facilities.
−Removed: We have had affiliated facilities placed on SFF status in the past and other operating subsidiaries may be identified for such status in the future.
−Removed: We currently have one facility placed on SFF status.
+Added: We have received notices of potential sanctions and remedies based upon alleged regulatory deficiencies from time to time, and such sanctions have been imposed on some of our independent subsidiaries.
+Added: We have had independent subsidiaries placed on SFF status in the past and other independent subsidiaries may be identified for such status in the future.
+Added: We currently have no facility placed on SFF status.
CMS’s changes to the SFF program and its look-back period may create greater risk of our facilities being subject to this program and subject to potential fines and sanctions, even after graduating from the SFF program.
−Removed: As discussed in discussed in greater detail in Item 2., under Government Regulation , in October of 2022 CMS updated the SFF program with the intent to reduce the amount of time a SNF spends as an SFF and increase the number of nursing homes that progress through the SFF program.
−Removed: On September 27, 2023, CMS published technical corrections to this program to clarify certain details of the SFF program updates and how they are to be implemented by each state survey agency (SA).
−Removed: As noted in the October 2022 revisions to the SFF program, a priority in revising the SFF program was to address “yo-yo” noncompliance of SNFs that would graduate from the SFF program only to later see their compliance and quality measures regress after graduation, potentially requiring readmission to the SFF program.
+Added: As discussed in discussed in greater detail in Item 2., under Government Regulation , in 2022 CMS updated the SFF program with the intent to reduce the amount of time a SNF spends as an SFF and increase the number of nursing homes that progress through the SFF program.
+Added: CMS clarified certain details of the SFF program updates in 2023 and how they are to be implemented by each state survey agency (SA).
+Added: As part of the revisions to the SFF program, a priority in revising the SFF program was to address “yo-yo” noncompliance of SNFs that would graduate from the SFF program only to later see their compliance and quality measures regress after graduation, potentially requiring readmission to the SFF program.
Among the measures implemented to avoid this issue of “yo-yo” noncompliance was a three-year lookback period for facilities that graduate from the SFF program to ensure that the quality and compliance improvements achieved through the SFF program were sustained.
Facilities that graduate from the SFF program but continue to demonstrate poor compliance as evidenced by any SA’s survey, such as for actual harm, substandard quality of care, or immediate jeopardy deficiencies, may be subject to enhanced enforcement by CMS, up to and including termination from the Medicare and/or Medicaid programs.
−Removed: This three-year lookback for sustained improvements by facilities that graduate the SFF program poses risk for our independent operating facilities, specifically those that may be subject to the SFF program or that have been subject to the SFF program in the past.
−Removed: As of September 30, 2023, we have three facilities graduated from the SFF program within the past three years.
+Added: This three-year lookback for sustained improvements by facilities that graduate the SFF program poses risk for our independent subsidiaries, specifically those that may be subject to the SFF program or that have been subject to the SFF program in the past.
+Added: As of March 31, 2024, we have three facilities graduated from the SFF program within the past three years.
First, for SNFs that are selected by CMS for participation in the SFF program, or which currently are in the SFF program, even graduation from the program is no longer an assurance that the SNF will be able to continue its operations.
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As a result, the financial and manpower resources needed for graduation from the SFF program may be for nothing if, in the three years following graduation from the SFF program, a SNF receives a poor survey result and permits CMS to impose fines and penalties up to the termination of the facility’s Medicare and Medicaid participation.
−Removed: As discussed above, Medicare and Medicaid represent significant sources of payment for our independently operating subsidiaries.
+Added: As discussed above, Medicare and Medicaid represent significant sources of payment for our independent subsidiaries.
Any of our facilities’ loss of a Medicare or Medicaid contract would significantly harm the financial performance of that facility.
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Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient or resident capacity, and profitability.
−Removed: On September 1, 2023, CMS issued a proposed rule setting forth proposed minimum nurse staffing requirements for SNFs.
−Removed: As discussed in more detail in Item 2., under Government Regulation , this proposed rule contains three primary staffing proposals:
−Removed: 1) minimum nurse staffing standards of 0.55 HPRD for RNs and 2.45 HPRD for NAs;
−Removed: 2) a requirement to have a RN on-site 24 hours per day, seven days per week;
−Removed: and 3) requirements for enhanced facility assessments.
−Removed: The proposed rule features a staggered implementation of these requirements, with potential accommodations for facilities that can demonstrate financial hardship and a delayed implementation schedule for rural facilities.
−Removed: Within this proposed rule, CMS also seeks comments about other staffing models, including alternate, higher standards for imposing staffing minimums, which will have a potentially adverse effect on our operations and profitability, the extent of which currently is not known.
−Removed: While the full effect of these proposed federal staff level minimums is not fully known at this time, likely will be studied by industry groups in the coming weeks and months to submit responsive comments while awaiting a final rule, and cannot be ascertained without a final rule that will specify the required number of staff for the Company’s operating subsidiaries to comply with such a regulation, we expect that such a mandate will have adverse financial consequences upon our business.
−Removed: Depending on the requirements of a final mandate and the time period over which its requirements are phased in, we may be required to hire substantially more staff members, particularly nurse practitioners, registered nurses, licensed practical nurses and nursing aides than currently staffed.
−Removed: Additionally, a federal mandate of this nature would place similar pressure on our competitors and result in sudden, expanded demand for nursing staff across the SNF industry.
+Added: On April 22, 2024 CMS issued its final rule establishing minimum staffing standards for skilled nursing facilities (the Staffing Rule).
+Added: As discussed in more detail in Item 2., under Government Regulation , the Staffing Rule contains three primary staffing requirements which are phased in over the next several years.
+Added: Due to pending legislation in both the House of Representative and the Senate as well as the long phase in of the requirements, the exact effects of the Staffing Rule cannot be ascertained.
+Added: However, we expect that the Staffing Rule in its current form will have adverse financial consequences upon our business.
+Added: We may be required to hire substantially more staff members, particularly nurse practitioners, registered nurses, licensed practical nurses and nursing aides than currently staffed.
+Added: Additionally, the Staffing Rule would place similar pressure on our competitors and result in sudden, expanded demand for nursing staff across the SNF industry.
This sudden demand across the SNF industry may exacerbate an already difficult labor market, with demand for nursing staff far outstripping the supply of qualified individuals, and the salary requirements of both current and prospective staff increasing markedly to increase the likelihood of recruiting and retaining skilled caregivers.
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The changes to the therapy caps imposed on Medicare Part B outpatient therapy from this law have been changed by the BBA, and are subject to future budgetary changes through rulemaking and legislation, resulting in ongoing uncertainty regarding payment for these Medicare Part B services.
−Removed: Under the proposed CY 2024 PFS, reductions in payment and conditions imposed in exchange for higher payments may impose operational requirements and working conditions that further detract from and reduce our financial performance.
−Removed: Similarly, new final rules concerning the PACE program and the information it will collect from our operating subsidiaries may adversely affect the risk-adjusted reimbursement.
−Removed: We face numerous risks related to the COVID-19 PHE’s expiration and surrounding wind-down and uncertainty, which could individually or in the aggregate have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
−Removed: The extent to which the COVID-19 PHE's termination will affect our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
−Removed: There remains uncertainty as to what changes will be made to HHS’s emergency response requirements for our SNFs and senior living facilities in order to better respond to the issues experienced during the COVID-19 PHE.
−Removed: Additionally, the expiration of the Emergency Waivers and other flexibilities allowed under the COVID-19 PHE create the risk of non-compliance and delays in operation as more attention is required to ensure that our operations comply with applicable laws and regulations.
−Removed: As discussed in Item 2., under Government Regulation , federal, state and local regulators implemented new regulations and waived existing regulations to promote care delivery during the COVID-19 PHE, which ended as of May 11, 2023.
−Removed: The ending of the Emergency Waivers and wind-down of other flexibilities may require and continue to require operational change requirements on short notice.
−Removed: The reinstatement of waived state and federal regulations has not occurred simultaneously, requiring heightened monitoring to ensure compliance.
−Removed: To the extent COVID-19 is endemic in nature, we and our independent operating subsidiaries may face continued challenges from ongoing infection control and emergency preparedness requirements made part of state laws or regulations.
−Removed: Additionally, the long-term effects of the COVID-19 pandemic may include long-term decline in demand for care in SNFs and senior living facilities, which will be borne out only through time.
−Removed: The extent and duration of the impact of the COVID-19 pandemic on our stock price is uncertain, our stock price may be more volatile, and our ability to raise capital could be impaired.
+Added: Under the CY 2024 PF Final Rule, reductions in conversion factor, payments to providers and conditions imposed in exchange for higher payments may impose operational requirements and working conditions that further detract from and reduce our financial performance.
+Added: Similarly, new final rules concerning the PACE program and the information it will collect from our independent subsidiaries may adversely affect the risk-adjusted reimbursement.
We may be subject to increased investigation and enforcement activities related to HIPAA violations.
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The regulations enacting HIPAA periodically change and the last proposed change was issued in late 2022.
−Removed: This proposed rulemaking may be made final in 2023 and, if adopted as proposed, may require our operating subsidiaries to modify certain policies, procedures and practices regarding the disclosure of residents’ information.
+Added: In 2024, CMS published the Interoperability Final Rule, which affects the data standards and APIs that entities may use.
+Added: Additionally, CMS issued its final rule updating the separate confidentiality requirements for Substance Use Disorder (SUD) records maintained.
+Added: Changes to these regulations may require our independent subsidiaries to modify certain policies, procedures and practices regarding the disclosure of residents’ information.
If we fail to comply with these state and federal laws, we could be subject to criminal penalties, civil sanctions, litigation, and be forced to modify our policies and procedures, in addition to undertaking costly breach notification and remediation efforts, as well as sustaining reputational harm.
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Healthcare businesses are increasingly the target of cyberattacks whereby hackers disrupt business operations or obtain protected health information, often demanding large ransoms.
+Added: Already in 2024, healthcare is the most-breached sector of the economy based on publicly disclosed information.
At the end of the first quarter of 2023, the healthcare sector saw a 60% increase in the average weekly number of cyberattacks over 2021.
+Added: By August of 2023, industry observers note that cybersecurity breaches in the healthcare industry had become less frequent, but larger in scope and affecting more patients than the prior year.
Our business is dependent on the proper functioning and availability of our computer systems and networks.
−Removed: While we have taken steps to protect the safety and security of our information systems and the patient health information and other data maintained within those systems, we cannot assure you that our safety and security measures and disaster recovery plan will prevent damage, interruption or breach of our information systems and operations.
+Added: We cannot assure you that our safety and security measures and disaster recovery plan will prevent damage, interruption or breach of our information systems and operations.
Additionally, we cannot control the safety and security of our information held by third-party vendors with whom we contract.
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We compete with various healthcare service providers, including other skilled nursing providers, in retaining and attracting qualified and skilled personnel.
−Removed: Our affiliated SNFs are located in the states of Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin.
+Added: Our independent SNFs are located in the states of Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin.
All states follow the current federal regulation relative to staffing, which establishes that SNFs are required to staff to meet the needs of the residents present in the facility.
−Removed: In addition, California has established minimum staffing requirements for facilities operating in that state.
+Added: In addition, several states have established minimum staffing requirements for facilities operating in those states.
Failure to comply with these requirements can, among other things, jeopardize a facility's compliance with the conditions of participation under relevant state and federal healthcare programs.
If a facility is determined to be out of compliance with these requirements, it may be subject to a notice of deficiency, a citation, or a significant fine or litigation risk, with penalties including the suspension of patient admissions and the termination of Medicaid participation, or the suspension, revocation or non-renewal of the SNF's license.
−Removed: On September 1, 2023, CMS published a long-awaited proposed rule setting forth proposed SNF minimum staffing requirements at the federal level.
−Removed: In relevant part, these proposed federal standards require 1) minimum nurse staffing standards of 0.55 HPRD for RNs and 2.45 HPRD for NAs;
−Removed: and 2) a requirement to have a RN on-site 24 hours per day, seven days per week.
−Removed: This proposed rule contains numerous other provisions discussed in more detail in Item 2., under Government Regulation .
−Removed: Comments are still being submitted for this proposed rule, and the substance of both the comments and any revisions to the later-issued final rule setting forth minimum staffing requirements may influence the effect that this rule has on our business and its financial performance.
Nonetheless, for the federal government or any state government to materially change the way compliance with the minimum staffing standard is calculated or enforced, our labor costs could increase and the current shortage of healthcare workers could impact us more significantly.
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Due to the limited supply of qualified applicants who seek or are willing to accept employment, these broader concerns, may increase our labor costs or lead to potential staffing shortages, reduced operations to comply with applicable laws and regulations, or difficulty complying with those laws and regulations at current operational levels.
−Removed: Federal laws and regulations, including the proposed minimum nurse staffing levels if they are made final, may increase our costs of maintaining qualified nursing and skilled personnel, or make it more difficult for us to attract or retain qualified nurses and skilled staff members.
+Added: Federal laws and regulations, such as the Staffing Rule, may increase our costs of maintaining qualified nursing and skilled personnel, or make it more difficult for us to attract or retain qualified nurses and skilled staff members.
Proposed legislation, such as the previously proposed Nursing Home Improvement Act and the proposed HCBS Access Act, may make it more expensive to compete for, hire, and retain nursing staff, if passed into law in substantially the same form as previously introduced to Congress.
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CMS has published guidance to surveyors addressing topics that specifically include nurse staffing and collection of payroll data to evaluate appropriate staffing levels, which may lead to future regulation that increase our staffing requirements and labor costs or lower revenues.
−Removed: Similar state-level requirements in the states where our affiliated SNFs operate, whether such requirements are passed by statute, regulation, or executive order, may result in a shortage or inability to obtain nurses and skilled staff.
+Added: Similar state-level requirements in the states where our independent SNFs operate, whether such requirements are passed by statute, regulation, or executive order, may result in a shortage or inability to obtain nurses and skilled staff.
Prior concerns about the COVID-19 vaccination IFR may be abated by the Omnibus Final Rule’s withdrawal of that IFR.
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As discussed in detail in Item 2., under Government Regulation , sub-heading Part B Rehabilitation Requirements , several government actions have been taken in recent years to try and contain the costs of rehabilitation therapy services provided under Medicare Part B, including the MPPR, institution of annual caps, mandatory medical reviews for annual claims beyond a certain monetary threshold, and a reduction in reimbursement rates for therapy assistant claim modifiers.
−Removed: Of specific concern has been CMSs efforts to lower Medicare Part B reimbursement rates for outpatient therapy services in 2021, 2022, and 2023.
+Added: Of specific concern has been CMS efforts to lower Medicare Part B reimbursement rates for outpatient therapy services in 2021, 2022, 2023 and 2024.
Such cost-containment measures and ongoing payment changes could have an adverse effect on our revenue.
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As discussed in greater detail in Item 2., under Government Regulation , Civil and Criminal Fraud and Abuse Laws and Enforcement, the OIG regularly conducts investigations regarding certain payment or compliance issues within the healthcare industry.
−Removed: The OIG identified SNF compliance as an issue of concern in its 2021 and 2022 semi-annual reports to Congress, and its January 2023 study regarding SNF emergency preparedness identified the need for further oversight and addition of SNF emergency readiness to the OIG's 2023 work plan.
+Added: The OIG identified SNF compliance as an issue of concern in its 2021 and 2022 semi-annual reports to Congress, and its January 2023 study regarding SNF emergency preparedness identified the need for further oversight and addition of SNF emergency readiness to the OIG's fall 2023 work plan.
+Added: In November of 2023, OIG added to its work plan an audit of nursing homes' nurse staffing hours reported in CMS's payroll-based journal, for which OIG expects to issue a report in FY 2025.
Nursing homes were also a topic of discussion in the OIG’s 2023 semiannual report to Congress, which emphasized the continued protection and oversight of care that nursing facilities provide to residents.
−Removed: Among other things, the OIG recommended a reduction in the use of psychotropic drugs in nursing homes and urged CMS to evaluate the appropriateness of psychotropic drug use among residents, including the use of data to identify nursing homes with higher rates of use for potential further scrutiny and action.
+Added: Among other things, the OIG recommended attention to the rate of reimbursement for professional services rendered within facilities.
+Added: The OIG’s reports to Congress have also recommended a reduction in the use of psychotropic drugs in nursing homes and urged CMS to evaluate the appropriateness of psychotropic drug use among residents, including the use of data to identify nursing homes with higher rates of use for potential further scrutiny and action.
Based on this information, SNFs in particular are potential targets for more robust scrutiny and examination by regulators.
Recent publications and statements by the Biden-Harris Administration have also called for greater scrutiny of SNF facilities.
−Removed: Our business model, like those of some other for-profit operators, is based in part on seeking out higher-acuity patients whom we believe are generally more profitable, and over time our overall patient mix has consistently shifted to higher-acuity and higher-resource utilization patients in most facilities we operate.
+Added: To respond to the local community needs and the shifting of higher acuity patients from the acute care setting to the SNF setting, over time our overall patient mix has consistently shifted to higher acuity and higher-resource utilization patients in most facilities we operate.
We also use specialized care-delivery software that assists our caregivers in more accurately capturing and recording activities of daily living services, among other things.
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If overbuilding in the skilled nursing industry in the markets in which we operate were to occur, it could reduce the occupancy rates of existing facilities and, in some cases, might reduce the private rates that we charge for our services.
−Removed: Newly enacted and proposed legislation in the States where our independently operating entities are located may affect our operations in terms of individual litigation and the broader regulatory environment.
+Added: Newly enacted and proposed legislation in the States where our independent subsidiaries are located may affect our operations in terms of individual litigation and the broader regulatory environment.
A bill in the State of California was recently signed into law which increases the cap of non-economic damages awarded to plaintiffs who are successful in medical malpractice litigation.
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Due to California's influence on other states, other jurisdictions where we operate may enact similar laws.
−Removed: Similar to the potential incentive of increased damages caps, the Supreme Court’s recent decision in certain case may increase public interest in potential claims against SNFs and senior living facilities, particularly pertaining to specific civil rights claims against governmental actors rather than general liability claims against privately owned SNFs such as those operated by our independent operating subsidiaries.
+Added: Similar to the potential incentive of increased damages caps, the Supreme Court’s recent decision in certain case may increase public interest in potential claims against SNFs and senior living facilities, particularly pertaining to specific civil rights claims against governmental actors rather than general liability claims against privately owned SNFs such as those operated by our independent subsidiaries.
While there may be additional claims and litigation that arise from the Supreme Court's decision that have an adverse impact on our cash flow, it is not expected that the decision will have a significant impact on our business.
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These new requirements may delay or limit the ability to obtain new SNF licenses within that state, whether through acquisition of existing facilities or opening a new facility.
−Removed: This new law's obligations may increase the costs of obtaining licensure, make applications more time-consuming and complex, and may result in civil penalties and other sanctions against our affiliated facilities in the event they are not compliant with these new licensure application requirements.
+Added: This new law's obligations may increase the costs of obtaining licensure, make applications more time-consuming and complex, and may result in civil penalties and other sanctions against our independent subsidiaries in the event they are not compliant with these new licensure application requirements.
As a result, this new law may delay or impede growth within California.
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More recently, California’s legislature has proposed bills related to increasing the minimum wage for workers, spending requirements and increased disclosure.
−Removed: As discussed in Item 2., Government Regulation , these proposed bills would create new and costly obligations on our independent operating subsidiaries if they became law and if enacted, would adversely affect our business, operations, and profitability.
+Added: As discussed in Item 2., Government Regulation , these proposed bills would create new and costly obligations on our independent subsidiaries if they became law and if enacted, would adversely affect our business, operations, and profitability.
As another example, Texas passed a bill which partially restored Medicaid state relief funding for SNFs through August 31, 2023, while it also considered legislation that contained direct care spending requirements and ownership, similar to proposed federal rulemaking discussed in Item 2., Government Regulation .
−Removed: While this bill provided financial relief to our independent operating subsidiaries in Texas, other proposed bills may impose the same regulatory requirements and limitations inherent in both the proposed legislation in other states and the federally proposed rule requiring disclosure of such information in applications and change-of-ownership disclosures, which may adversely affect our business, operations, and profitability.
+Added: While this bill provided financial relief to our independent subsidiaries in Texas, other proposed bills may impose the same regulatory requirements and limitations inherent in both the proposed legislation in other states and the federally proposed rule requiring disclosure of such information in applications and change-of-ownership disclosures, which may adversely affect our business, operations, and profitability.
Changes to federal and state employment-related laws and regulations could increase our cost of doing business.
−Removed: Our operating subsidiaries are subject to a variety of federal and state employment-related laws and regulations, including, but not limited to, the U.S.
+Added: Our independent subsidiaries are subject to a variety of federal and state employment-related laws and regulations, including, but not limited to, the U.S.
Fair Labor Standards Act that governs such matters as minimum wages, overtime and other working conditions, the ADA and similar state laws that provide civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas, the National Labor Relations Act, regulations of the EEOC, regulations of the Office of Civil Rights, regulations of state attorney generals, family leave mandates and a variety of similar laws enacted by the federal and state governments that govern these and other employment law matters.
−Removed: On June 5, 2023, CMS published the Omnibus Final Rule, withdrawing the COVID-19 vaccination IFR 60 days after the rule's publication.
−Removed: Previously in November of 2022, a coalition of 22 states formally called on the Biden-Harris Administration to withdraw the COVID-19 vaccination IFR.
−Removed: At present, there is no nationally significant litigation concerning such mandates.
−Removed: The effects of the COVID-19 vaccination IFR's withdrawal on our operations and the labor pool for nursing and administrative staff is unknown, but may have an impact on our business, operations, and profitability.
−Removed: Furthermore, the Biden-Harris Administration has requested HHS and CMS study and issue proposed rules regarding care-based careers, including improving access to training, increasing the attractiveness of compensation in care-based positions, and improving the retention and career progression of care workers.
−Removed: The Biden-Harris Administration has sought proposed rules that tie some of these issues, such as wages and retention, to Medicare reimbursement for facilities.
+Added: Changes to federal and state regulations and laws are discussed in more detail in Item 2., under Government Regulation.
+Added: The Biden-Harris Administration has requested HHS and CMS study and issue proposed rules regarding care-based careers, including improving access to training, increasing the attractiveness of compensation in care-based positions, and improving the retention and career progression of care workers.
+Added: The administration has sought proposed rules that tie some of these issues, such as wages and retention, to Medicare reimbursement for facilities.
Other pending legislation, such as the HCBS Access Act, indicate a legislative priority of providing funding for care-based careers that may affect our pool of desired workers.
Rising operating costs due to labor shortages, greater compensation and incentives required to attract and retain qualified personnel and higher-than-usual inflation on items including energy, utilities, food and other goods used in our facilities and the costs for transporting these items could increase our cost and decrease our profits.
−Removed: On September 1, 2023, CMS published a long-awaited proposed rule setting forth proposed SNF minimum staffing requirements at the federal level.
−Removed: In relevant part, these proposed federal standards require 1) minimum nurse staffing standards of 0.55 HPRD for RNs and 2.45 HPRD for NAs;
−Removed: and 2) a requirement to have a RN on-site 24 hours per day, seven days per week.
−Removed: This proposed rule contains numerous other provisions discussed in more detail in Item 2., under Government Regulation .
−Removed: Comments are still being submitted for this proposed rule, and the substance of both the comments and any revisions to the later-issued final rule setting forth minimum staffing requirements may influence the effect that this rule has on our business and its financial performance.
−Removed: Any implementation of this proposed rule, however, is likely to increase demand for labor, including skilled caregivers, increase our costs, and may adversely affect our financial performance.
The compliance costs associated with these laws and evolving regulations could be substantial.
−Removed: By way of example, all of our affiliated facilities are required to comply with the ADA, which has separate compliance requirements for “public accommodations” and “commercial properties,” but generally requires that buildings be made accessible to people with disabilities.
+Added: By way of example, all of our independent subsidiaries are required to comply with the ADA, which has separate compliance requirements for “public accommodations” and “commercial properties,” but generally requires that buildings be made accessible to people with disabilities.
Compliance with ADA requirements could require removal of access barriers and non-compliance could result in imposition of government fines or an award of damages to private litigants.
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Required regulatory approvals could delay or prohibit transfers of our healthcare operations, which could result in periods in which we are unable to receive reimbursement for such properties.
−Removed: The operations of our operating subsidiaries must be licensed under applicable state law and, depending upon the type of operation, certified or approved as providers under the Medicare and/or Medicaid programs.
+Added: The operations of our independent subsidiaries must be licensed under applicable state law and, depending upon the type of operation, certified or approved as providers under the Medicare and/or Medicaid programs.
In the process of acquiring or transferring operating assets, our operations must receive change of ownership approvals from state licensing agencies, Medicare and Medicaid as well as third-party payors.
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Compliance with federal and state fair housing, fire, safety and other regulations may require us to make unanticipated expenditures, which could be costly to us.
−Removed: We must comply with the federal Fair Housing Act and similar state laws, which prohibit us from discriminating against individuals if it would cause such individuals to face barriers in gaining residency in any of our affiliated facilities.
+Added: We must comply with the federal Fair Housing Act and similar state laws, which prohibit us from discriminating against individuals if it would cause such individuals to face barriers in gaining residency in any of our independent subsidiaries.
Additionally, the Fair Housing Act and other similar state laws require that we advertise our services in such a way that we promote diversity and not limit it.
We may be required, among other things, to change our marketing techniques to comply with these requirements.
−Removed: In addition, our affiliated facilities are required to operate in compliance with applicable fire and safety regulations, building codes and other land use regulations and food licensing or certification requirements as they may be adopted by governmental agencies and bodies from time to time.
−Removed: Like other healthcare facilities, our affiliated SNFs are subject to periodic surveys or inspections by governmental authorities to assess and assure compliance with regulatory requirements.
+Added: In addition, our independent subsidiaries are required to operate in compliance with applicable fire and safety regulations, building codes and other land use regulations and food licensing or certification requirements as they may be adopted by governmental agencies and bodies from time to time.
+Added: Like other healthcare facilities, our independent SNFs are subject to periodic surveys or inspections by governmental authorities to assess and assure compliance with regulatory requirements.
Surveys occur on a regular (often annual or biannual) schedule, and special surveys may result from a specific complaint filed by a patient, a family member or one of our competitors.
We may be required to make substantial capital expenditures to comply with these requirements.
−Removed: We depend largely upon reimbursement from third-party payors, and our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our affiliated facilities as well as payor mix and payment methodologies.
−Removed: Our revenue is affected by the percentage of the patients of our operating subsidiaries who require a high level of skilled nursing and rehabilitative care, whom we refer to as high acuity patients, and by our mix of payment sources.
+Added: In some cases, we may be unable to comply with new regulations prior to their effective date exposing us to potential fines or regulatory action.
+Added: We depend largely upon reimbursement from third-party payors, and our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our independent subsidiaries as well as payor mix and payment methodologies.
+Added: Our revenue is affected by the percentage of the patients of our independent subsidiaries who require a high level of skilled nursing and rehabilitative care, whom we refer to as high acuity patients, and by our mix of payment sources.
Changes in the acuity level of patients we attract, as well as our payor mix among Medicaid, Medicare, private payors and managed care companies, significantly affect our profitability.
We generally receive higher reimbursement rates for high acuity patients, and payors reimburse us at different rates.
−Removed: For the three and nine months ended September 30, 2023, 72.1% and 72.8%, of our revenue was provided by government payors that reimburse us at predetermined rates, respectively.
+Added: For the three months ended March 31, 2024 and 2023, 71.6% and 73.3%, of our revenue was provided by government payors that reimburse us at predetermined rates, respectively.
If our labor or other operating costs increase, we will be unable to recover such increased costs from government payors.
−Removed: Accordingly, if we fail to maintain our proportion of high acuity patients or if there is any significant increase in the percentage of the patients of our operating subsidiaries for whom we receive Medicaid reimbursement, our results of operations may be adversely affected.
+Added: Accordingly, if we fail to maintain our proportion of high acuity patients or if there is any significant increase in the percentage of the patients of our independent subsidiaries for whom we receive Medicaid reimbursement, our results of operations may be adversely affected.
Initiatives undertaken by major insurers and managed care companies to contain healthcare costs may adversely affect our business.
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CMS first requested information regarding these priorities in 2022 and subsequently published further requests for information from the public in the Federal Register to aid in studies and anticipated rulemaking.
−Removed: CMS's proposed rule regarding disclosure of significant information regarding their ownership, operations, management and the owners of real property leased or subleased by our operating subsidiaries, may result in additional regulatory requirements for participation in those programs.
+Added: CMS's final rule regarding nursing home ownership disclosure represented a product of these efforts and imposes additional regulatory requirements for participation in those programs.
We are subject to litigation that could result in significant legal costs and large settlement amounts or damage awards.
−Removed: The skilled nursing business involves a significant risk of liability given the age and health of the patients and residents of our operating subsidiaries and the services we provide.
+Added: The skilled nursing business involves a significant risk of liability given the age and health of the patients and residents of our independent subsidiaries and the services we provide.
The industry has experienced an increased trend in the number and severity of litigation claims, due in part to the number of large verdicts, including large punitive damage awards.
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Plaintiffs' attorneys have become increasingly more aggressive in their pursuit of claims against healthcare providers, including skilled nursing providers, employing a wide variety of advertising and solicitation activities to generate more claims.
−Removed: The increased caps on damages awarded in such actions, as discussed above, may trigger a larger number of these lawsuits against our independent operating subsidiaries in California and other states that adopt similar legislation.
+Added: The increased caps on damages awarded in such actions, as discussed above, may trigger a larger number of these lawsuits against our independent subsidiaries in California and other states that adopt similar legislation.
The defense of lawsuits has in the past, and may in the future, result in significant legal costs, regardless of the outcome.
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Due to these whistleblower incentives, qui tam lawsuits have become more frequent.
−Removed: For example, and despite the decision of the DOJ to decline to participate in litigation based on the subject matter of its CID issued on May 31, 2018, the involved qui tam relator has moved forward with the lawsuit and is pursuing claims that we allegedly violated the FCA and/or the AKS.
−Removed: We are vigorously defending this lawsuit, but the costs of defense may be significant given the nature of the allegations and the date range contemplated by the complaint.
+Added: For example, d espite the decision of the DOJ to decline to participate in litigation based on the subject matter of its previously issued CID, the involved qui tam relator moved forward with the complaint in December 2020.
+Added: Refer to Item 3.
+Added: Legal Proceedings for additional information on this case.
Beyond our skilled nursing business, we engage in numerous ancillary businesses through one or more of our subsidiaries.
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the bill and its analogue introduced in the Senate have never made it out of the committees to which they were referred for discussion.
−Removed: This legislation or similar bills have not yet been introduced in the current session of Congress, which commenced at the beginning of 2023.
−Removed: Our independently operating subsidiaries use arbitration agreements, which have generally been favored by the courts, to streamline the dispute resolution process and reduce our exposure to legal fees and excessive jury awards.
+Added: The Fairness in Nursing Home Arbitration Act was re-introduced in the House of Representatives on January 29, 2024 and was referred to the Committee on Ways and Means and the Committee on Energy and Commerce.
+Added: No action has been taken since these referrals of the bill to these committees.
+Added: Our independent subsidiaries use arbitration agreements, which have generally been favored by the courts, to streamline the dispute resolution process and reduce our exposure to legal fees and excessive jury awards.
CMS has identified these arbitration agreements as an area of focus and issued guidance to state surveyors regarding federal requirements for the use of arbitration agreements in nursing home care, with non-compliance potentially resulting in fines and other sanctions.
If we are not able to secure pre-admission arbitration agreements, our litigation exposure and costs of defense in patient liability actions could increase, our liability insurance premiums could increase, and our business may be adversely affected.
−Removed: We conduct regular internal investigations into the care delivery, recordkeeping and billing processes of our operating subsidiaries.
+Added: The outcomes of any of these litigation matters are difficult to predict and litigation and other legal claims are subject to inherent uncertainties.
+Added: Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate.
+Added: A further complication is that even where the possibility of an adverse outcome is remote under traditional legal analysis, juries sometimes substitute their subjective views in place of facts and established legal principles.
+Added: Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings (possibly resulting in changes in established reserves) could have a material adverse effect on our business, financial condition, and results of operations.
+Added: We conduct regular internal investigations into the care delivery, recordkeeping and billing processes of our independent subsidiaries.
These reviews sometimes detect instances of noncompliance which we attempt to correct, which can decrease our revenue.
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Our compliance program includes, among other things, (1) policies and procedures modeled after applicable laws, regulations, sub-regulatory guidance and industry practices and customs that govern the clinical, reimbursement and operational aspects of our subsidiaries;
−Removed: (2) training about our compliance process for all of the employees of our operating subsidiaries, our directors and officers, and training about Medicare and Medicaid laws, fraud and abuse prevention, clinical standards and practices, and claim submission and reimbursement policies and procedures for appropriate employees;
+Added: (2) training about our compliance process for all of the employees of our independent subsidiaries, our directors and officers, and training about Medicare and Medicaid laws, fraud and abuse prevention, clinical standards and practices, and claim submission and reimbursement policies and procedures for appropriate employees;
and (3) internal controls that monitor, among other things, the accuracy of claims, reimbursement submissions, cost reports and source documents, provision of patient care, services, and supplies as required by applicable standards and laws, accuracy of clinical assessment and treatment documentation, and implementation of judicial and regulatory requirements (i.e., background checks, licensing and training).
From time to time our systems and controls highlight potential compliance issues, which we investigate as they arise.
−Removed: Historically, we have, and will continue to do so in the future, initiated internal inquiries into possible recordkeeping and related irregularities at our affiliated SNFs, which were detected by our internal compliance team in the course of its ongoing reviews.
+Added: Historically, we have, and will continue to do so in the future, initiated internal inquiries into possible recordkeeping and related irregularities at our independent subsidiaries, which were detected by our internal compliance team in the course of its ongoing reviews.
Through these internal inquiries, we have identified potential deficiencies in the assessment of and recordkeeping for small subsets of patients.
−Removed: We have assisted in implementing, targeted improvements in the assessment and recordkeeping practices to make them consistent with the existing standards and policies applicable to our affiliated SNFs.
+Added: We have assisted in implementing, targeted improvements in the assessment and recordkeeping practices to make them consistent with the existing standards and policies applicable to our independent subsidiaries.
We continue to monitor the measures implemented for effectiveness and perform follow-up reviews to ensure compliance.
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Failure to refund overpayments within required time frames (as described in greater detail above) could result in FCA liability and our business, financial condition and results of operations could be materially and adversely affected and our stock price could decline.
−Removed: We may be unable to complete future facility or business acquisitions at attractive prices or at all, which may adversely affect our revenue;
−Removed: we may also elect to dispose of underperforming or non-strategic operating subsidiaries, which would also decrease our revenue.
+Added: We may be unable to complete future asset or business acquisitions at attractive prices or at all, which may adversely affect our revenue;
+Added: we may also elect to dispose of underperforming or non-strategic independent subsidiaries, which would also decrease our revenue.
To date, our revenue growth has been significantly impacted by our acquisition of new facilities and businesses.
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In the future, we anticipate the rate at which we may acquire facilities will continue to fluctuate, which may affect our revenue.
−Removed: We have also previously acquired a few facilities, which were or have proven to be non-strategic or less desirable, and we may consider disposing of such facilities or exchanging them for facilities that are more desirable, either because they were included in larger, indivisible groups of facilities or under other circumstances.
−Removed: To the extent we dispose of such a facility without simultaneously acquiring a facility in exchange, our revenue may decrease.
−Removed: We may not be able to successfully integrate acquired facilities and businesses into our operations, and we may not achieve the benefits we expect from any of our facility acquisitions.
−Removed: We may not be able to successfully or efficiently integrate new acquisitions of facilities and businesses with our existing operating subsidiaries, culture and systems.
+Added: We have also previously acquired a few operations, which were or have proven to be non-strategic or less desirable, and we may consider disposing of such operations or exchanging them for operations that are more desirable, either because they were included in larger, indivisible groups of operations or under other circumstances.
+Added: To the extent we dispose of such a operation without simultaneously acquiring a operation in exchange, our revenue may decrease.
+Added: We may not be able to successfully integrate acquired assets and businesses into our operations, and we may not achieve the benefits we expect from any of our acquisitions.
+Added: We may not be able to successfully or efficiently integrate new acquisitions of assets and businesses with our existing independent subsidiaries, culture and systems.
The process of integrating acquisitions into our existing operations may result in unforeseen operating difficulties, divert management's attention from existing operations, or require an unexpected commitment of staff and financial resources, and may ultimately be unsuccessful.
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We also may determine that renovations of acquired facilities and changes in staff and operating management personnel are necessary to successfully integrate those acquisitions into our existing operations.
−Removed: We may not be able to recover the costs incurred to reposition or renovate newly operating subsidiaries.
+Added: We may not be able to recover the costs incurred to reposition or renovate newly independent subsidiaries.
The financial benefits we expect to realize from many of our acquisitions are largely dependent upon our ability to improve clinical performance, overcome regulatory deficiencies, rehabilitate or improve the reputation of the operations in the community, increase and maintain occupancy, control costs, and in some cases change the patient acuity mix.
−Removed: If we are unable to accomplish any of these objectives at the operating subsidiaries we acquire, we will not realize the anticipated benefits and we may experience lower than anticipated profits, or even losses.
−Removed: During the nine months ended September 30, 2023, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases , with the addition of 24 stand-alone skilled nursing operations.
+Added: If we are unable to accomplish any of these objectives at the independent subsidiaries we acquire, we will not realize the anticipated benefits and we may experience lower than anticipated profits, or even losses.
+Added: During the three months ended March 31, 2024, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases , with the addition of five skilled nursing operations.
This growth has placed and will continue to place significant demands on our current management resources.
Our ability to manage our growth effectively and to successfully integrate new acquisitions into our existing business will require us to continue to expand our operational, financial and management information systems and to continue to retain, attract, train, motivate and manage key employees, including facility-level leaders and our local directors of nursing.
−Removed: We may not be successful in attracting qualified individuals necessary for future acquisitions to be successful, and our management team may expend significant time and energy working to attract qualified personnel to manage facilities we may acquire in the future.
−Removed: Also, the newly acquired facilities may require us to spend significant time improving services that have historically been substandard, and if we are unable to improve such facilities quickly enough, we may be subject to litigation and/or loss of licensure or certification.
+Added: We may not be successful in attracting qualified individuals necessary for future acquisitions to be successful, and our management team may expend significant time and energy working to attract qualified personnel to manage operations we may acquire in the future.
+Added: Also, the newly acquired operations may require us to spend significant time improving services that have historically been substandard, and if we are unable to improve such operations quickly enough, we may be subject to litigation and/or loss of licensure or certification.
If we are not able to successfully overcome these and other integration challenges, we may not achieve the benefits we expect from any of our acquisitions, and our business may suffer.
In undertaking acquisitions, we may be adversely impacted by costs, liabilities and regulatory issues that may adversely affect our operations.
−Removed: In undertaking acquisitions, we also may be adversely impacted by unforeseen liabilities attributable to the prior providers who operated those facilities, against whom we may have little or no recourse.
−Removed: Many facilities we have historically acquired were underperforming financially and had clinical and regulatory issues prior to and at the time of acquisition.
−Removed: Even where we have improved operating subsidiaries and patient care at facilities that we have acquired, we still may face post-acquisition regulatory issues related to pre-acquisition events.
+Added: In undertaking acquisitions, we also may be adversely impacted by unforeseen liabilities attributable to the prior providers who operated those businesses, against whom we may have little or no recourse.
+Added: Many operations we have historically acquired were underperforming financially and had clinical and regulatory issues prior to and at the time of acquisition.
+Added: Even where we have improved independent subsidiaries and patient care , we still may face post-acquisition regulatory issues related to pre-acquisition events.
These may include, without limitation, payment recoupment related to our predecessors' prior noncompliance, the imposition of fines, penalties, operational restrictions or special regulatory status.
−Removed: Further, we may incur post-acquisition compliance risk due to the difficulty or impossibility of immediately or quickly bringing non-compliant facilities into full compliance.
+Added: Further, we may incur post-acquisition compliance risk due to the difficulty or impossibility of immediately or quickly bringing non-compliant operations into full compliance.
Diligence materials pertaining to acquisition targets, especially the underperforming facilities that often represent the greatest opportunity for return, are often inadequate, inaccurate or impossible to obtain, sometimes requiring us to make acquisition decisions with incomplete information.
−Removed: Despite our due diligence procedures, facilities that we have acquired or may acquire in the future may generate unexpectedly low returns, may cause us to incur substantial losses, may require unexpected levels of management time, expenditures or other resources, or may otherwise not meet a risk profile that our investors find acceptable.
−Removed: In addition, we might encounter unanticipated difficulties and expenditures relating to any of the acquired facilities, including contingent liabilities.
−Removed: For example, when we acquire a facility, we generally assume the facility's existing Medicare provider number for purposes of billing Medicare for services.
−Removed: If CMS later determines that the prior owner of the facility had received overpayments from Medicare for the period of time during which it operated the facility, or had incurred fines in connection with the operation of the facility, CMS could hold us liable for repayment of the overpayments or fines.
−Removed: We may be unable to improve every facility that we acquire.
−Removed: In addition, operation of these facilities may divert management time and attention from other operations and priorities, negatively impact cash flows, result in adverse or unanticipated accounting charges, or otherwise damage other areas of our company if they are not timely and adequately improved.
+Added: Despite our due diligence procedures, operations that we have acquired or may acquire in the future may generate unexpectedly low returns, may cause us to incur substantial losses, may require unexpected levels of management time, expenditures or other resources, or may otherwise not meet a risk profile that our investors find acceptable.
+Added: In addition, we might encounter unanticipated difficulties and expenditures relating to any of the acquired operations, including contingent liabilities.
+Added: For example, when we acquire a operations, we generally assume the operation's existing Medicare provider number for purposes of billing Medicare for services.
+Added: If CMS later determines that the prior owner of the operation had received overpayments from Medicare for the period of time during which it ran the operation, or had incurred fines in connection, CMS could hold us liable for repayment of the overpayments or fines.
+Added: We may be unable to improve every operation that we acquire.
+Added: In addition, operation of these newly acquired operations may divert management time and attention from other operations and priorities, negatively impact cash flows, result in adverse or unanticipated accounting charges, or otherwise damage other areas of our company if they are not timely and adequately improved.
We also incur regulatory risk in acquiring certain facilities due to the licensing, certification and other regulatory requirements affecting our right to operate the acquired facilities.
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Based on CMS's guidance and regulations, we expect more data to be collected by CMS and reported on the Nursing Home Compare website in the future.
−Removed: CMS continues to increase quality measure thresholds, making it more difficult to achieve upward and five-star ratings.
−Removed: CMS increased its quality measure thresholds in October of 2022, making it more difficult for facilities to obtain or maintain four- and five-star ratings, which were most recently re-calculated in July of 2023, allowing only 10% of nursing facilities within a state to receive a five-star rating.
−Removed: CMS discloses the increasing standards for four- and five-star ratings in its star rating cut point table, which discloses the points needed for each star rating within every state.
−Removed: CMS has indicated that it will increase these quality measure thresholds every six months.
−Removed: Some facilities may see a decline in their overall five-star rating absent any new inspection information, and as a result the five-star ratings of our affiliated facilities may decline even as their quality measures remain unchanged or improve.
+Added: Additionally, CMS's ownership transparency final rule, which requires the disclosure of SNF ownership and affiliated parties, will ultimately provide for the public disclosure of information reported to CMS under that rule.
+Added: This publicly available information may result in potential residents perceiving our highly rated facilities to be less desirable if they share ownership with lower rated facilities, even if the lower rated facility is a new acquisition or has a lower score for reasons beyond our control.
+Added: CMS continues to increase quality measure thresholds, which is regularly increased every six months, making it more difficult to achieve upward and five-star ratings.
+Added: CMS increased its quality measure thresholds in 2022, making it more difficult for facilities to obtain or maintain four- and five-star ratings.
+Added: Some facilities may see a decline in their overall five-star rating absent any new inspection information, and as a result the five-star ratings of our independent subsidiaries may decline even as their quality measures remain unchanged or improve.
Additionally, on the Nursing Home Compare website, CMS recently began displaying a consumer alert icon next to nursing homes that have been cited on inspection reports for incidents of abuse, neglect, or exploitation.
−Removed: In July of 2022, CMS updated the scoring measures used for SNFs to include six dimensions of staffing and turnover, which may adversely affect the rating of our facilities on the Nursing Home Compare website.
+Added: In 2022, CMS updated the scoring measures used for SNFs to include six dimensions of staffing and turnover, which may adversely affect the rating of our facilities on the Nursing Home Compare website.
In July 2023, CMS revised the nursing-home level exclusion criteria used on the administrator turnover measure, adding information regarding its calculation of the staff turnover measure and publishing an updated ratings table, which identifies the points needed for each nursing facility to obtain certain star ratings within its state.
1 unchanged sentence
Only 10% of nursing facilities can receive a five-star rating in the state where it operates.
−Removed: The July 2023 change also increases the pressure on our independent operating subsidiaries to obtain a smaller number of available five-star ratings, as lower ratings may make it more difficult to attract prospective residents to receive our services.
+Added: These changes also increase the pressure on our independent subsidiaries to obtain a smaller number of available five-star ratings, as lower ratings may make it more difficult to attract prospective residents to receive our services.
In September 2023, CMS announced that it will update the staffing level case-mix adjustment methodology and freeze four of the quality measures used in the Nursing Home Five-Star Quality Rating System beginning with the April 2024 refresh of the Nursing Home Compare website data.
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Further, CMS will penalize SNFs that submit erroneous data, or fail to submit data, by awarding them the lowest possible rating on that measure.
−Removed: We may be significantly affected if any of our independent operating subsidiaries fail to submit information for the MDS in 2024, or if CMS deems their MDS submissions to be erroneous.
+Added: We may be significantly affected if any of our independent subsidiaries fail to submit information for the MDS in 2024, or if CMS deems their MDS submissions to be erroneous.
In addition to the uncertainty created by coming changes to CMS’s five-star ratings that currently are unknown, the potential negative consequences of freezing unfavorable data may adversely affect our star rating and negatively impact our ability to attract residents.
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Claims against us, regardless of their merit or eventual outcome, could also inhibit our ability to attract patients or expand our business and could require our management to devote time to matters unrelated to the day-to-day operation of our business.
−Removed: With few exceptions, workers compensation and employee health insurance costs have also increased markedly in recent years.
+Added: With few exceptions, workers compensation and employee health insurance costs have also increased markedly in recent years and are expected to increase in the future.
To partially offset these increases, we have increased the amounts of our self-insured retention and deductibles in connection with general and professional liability claims.
3 unchanged sentences
Our self-insurance programs may expose us to significant and unexpected costs and losses.
−Removed: We have maintained general and professional liability insurance since 2002 and workers compensation insurance since 2005 through a wholly owned captive insurance subsidiary to insure our self-insurance reimbursements and deductibles as part of a continually evolving overall risk management strategy.
+Added: We maintain general and professional liability insurance and workers compensation insurance through a wholly-owned captive insurance subsidiary to insure our self-insurance reimbursements and deductibles as part of a continually evolving overall risk management strategy.
We establish the insurance loss reserves based on an estimation process that uses information obtained from both company-specific and industry data.
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For these and other reasons, our self-insurance reserves could prove to be inadequate, resulting in liabilities in excess of our available insurance and self-insurance.
−Removed: successful claim is made against us and it is not covered by our insurance or exceeds the insurance policy limits, our business may be negatively and materially impacted.
+Added: If a successful claim is made against us and it is not covered by our insurance or exceeds the insurance policy limits, our business may be negatively and materially impacted.
Further, because our self-insurance reimbursements under our general and professional liability and workers compensation programs applies on a per claim basis, there is no limit to the maximum number of claims or the total amount for which we could incur liability in any policy period.
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Therefore, our reserves may prove to be insufficient and we may be exposed to significant and unexpected losses.
−Removed: The geographic concentration of our affiliated facilities could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas.
−Removed: Our affiliated facilities located in Arizona, California, and Texas account for the majority of our total revenue.
−Removed: As a result of this concentration, the conditions of local economies, changes in governmental rules, presence and participation of insurers, regulations and reimbursement rates or criteria, changes in demographics, state funding, acts of nature and other factors that may result in a decrease in demand and/or reimbursement for skilled nursing services in these states could have a disproportionately adverse effect on our revenue, costs and results of operations.
−Removed: Moreover, since over 24% of our affiliated facilities are located in California, we are particularly susceptible to revenue loss, cost increase or damage caused by natural disasters such as electrical power shortages, fires, earthquakes or mudslides, or increased liabilities that may arise from regulations as discussed within Item 2., under Government Regulation .
−Removed: In addition, our affiliated facilities in Iowa, Nebraska, Kansas, South Carolina, Washington and Texas are more susceptible to revenue loss, cost increases or damage caused by natural disasters including hurricanes, tornadoes and flooding.
−Removed: These acts of nature may cause disruption to us, the employees of our operating subsidiaries and our affiliated facilities, which could have an adverse impact on the patients of our operating subsidiaries and our business.
−Removed: In order to provide care for the patients of our operating subsidiaries, we are dependent on consistent and reliable delivery of food, pharmaceuticals, utilities and other goods to our affiliated facilities, and the availability of employees to provide services.
−Removed: If the delivery of goods or the ability of employees to reach our affiliated facilities were interrupted in any material respect due to a natural disaster or other reasons, it would have a significant impact on our affiliated facilities and our business.
+Added: The geographic concentration of our independent subsidiaries could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas.
+Added: Our independent subsidiaries located in Arizona, California, and Texas account for the majority of our total revenue.
+Added: As a result of this concentration, the conditions of local economies and real estate markets, changes in governmental rules, presence and participation of insurers, regulations and reimbursement rates or criteria, changes in demographics, state funding, acts of nature and other factors that may result in a decrease in demand and/or reimbursement for skilled nursing services in these states could have a disproportionately adverse effect on our revenue, costs and results of operations.
+Added: Moreover, since over 23% of our independent subsidiaries are located in California, we are particularly susceptible to revenue loss, cost increase or damage caused by natural disasters such as electrical power shortages, fires, earthquakes or mudslides, or increased liabilities that may arise from regulations as discussed within Item 2., under Government Regulation .
+Added: In addition, our independent subsidiaries in certain states are more susceptible to revenue loss, cost increases or damage caused by natural disasters including hurricanes, tornadoes and flooding.
+Added: These acts of nature may cause disruption to us, the employees of our independent subsidiaries, which could have an adverse impact on the patients of our independent subsidiaries and our business.
+Added: In order to provide care for the patients of our independent subsidiaries, we are dependent on consistent and reliable delivery of food, pharmaceuticals, utilities and other goods to our independent subsidiaries, and the availability of employees to provide services.
+Added: If the delivery of goods or the ability of employees to reach our independent subsidiaries were interrupted in any material respect due to a natural disaster or other reasons, it would have a significant impact on our independent subsidiaries and our business.
Furthermore, the impact, or impending threat, of a natural disaster may require that we evacuate one or more facilities, which would be costly and would involve risks, including potentially fatal risks, for the patients.
The impact of disasters and similar events is inherently uncertain.
−Removed: Such events could harm the patients and employees of our operating subsidiaries, severely damage or destroy one or more of our affiliated facilities, harm our business, reputation and financial performance, or otherwise cause our business to suffer in ways that we currently cannot predict.
+Added: Such events could harm the patients and employees of our independent subsidiaries, severely damage or destroy one or more of our independent subsidiaries, harm our business, reputation and financial performance, or otherwise cause our business to suffer in ways that we currently cannot predict.
The actions of a national labor union that has pursued a negative publicity campaign criticizing our business in the past may adversely affect our revenue and our profitability.
−Removed: We continue to maintain our right to inform the employees of our operating subsidiaries about our views of the potential impact of unionization upon the workplace generally and upon individual employees.
−Removed: Historically, the staff at our affiliated facilities that have been approached to unionize have uniformly rejected union organizing efforts.
+Added: We continue to maintain our right to inform the employees of our independent subsidiaries about our views of the potential impact of unionization upon the workplace generally and upon individual employees.
+Added: Historically, the staff at our independent subsidiaries that have been approached to unionize have uniformly rejected union organizing efforts.
Forthcoming proposed rules from CMS, which, based on the Biden-Harris Administration's executive orders discussed under Government Regulation in Item 2., as well as potential legislation such as the HCBS Access Act aimed toward providing more resources to those considering care-based careers, may increase the likelihood of employee unionization due to increased emphasis on care-based careers in SNF facilities.
If employees decide to unionize, our cost of doing business could increase, and we could experience contract delays, difficulty in adapting to a changing regulatory and economic environment, cultural conflicts between unionized and non-unionized employees, strikes and work stoppages, and we may conclude that affected facilities or operations would be uneconomical to continue operating.
−Removed: Because we lease the majority of our affiliated facilities, we are subject to risks associated with leased real property, including risks relating to lease termination, lease extensions and special charges, any of which could adversely affect our business, financial position or results of operations.
−Removed: As of September 30, 2023, we leased 213 of our 295 affiliated facilities.
+Added: Because we lease the majority of our independent subsidiaries, we are subject to risks associated with leased real property, including risks relating to lease termination, lease extensions and special charges, any of which could adversely affect our business, financial position or results of operations.
+Added: As of March 31, 2024, we leased 218 of our 302 independent subsidiaries.
Most of our leases are triple-net leases, which means that, in addition to rent, we are required to pay for the costs related to the property (including property taxes, insurance, and maintenance and repair costs).
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There can be no assurance that we will be able to comply with all of our obligations under the leases in the future.
−Removed: Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt, mortgage or operating lease arrangements, which could harm our operating subsidiaries and cause us to lose facilities or experience foreclosures.
+Added: Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt, mortgage or operating lease arrangements, which could harm our independent subsidiaries and cause us to lose facilities or experience foreclosures.
Our Credit Facility has a borrowing capacity of up to $600.0 million in aggregate principal amount.
−Removed: As of September 30, 2023 and through the filing date of this report, we had no outstanding borrowings under our Credit Facility.
+Added: As of March 31, 2024 and through the filing date of this report, we had no outstanding borrowings under our Credit Facility.
Twenty-three of our subsidiaries have mortgage loans insured with the Department of Housing and Urban Development (HUD) for an aggregate amount of $149.4 million, which subjects these subsidiaries to HUD oversight and periodic inspections.
The terms of the mortgage loans range from 25- to 35-years.
−Removed: We also have one outstanding promissory note with an aggregate principal amount of approximately $2.3 million as of September 30, 2023.
+Added: We also have one outstanding promissory note with an aggregate principal amount of approximately $2.0 million as of March 31, 2024.
The term of the note is 12 years.
−Removed: Because this mortgage loan is insured with HUD, our borrower subsidiary under the loan is subject to HUD oversight and periodic inspections.
−Removed: In addition, we had $2.7 billion of future operating lease obligations as of September 30, 2023.
−Removed: We intend to continue financing our operating subsidiaries through mortgage financing, long-term operating leases and other types of financing, including borrowings under our lines of credit and future credit facilities we may obtain.
+Added: Because this promissory note is insured with HUD, our borrower subsidiary under the note is subject to HUD oversight and periodic inspections.
+Added: In addition, we had $2.8 billion of future operating lease obligations as of March 31, 2024.
+Added: We intend to continue financing our independent subsidiaries through mortgage financing, long-term operating leases and other types of financing, including borrowings under our lines of credit and future credit facilities we may obtain.
We may not generate sufficient cash flow from operations to cover required interest, principal and lease payments.
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Because our term loans, promissory note, bonds, mortgages and lease obligations are fixed expenses and secured by specific assets, and because our revolving loan obligations are secured by virtually all of our assets, if reimbursement rates, patient acuity mix or occupancy levels decline, or if for any reason we are unable to meet our loan or lease obligations, we may not be able to cover our costs and some or all of our assets may become at risk.
−Removed: Our ability to make payments of principal and interest on our indebtedness and to make lease payments on our operating leases depends upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our operating subsidiaries, many of which are beyond our control.
+Added: Our ability to make payments of principal and interest on our indebtedness and to make lease payments on our operating leases depends upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our independent subsidiaries, many of which are beyond our control.
If we are unable to generate sufficient cash flow from operations in the future to service our debt or to make lease payments on our operating leases, we may be required, among other things, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets, reduce or delay planned capital expenditures or delay or abandon desirable acquisitions.
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In addition, any such financing, refinancing or sale of assets might not be available on terms that are economically favorable to us, or at all.
−Removed: Move-in and occupancy rates may remain unpredictable even after the COVID-19 pandemic is over.
−Removed: Occupancy levels at SNFs are likely to remain vulnerable to the effects of COVID-19 even after the pandemic is over.
−Removed: Facilities experiencing decreases in move-in rates cite resident or family member concerns as the basis for such decreases.
−Removed: These and other similar concerns may continue to impact our ability to attract new residents and our ability to retain existing residents.
A housing downturn could decrease demand for senior living services.
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As we expand our presence in other relevant healthcare industries, we would become subject to risks in a market in which we have limited experience.
−Removed: The majority of our affiliated facilities have historically been SNFs.
+Added: The majority of our independent subsidiaries have historically been SNFs.
As we expand our presence in other relevant healthcare industries, our existing overall business model will continue to change and expose our company to risks in markets in which we have limited experience, such as the Eliminating Kickbacks in Recovery Act and other state laws that are not as well-developed in regulation and decisional authority as their federal equivalents.
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If our referral sources fail to view us as an attractive skilled nursing provider, or if our referral sources otherwise refer fewer patients, our patient base may decrease.
−Removed: We rely significantly on appropriate referrals from hospitals, physicians, and other healthcare providers in the communities in which we deliver our services to attract appropriate residents and patients to our affiliated facilities.
+Added: We rely significantly on appropriate referrals from hospitals, physicians, and other healthcare providers in the communities in which we deliver our services to attract appropriate residents and patients to our independent subsidiaries.
Our referral sources are not obligated to refer business to us and may refer business to other healthcare providers.
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In addition, if any of our referral sources have a reduction in patients whom they can refer due to a decrease in their business, our occupancy rate and the quality of our patient mix could suffer.
−Removed: We may need additional capital to fund our operating subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow.
−Removed: Our ability to maintain and enhance our operating subsidiaries and equipment in a suitable condition to meet regulatory standards, operate efficiently and remain competitive in our markets requires us to commit substantial resources to continued investment in our affiliated facilities and equipment.
+Added: We may need additional capital to fund our independent subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow.
+Added: Our ability to maintain and enhance our independent subsidiaries and equipment in a suitable condition to meet regulatory standards, operate efficiently and remain competitive in our markets requires us to commit substantial resources to continued investment in our independent subsidiaries and equipment.
We are sometimes more aggressive than our competitors in capital spending to address issues that arise in connection with aging and obsolete facilities and equipment.
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treasury securities.
−Removed: As a result of the uncertain domestic and global political, economic, credit and financial market conditions, including the significant increases in the federal funds rate since 2021, an increase in the Consumer Price Index of 7% in 2022, which has continued at a slightly slower rate in 2023 that still exceeds target inflation, investments in these types of financial instruments pose risks arising from liquidity and credit concerns.
+Added: As a result of the uncertain domestic and global political, economic, credit and financial market conditions, including the significant increases in the federal funds rate since 2021, an increase in the Consumer Price Index of 7% in 2022, expected Consumer Price Index increases above historical norms for 2023, investments in these types of financial instruments pose risks arising from liquidity and credit concerns.
Given that future deterioration in the U.S.
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MCOs may be more aggressive than state Medicaid and federal Medicare agencies in denying claims or seeking recoupment of payments so that their services under these managed contracts are profitable.
−Removed: The additional steps created by the use of MCOs in disbursement of funds creates more risk of delayed, reduced, or recouped payments for our independent operating subsidiaries, and additional avenues for risks that include fines and other sanctions, including suspension or exclusion from participation in various governmental programs.
+Added: The additional steps created by the use of MCOs in disbursement of funds creates more risk of delayed, reduced, or recouped payments for our independent subsidiaries, and additional avenues for risks that include fines and other sanctions, including suspension or exclusion from participation in various governmental programs.
Compliance with the regulations of the Department of Housing and Urban Development may require us to make unanticipated expenditures which could increase our costs.
−Removed: Twenty-three of our affiliated facilities are currently subject to regulatory agreements with HUD that give the Commissioner of HUD broad authority to require us to be replaced as the operator of those facilities in the event that the Commissioner determines there are operational deficiencies at such facilities under HUD regulations.
+Added: Twenty-three of our independent subsidiaries are currently subject to regulatory agreements with HUD that give the Commissioner of HUD broad authority to require us to be replaced as the operator of those facilities in the event that the Commissioner determines there are operational deficiencies at such facilities under HUD regulations.
Compliance with HUD's requirements can often be difficult because these requirements are not always consistent with the requirements of other federal and state agencies.
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If we fail to safeguard the monies held in our patient trust funds, we will be required to reimburse such monies, and we may be subject to citations, fines and penalties.
−Removed: Each of our affiliated facilities is required by federal law to maintain a patient trust fund to safeguard certain assets of their residents and patients.
+Added: Each of our independent subsidiaries is required by federal law to maintain a patient trust fund to safeguard certain assets of their residents and patients.
If any money held in a patient trust fund is misappropriated, we are required to reimburse the patient trust fund for the amount of money that was misappropriated.
If any monies held in our patient trust funds are misappropriated in the future and are unrecoverable, we will be required to reimburse such monies, and we may be subject to citations, fines and penalties pursuant to federal and state laws.
−Removed: We are a holding company with no operations and rely upon our multiple independent operating subsidiaries to provide us with the funds necessary to meet our financial obligations.
+Added: We are a holding company with no operations and rely upon our multiple independent subsidiaries to provide us with the funds necessary to meet our financial obligations.
Liabilities of any one or more of our subsidiaries could be imposed upon us or our other subsidiaries.
We are a holding company with no direct operating assets, employees or revenue.
−Removed: Each of our affiliated facilities is operated through a separate, wholly owned, independent subsidiary, which has its own management, employees and assets.
+Added: Each of our independent subsidiaries is operated through a separate, wholly-owned, independent subsidiary, which has its own management, employees and assets.
Our principal assets are the equity interests we directly or indirectly hold in our multiple operating and real estate holding subsidiaries.
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federal income tax purposes.
−Removed: Standard Bearer elected to be taxed as a REIT for U.S.
−Removed: federal income tax purposes beginning with its taxable year ended December 31, 2022.
+Added: Standard Bearer has elected to be taxed as a REIT for U.S.
+Added: federal income tax purposes.
If Standard Bearer fails to qualify to be taxed as a REIT in any year, it would be subject to U.S.
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federal tax laws and interpretations thereof, whether under the TCJA or otherwise, could adversely affect an investment in our stock.
+Added: Additionally, REIT's that are related to our operation will likely be subject to the disclosure requirements of CMS's ownership transparency final rule, and may subject these REITs to additional public scrutiny.
No prediction can be made regarding whether new legislation or regulation (including new tax measures) will be enacted by legislative bodies or governmental agencies, nor can we predict what consequences would result from this legislation or regulation.
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Some of the factors are beyond our control and a change in any such factor could affect our ability to pay or maintain dividends.
−Removed: The Amended Credit Agreement restricts our ability to pay dividends to stockholders if we receive notice that we are in default under the agreement.
+Added: The Credit Facility restricts our ability to pay dividends to stockholders if we receive notice that we are in default under the agreement.
The failure to pay or maintain dividends could adversely affect our stock price.
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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.