4 unchanged sentences
• Reforms to the U.S.
−Removed: 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: healthcare system, including new regulations under the ACA, new transparency and disclosure requirements, and federal and state standards for minimum nurse staffing levels, continue to impose new requirements upon us that could materially impact our business.
• Changes in the U.S.
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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.
−Removed: • 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.
+Added: • Public and government calls for increased enforcement efforts toward SNFs, past and potential rulemaking that results 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.
• 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.
1 unchanged sentence
• Future cost containment initiatives undertaken by payors may limit our revenue and profitability.
−Removed: • Changes in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.
+Added: • Reductions in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.
• We may be subject to increased investigation and enforcement activities related to HIPAA violations.
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• 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 independent subsidiaries are located may impact the volume and severity 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 and exposure in claims 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.
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Additionally, legislative or other actions affecting REITs could have a negative effect on Standard Bearer.
+Added: • Failure to comply with existing environmental laws could result in increased expenditures, litigation and potential loss to our business and in our asset value.
Risks Related to Ownership of our Common Stock
3 unchanged sentences
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 25.1% and 25.8% of our service revenue from the Medicare programs for the three and six months ended June 30, 2024, respectively, and 27.1% and 27.6% for the three and six months ended June 30, 2023, respectively.
+Added: We derived 24.5% and 25.3% of our service revenue from the Medicare programs for the three and nine months ended September 30, 2024, respectively, and 25.4% and 26.8% for the three and nine months ended September 30, 2023, respectively.
In addition, many other payors may use published Medicare rates as a basis for reimbursements.
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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 46.1% and 45.6% of our revenue for the three and six months ended June 30, 2024, respectively, and 46.0% and 45.6% for the three and six months ended June 30, 2023, respectively.
+Added: In fact, Medicaid is our largest source of revenue, accounting for 45.7% of our revenue for both the three and nine months ended September 30, 2024, respectively, and 46.7% and 46.0% for the three and nine months ended September 30, 2023, respectively.
Medicaid is a state-administered program financed by both state funds and matching federal funds.
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it is expected that Washington will continue to amend this law in the future.
−Removed: 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: 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 expended for direct care activities, including direct care staff wages and benefits.
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.
−Removed: 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.
+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, similar legislation in the future may seek to impose identical or analogous funding requirements for SNFs operating in California or other states.
Reforms to the U.S.
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In addition, even if the ACA is not amended or repealed, the President and the executive branch of the federal government, as well as CMS and HHS have a significant impact on the implementation of the provisions of the ACA, and a new administration could make changes impacting the implementation and enforcement of the ACA, which could harm our business, operating results and financial condition.
−Removed: We have already seen this with regulatory activity promulgating rules regarding anti-discrimination under Section 1557 of the ACA and most recently proposed rulemaking requiring the disclosure of SNF ownership and service providers under Section 6101 of the ACA.
+Added: We have already seen this with regulatory activity promulgating rules regarding anti-discrimination under Section 1557 of the ACA and recent rulemaking requiring SNFs to disclose their ownership and the ownership of service providers under Section 6101 of the ACA.
If we are slow or unable to adapt to any such changes, our business, operating results and financial condition could be adversely affected.
−Removed: Similarly, the Nursing Home Improvement Act proposed during the prior Congress may be re-introduced in the future and could ultimately have an impact on our business due to the proposed 2% decrease in payments to SNFs, as well as the staffing and reporting requirements contained within the bill.
−Removed: 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 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: Similarly, the Nursing Home Improvement Act proposed during the prior Congress may be re-introduced in the future and could ultimately have an impact on our business due to the proposed 2% decrease in payments to SNFs, as well as the staffing and reporting requirements contained within that bill.
+Added: While it is difficult to determine whether the Nursing Home Improvement Act or a similar 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.
+Added: In 2023, CMS issued a final rule that, requires SNFs to disclose certain information regarding their ownership and managerial relationships.
+Added: This final rule is more invasive and comprehensive than the ownership information already disclosed through Medicare's Nursing Home Compare website.
Refer to Item 2., under Government Regulation , for additional information.
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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: 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: 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 subsidiaries, creating still more uncertainty and unpredictability in the legislative process.
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.
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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: SNF PPS FY 2025 Proposed Rule proposed increased penalties that surveyors may impose on SNFs for perceived non-compliance with CMS’s requirements for SNF participation in Medicare.
−Removed: 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: SNF PPS FY 2025 Final Rule implemented increased penalties that surveyors may impose on SNFs for perceived non-compliance with CMS’s requirements for SNF participation in Medicare.
+Added: In addition, in 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.
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 .
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Ongoing failure to demonstrate improvement towards meeting all claim filing and documentation requirements could ultimately lead to Medicare decertification.
−Removed: As of June 30, 2024 and through the filing date of this report, 11 of our independent subsidiaries had reviews scheduled or in process, either pre- or post-payment.
+Added: As of September 30, 2024 and through the filing date of this report, 18 of our independent subsidiaries had multi-claim reviews scheduled or in process, either pre- or post-payment.
We anticipate that these reviews could increase in frequency in the future.
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and the medical necessity of rendered services.
−Removed: For example, refer to the matter discussed in Part II, Item 1.
−Removed: Legal Proceedings .
+Added: For example, refer to the matter discussed in Part II, Item 1., 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.
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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: CMS's recently finalized ownership transparency rule, and similar state disclosure rules such as California’s (for which new regulations took effect in March of 2024), 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.
−Removed: 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.
+Added: CMS's recently finalized ownership transparency rule, and similar state disclosure requirements such as California’s, 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.
+Added: We believe that such regulations that may adversely affect our business, operation and profitability.
+Added: The quantity and scope of these regulations may increase in the future and we cannot predict the ultimate content, timing or impact on us of any healthcare reform legislation.
If we fail to comply with these applicable laws and regulations, or their interpretations as determined by courts or enforced by regulators, we could suffer civil or criminal penalties and other detrimental consequences, including denial of reimbursement, imposition of fines, temporary suspension of admission of new patients, suspension or decertification from the Medicaid and Medicare programs, restrictions on our ability to acquire new facilities or expand or operate existing facilities, the loss of our licenses to operate and the loss of our ability to participate in federal and state reimbursement programs.
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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: 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: Within the SNF PPS FY 2025 Final Rule, CMS was granted greater ability to impose monetary penalties upon SNFs for incident-based and day-based violations of CMS’s conditions of participation.
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.
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.
−Removed: 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.
+Added: The likely result may be more frequent surveys of our independent subsidiaries, with more substantial penalties, fines and other 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.
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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: The OIG has been studying the SFF program, including its 2022 updates, to understand the program’s outcomes, identify factors that aided SFFs that successfully graduated the SFF program with sustained quality improvements, and make further changes based on the data obtained in this study.
CMS clarified certain details of the SFF program updates in 2023 and how they are to be implemented by each state survey agency (SA).
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This three-year look-back 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.
−Removed: As of June 30, 2024, we have three facilities graduated from the SFF program within the past three years.
+Added: As of September 30, 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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Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient or resident capacity, and profitability.
−Removed: On April 22, 2024 CMS issued its final rule establishing minimum staffing standards for skilled nursing facilities (the Staffing Rule).
+Added: On April 22, 2024 CMS issued the Staffing Rule, establishing minimum staffing standards for SNFs.
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.
−Removed: Due to pending legislation in both the House of Representatives and the Senate, industry litigation filed to dispute the Staffing Rule's validity and enforceability, as well as the long phase in of the requirements, the exact effects of the Staffing Rule cannot be ascertained.
+Added: Due to pending legislation in both the House of Representatives and the Senate, industry litigation filed to dispute the Staffing Rule's validity and enforceability, as well as the long phase in of the requirements, the exact effects of the Staffing Rule cannot yet be ascertained.
+Added: Given the pending legislation before both houses of Congress and potential changes in composition or control of those bodies following the 2024 presidential election, future developments may significantly alter or even halt the implementation of the Staffing Rule.
However, we expect that the Staffing Rule in its current form will have adverse financial consequences upon our business.
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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 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: Under both the 2024 PFS Final Rule, and the 2025 PFS Proposed 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.
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.
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Unauthorized parties may attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud or other forms of deception.
−Removed: Additionally, the rapid ongoing evolution and increased adoption of emerging technologies such as artificial intelligence and machine learning may make it more difficult to anticipate and implement protective measures to recognize, detect and prevent the occurrence of cybersecurity breaches.
+Added: Additionally, the rapid ongoing evolution and increased adoption of emerging technologies such as artificial intelligence and machine learning may make it more difficult to anticipate and implement protective measures to recognize, detect and prevent the occurrence of data breaches, including but not limited to cybersecurity breaches.
On occasion, we have acquired additional information systems through our business acquisitions, and these acquired systems may expose us to risk.
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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 fall 2023 work plan.
+Added: The OIG identified SNF compliance as an issue of concern in its 2021, 2022, 2023 and Spring 2024 semi-annual reports to Congress.
+Added: The OIG's 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.
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.
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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.
−Removed: 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.
+Added: A bill in the State of California was signed into law which increases the cap of non-economic damages awarded to plaintiffs who are successful in medical malpractice litigation.
The cap increases from $0.25 million to $0.35 million beginning on January 1, 2023, then increases over the following 10 years until the cap reaches a maximum of $0.75 million, with further adjustments for inflation.
In wrongful death cases, the cap increases from $0.25 million to $0.5 million on January 1, 2023, with incremental increases over the following 10 years until the cap reaches a maximum of $1.0 million, with adjustments for inflation.
−Removed: 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 subsidiaries.
+Added: Due to California's influence on other states, other jurisdictions where we operate have enacted and may enact similar laws in the future.
+Added: Similar to the potential incentive of increased damages caps, the Supreme Court’s recent decision in a 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.
4 unchanged sentences
As with the bill that increases the cap of non-economic damages for medical malpractice litigation, California’s influence on other states may result in this legislation becoming a model for other states and having similar, potentially adverse effects within those jurisdictions as well.
−Removed: In late 2023, California passed and its governor signed into law SB-525, which would increase the minimum wage for healthcare workers upon passage of a companion bill imposing minimum spending requirements upon SNFs.
+Added: Effective October 2024, California law SB525 will increase the minimum wage for healthcare workers.
+Added: However, the law will only impact SNFs upon passage of a companion bill imposing minimum spending requirements upon SNFs.
+Added: For the 2023-2024 California legislative session, this minimum spending bill took the form of AB1537 and, as of October 2024 has been placed in suspense without further action.
+Added: A future bill may still be passed that would trigger SB525's requirements for healthcare workers in SNFs to receive higher minimum wages.
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.
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We also may be subject to employee-related claims such as wrongful discharge, discrimination or violation of equal employment law.
−Removed: While we are insured for these types of claims, we could be subject to damages that are not covered by our insurance policies or that exceed our insurance limits, and we may be required to pay such damages directly, which would negatively impact our cash flow from operations.
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.
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We generally receive higher reimbursement rates for high acuity patients, and payors reimburse us at different rates.
−Removed: For the three and six months ended June 30, 2024, 71.2% and 71.4%, of our revenue was provided by government payors that reimburse us at predetermined rates, respectively.
+Added: For the three and nine months ended September 30, 2024, 70.2% and 71.0%, 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.
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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.
−Removed: Refer to Part II, Item 1.
−Removed: Legal Proceedings for additional information on this case.
+Added: Refer to Part II, Item 1., 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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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.
−Removed: During the six months ended June 30, 2024, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases, with the addition of 13 stand-alone skilled nursing operations and two campus operations.
+Added: During the nine months ended September 30, 2024, 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 and two campus operations.
This growth has placed and will continue to place significant demands on our current management resources.
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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.
−Removed: In April 2024, CMS announced that it is freezing four quality measures, with one short-stay measure to be replaced in October of 2024 and the other three measures to be unfrozen in January of 2025.
−Removed: CMS will also be freezing three of its staffing level measures until July of 2024, although these frozen measures will not affect staff turnover measures.
−Removed: Additionally, CMS announced that it is changing its staffing rating methodology to give the lowest possible score to and penalize providers that fail to provide staffing data or provide erroneous staffing data.
−Removed: These changes risk our independent operating subsidiaries’ facilities being incorrectly awarded a lower star rating, or prevented from attaining a deserved higher ranking due to favorable data not being reflected in CMS’s five-star ratings due to the freeze or replacement of certain measures.
−Removed: These lower ratings may cause potential residents to evaluate these independent operating subsidiaries’ facilities as less desirable, and result in fewer admissions and thus reduced revenue.
−Removed: In July 2024, CMS will change the staffing case-mix adjustment methodology to a model based on PDPM.
+Added: In April 2024, CMS announced that it is freezing four quality measures, with one short-stay measure which was replaced in October of 2024 with the new Discharge Function Score Measure and the other three measures to be unfrozen in January of 2025.
+Added: CMS has unfrozen its staffing level measures with changes to the time period needed to constitute the cessation of employment for the purposes of turnover measurement.
+Added: CMS announced that it is changing its staffing rating methodology to give the lowest possible score to and penalize providers that fail to provide staffing data or provide erroneous staffing data.
+Added: These changes risk our independent subsidiaries’ facilities being incorrectly awarded a lower star rating, or prevented from attaining a deserved higher ranking due to favorable data not being reflected in CMS’s five-star ratings due to the freeze or replacement of certain measures.
+Added: These lower ratings may cause potential residents to evaluate these independent subsidiaries’ facilities as less desirable, and result in fewer admissions and thus reduced revenue.
+Added: In July 2024, CMS changed the staffing case-mix adjustment methodology to a model based on PDPM.
The Nursing Home Compare website will then begin posting staffing level measures that use this methodology.
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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 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.
−Removed: As of June 30, 2024, we leased 222 of our 312 independent subsidiaries.
+Added: Because we lease the majority of the facilities operated by 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 September 30, 2024, our independent subsidiaries operated 231 of our 322 facilities under long term lease arrangements.
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).
5 unchanged sentences
Our Credit Facility has a borrowing capacity of up to $600.0 million in aggregate principal amount.
−Removed: As of June 30, 2024 and through the filing date of this report, we had no outstanding borrowings under our Credit Facility.
+Added: As of September 30, 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 $147.7 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 $1.8 million as of June 30, 2024.
+Added: We also have one outstanding promissory note with an aggregate principal amount of approximately $1.7 million as of September 30, 2024.
The term of the note is 12 years.
Because this promissory note is insured with HUD, our borrower subsidiary under the note is subject to HUD oversight and periodic inspections.
−Removed: In addition, we had $2.8 billion of future operating lease obligations as of June 30, 2024.
+Added: In addition, we had $2.9 billion of future operating lease obligations as of September 30, 2024.
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.
22 unchanged sentences
As we continue to acquire and lease real estate assets, we may not be successful in identifying and consummating these transactions.
−Removed: We lease 30 of our properties to third-party operators.
+Added: As of September 30, 2024, we lease 30 of our properties to third-party operators.
In the future, we might expand our leasing property portfolio to additional tenants.
34 unchanged sentences
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, 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.
+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, and 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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The ability of our subsidiaries to make distributions to us will depend substantially on their respective operating results and will be subject to restrictions under, among other things, the laws of their jurisdiction of organization, which may limit the amount of funds available for distribution to investors or stockholders, agreements of those subsidiaries, the terms of our financing arrangements and the terms of any future financing arrangements of our subsidiaries.
−Removed: If the separation of Pennant fails to qualify as generally tax-free for U.S.
−Removed: federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.
−Removed: The spin-off in 2019 is intended to qualify for tax-free treatment to us and our stockholders for U.S.
−Removed: federal income tax purposes.
−Removed: Accordingly, completion of the transaction was conditioned upon, among other things, our receipt of opinions from outside tax advisors that the distributions would qualify as a transaction that is intended to be tax-free to both us and our stockholders for U.S.
−Removed: federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.
−Removed: The opinions were based on and relied on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings, including those relating to the past and future conduct.
−Removed: If any of these facts, assumptions, representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if any of the parties' breach any of their respective covenants relating to the transactions, the tax opinions may be invalid.
−Removed: Moreover, the opinions are not binding on the IRS or any courts.
−Removed: Accordingly, notwithstanding receipt of the opinion, the IRS could determine that the distribution and certain related transactions should be treated as taxable transactions for U.S.
−Removed: federal income tax purposes.
−Removed: If the spin-off fails to qualify as a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code, in general, for U.S.
−Removed: federal income tax purposes, we would recognize taxable gain with respect to the distributed securities and our stockholders who received securities in such distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
−Removed: We also have obligations to provide indemnification to a number of parties as a result of the transaction.
−Removed: Any indemnity obligations for tax issues or other liabilities related to the spin-off, could be significant and could adversely impact our business.
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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Any of these taxes would decrease cash available for distribution to its shareholders.
+Added: Failure to comply with existing environmental laws could result in increased expenditures, litigation and potential loss to our business and in our asset value.
+Added: Our independent subsidiaries are subject to regulations under various federal, state and local environmental laws, primarily those relating to the handling, storage, transportation, treatment and disposal of medical waste;
+Added: the identification and warning of the presence of asbestos-containing materials in buildings, as well as the encapsulation or removal of such materials;
+Added: and the presence of other substances in the indoor environment.
+Added: Our independent subsidiaries generate infectious or other hazardous medical waste due to the illness or physical condition of the patients.
+Added: Each of our independent subsidiaries has an agreement with a waste management company for the proper disposal of all infectious medical waste, but the use of a waste management company does not immunize us from alleged violations of such laws even if carried out by a third party, nor does it immunize us from third-party claims for the cost to cleanup disposal sites at which such wastes have been disposed.
+Added: Some of the independently operated facilities we lease, own or may acquire may have asbestos-containing materials.
+Added: Federal regulations require building owners and those exercising control over a building's management to identify and warn their employees and other employers operating in the building of potential hazards posed by workplace exposure to installed asbestos-containing materials and known or suspected asbestos-containing materials in their buildings.
+Added: Significant fines can be assessed for violation of these regulations.
+Added: Building owners and those exercising control over a building's management may be subject to an increased risk of personal injury lawsuits.
+Added: Federal, state and local laws and regulations also govern the removal, encapsulation, disturbance, handling and disposal of asbestos-containing materials and potential asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation or demolition of a building.
+Added: Such laws may impose liability for improper handling or a release into the environment of asbestos containing materials and potential asbestos-containing materials and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with asbestos-containing materials and potential asbestos-containing materials.
+Added: The presence of mold, lead-based paint, underground storage tanks, contaminants in drinking water, radon and/or other substances at our independent subsidiaries may lead to the incurrence of costs for remediation, mitigation or the implementation of an operations and maintenance plan and may result in third party litigation for personal injury or property damage.
+Added: If we fail to comply with applicable environmental laws, we would face increased expenditures in terms of fines and remediation of the underlying problems, potential litigation relating to exposure to such materials, and a potential decrease in value to our business and in the value of our underlying assets.
Risks Related to Ownership of our Common Stock
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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.