LEGAL PROCEEDINGS
−Removed: Indemnities — From time to time, we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims.
+Added: Indemnities — From time to time, we enter into contracts that contingently require us to indemnify parties against third-party claims.
These contracts primarily include (i) certain real estate leases, under which we may be required to indemnify property owners or prior facility operators for post-transfer environmental or other liabilities and other claims arising from our use of the applicable premises, (ii) operations transfer agreements, in which we agree to indemnify past operators of facilities we acquire against certain liabilities arising from the transfer of the operation and/or the operation thereof after the transfer to our independent subsidiary, (iii) certain lending agreements, under which we may be required to indemnify the lender against various claims and liabilities, and (iv) certain agreements with our officers, directors and others, under which we may be required to indemnify such persons for liabilities based on the nature of their relationship to us.
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Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted.
−Removed: Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on our balance sheets for any of the periods presented.
+Added: Consequently, because no claims have been asserted, no liabilities have been recorded for any such potential obligation on our balance sheets for any of the periods presented.
Litigation and Regulatory Matters — Laws and regulations governing Medicare and Medicaid programs are complex and subject to review and interpretation.
−Removed: Compliance with such laws and regulations is evaluated regularly, the results of which can be subject to future governmental review and interpretation, and can include significant regulatory action with fines, penalties, and exclusion from certain governmental programs.
−Removed: Included in these laws and regulations is monitoring performed by the Office of Civil Rights which enforces the Health Insurance Portability and Accountability Act of 1996, the terms of which require healthcare providers (among other things) to safeguard the privacy and security of certain patient protected health information.
+Added: Compliance with such laws and regulations is evaluated regularly, the results of which can be subject to future governmental review and interpretation and can include significant regulatory action with the possibility of fines, penalties, and exclusion from certain governmental programs.
+Added: Included in these laws and regulations is the Health Insurance Portability and Accountability Act of 1996 (monitored and enforced by the Office of Civil Rights), the terms of which require healthcare providers (among other things) to safeguard the privacy and security of certain patient protected health information.
We and our independent subsidiaries are party to various legal actions and administrative proceedings and are subject to various claims arising in the ordinary course of business, including claims that services provided to patients by our independent subsidiaries have resulted in injury or death, and claims related to employment and commercial matters.
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In addition to being subject to regulatory oversight from state and federal agencies, the skilled nursing and post-acute care industry is also subject to regulatory requirements which, if noncompliance is identified, could result in civil, administrative or criminal fines, penalties or restitutionary relief, and/or reimbursement;
−Removed: authorities could also seek the suspension or exclusion of the provider or individual from participation in State and Federal healthcare programs.
−Removed: We believe that there has been, and will continue to be, an increase in governmental investigations of post-acute providers, particularly in the area of alleged Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations.
+Added: authorities could also seek the suspension or exclusion of a provider or individual from participation in State and Federal healthcare programs.
+Added: We believe that there has been, and will continue to be, an increase in governmental investigations of post-acute providers, particularly in alleged Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations.
Adverse determinations in civil legal proceedings or governmental investigations, whether currently asserted or arising in the future, could have a material adverse effect on our financial position, results of operations, and cash flows.
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We, on behalf of our independent subsidiaries, received a Civil Investigative Demand (CID) from the U.S.
−Removed: Department of Justice (DOJ) in January of 2024 indicating that the DOJ is investigating the Company to determine whether we have caused the submission of claims to Medicare and Texas Medicaid for services which were unnecessary or otherwise not consistent with existing reimbursement requirements.
+Added: Department of Justice (DOJ) in January of 2024 indicating that the DOJ is investigating the Company to determine whether claims have been submitted to Medicare and Texas Medicaid for services which were unnecessary or otherwise not consistent with existing reimbursement requirements.
The CID covers the period from January 1, 2016 to the present.
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However, we cannot predict the outcome of the investigation or its potential impact to the consolidated financial statements.
−Removed: In addition to the potential lawsuits and claims described above, we and our independent subsidiaries are also subject to potential lawsuits under the FCA and comparable state laws alleging submission of fraudulent claims for services to any healthcare program (such as Medicare or Medicaid) or other payor.
+Added: In addition to the potential lawsuits and claims described above, we and our independent subsidiaries are also subject to potential lawsuits under the FCA and comparable state laws alleging the submission of fraudulent claims for services to any Federal and State healthcare program (such as Medicare or Medicaid).
A violation may provide the basis for exclusion from federally funded healthcare programs.
−Removed: Such exclusions could have a correlative negative impact on our financial performance.
−Removed: In addition, and pursuant to the qui tam or "whistleblower" provisions of the FCA, a private individual with knowledge of fraud or potential fraud may bring a claim on behalf of the federal government and receive a percentage of any recovery obtained for the Federal government.
+Added: Such exclusions could also have a correlative negative impact on our financial performance.
+Added: In addition, and pursuant to the qui tam or "whistleblower" provisions of the FCA, a private individual with knowledge of fraud or potential fraud may bring a claim on behalf of the Federal government, and receive a percentage of any recovery obtained.
Due to these whistleblower incentives, qui tam lawsuits have become more frequent.
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From that time until December 2023, and notwithstanding our success in early pre-trial motions, we continued to incur legal defense costs and fees, including significant amounts related to the mandatory exchange of information between the parties in the fourth quarter of 2023.
−Removed: In early January 2024, we entered into mediation with the involved parties and on January 19, 2024, the parties agreed to settle the civil case for $48.0 million, subject to the review of the DOJ and other relevant government entities.
+Added: In 2024, we entered into mediation with the involved parties and agreed to settle the civil case for $48.0 million.
+Added: Following the finalization of the settlement documents and payment of the settlement funds, the qui tam complaint was dismissed and the matter was resolved.
The settlement does not include admissions on the part of the Company or our independent subsidiaries, and we maintain that we have consistently complied with and continue to comply with all applicable State and Federal statutes (including but not limited to the FCA and the AKS).
−Removed: The settlement documents are in the process of being finalized and, following payment of the settlement funds, the qui tam complaint will be dismissed and the matter will be resolved.
In addition to the FCA, some states, including California, Arizona and Texas, have enacted similar whistleblower and false claims laws and regulations.
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This includes the retention of any government overpayment.
−Removed: The government can argue, therefore, that an FCA violation can occur without any affirmative fraudulent action or statement, as long as the action or statement is knowingly improper.
+Added: The government can argue, therefore, that an FCA violation can occur without any affirmative fraudulent action or statement, if the action or statement is knowingly improper.
In addition, FERA extended protections against retaliation for whistleblowers, including protections not only for employees, but also contractors and agents.
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Healthcare litigation (including class action litigation) is common and is filed based upon a wide variety of claims and theories.
−Removed: We and our independent subsidiaries have been subjected to, and/or are currently involved in, class action litigation alleging violations (alone or in combination) of state and federal wage and hour law as related to the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and other such similar causes of action.
+Added: We and our independent subsidiaries have been subjected to, and/or are currently involved in, class action litigation alleging violations (alone or in combination) of state and federal wage and hour law related to the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and other such similar causes of action.
Additionally, in July of 2024, two of our independent subsidiaries received a subpoena to produce documents related to alleged environmental matters from the United States’ Attorney’s office for the Western District of Washington.
−Removed: Our independent subsidiaries are fully cooperating with the United States' Attorney’s office in response to the subpoena.
−Removed: We do not believe that the ultimate resolution of these actions will have a material adverse effect on our business, cash flows, financial condition or results of operations.
+Added: Our independent subsidiaries fully cooperated with the United States' Attorney’s office in response to the subpoena.
+Added: We recently learned that the United States’ Attorney’s office for the Western District of Washington has declined to pursue further proceedings in connection with this subpoena.
+Added: Although a state or other authority may pursue the subject matter of this inquiry, we do not believe that the ultimate resolution of this matter will have a material adverse effect on our business, cash flows, financial condition or results of operations.
We and our independent subsidiaries have been, and continue to be, subject to claims, findings and legal actions that arise in the ordinary course of the various businesses, including in connection with the delivery of healthcare and non-healthcare services.
These claims include but are not limited to potential claims related to patient care and treatment (professional negligence claims) as well as employment related claims.
−Removed: While we have been able to settle or otherwise resolve many of these types of claims without an ongoing material adverse effect on our business, a significant increase in the number of these claims, or an increase in the amounts owing should plaintiffs be successful in their prosecution of remaining or future claims, could materially adversely affect our business, financial condition, results of operations and cash flows.
+Added: While we have been able to settle or otherwise resolve many of these types of claims without an ongoing material adverse effect on our business, a significant increase in the number of these claims, or an increase in the amounts owed should plaintiffs be successful in their prosecution of remaining or future claims, could materially adversely affect our business, financial condition, results of operations and cash flows.
In addition, these claims could impact our ability to procure insurance to cover our exposure related to the various services provided by our independent subsidiaries to their residents, customers and patients.
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Medicare Revenue Recoupments — We and our independent subsidiaries are subject to regulatory reviews relating to the provision of Medicare services, billings and potential overpayments resulting from reviews conducted via RAC, various Program Safeguard Contractors and Medicaid Integrity Contractors (collectively referred to as Reviews).
−Removed: Reviews vary in claim selection size and processes, ranging from a single episode/claim month to larger, multi-claim batches;
+Added: Reviews vary in claim selection size and processes, ranging from a single episode/claim to larger, multi-claim batches;
and from single rounds of review to reviews of multiple rounds with pass/fail criteria.
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We anticipate that these Reviews could increase in frequency in the future.
−Removed: As of September 30, 2024 and through the filing date of this report, 18 of the our independent subsidiaries had multi-claim Reviews scheduled or in process.
−Removed: In June 2023, 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 SNF to check for compliance.
+Added: As of March 31, 2025 and through the filing date of this report, 18 of our independent subsidiaries had multi-claim Reviews scheduled or in process.
+Added: In June 2023, 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 SNF to evaluate for claims compliance.
In implementing this SNF 5-Claim Probe & Educate Review, CMS acknowledged that the increase in observed improper payments from 2021 to 2022 may have arisen from a “misunderstanding” by SNFs about how to appropriately bill for claims of service after October 1, 2019.
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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.