What changed in this filing

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Item 1A. Risk Factors

2025-04-29 compared with 2024-10-24 · 122 added, 116 removed, 711 unchanged (25% of the section changed)

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.

• Reforms to the U.S.

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.

political environment may result in significant changes to the regulatory framework, enforcement, and reimbursements in our industry.

• State-level direct spending requirements could negatively impact our results of operations.

• Changes to the U.S.

healthcare system, including changes to the ACA or its regulations, 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.

• Anticipated changes in the U.S.

political environment, including those as a result of the change in Presidential administration and control of Congress, and to regulatory agencies, particularly HHS, may result in significant changes to the regulatory framework, enforcement, and reimbursements in our industry, including changes in payment rules.

• 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.

51 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.

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.

We derived 24.7% and 26.4% of our service revenue from the Medicare programs for the three months ended March 31, 2025 and 2024, respectively.

In addition, many other payors may use published Medicare rates as a basis for reimbursements.

12 unchanged sentences

• changes in staff requirements as a condition of payment or eligibility for Medicare reimbursement (See also, Item 2., under Government Regulation );

• the reduction or elimination of annual rate increases, or the end of the reduced payments deferment (See also, Item 2., under Government Regulation );

• the reduction or elimination of annual rate increases, implementation of reimbursement decreases, or the end of the reduced payments deferment (See also, Item 2., under Government Regulation );

• an increase in co-payments or deductibles payable by beneficiaries.

4 unchanged sentences

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.

The Biden-Harris Administration focused on studying the nursing home industry and directed HHS to issue proposed rules based on those studies, including changes to SNF facility reimbursement and specifically, the SNF-VBP Program, which may also adversely affect our reimbursement.

The change in presidency following the 2024 presidential election, with the new Presidential Administration beginning in January of 2025, may result in different focuses with respect to the nursing home industry.

The new Presidential Administration's policy directives and priorities regarding the nursing home industry and SNFs in particular are not yet known.

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.

3 unchanged sentences

A significant portion of reimbursement for skilled nursing services comes from Medicaid.

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.

In fact, Medicaid is our largest source of revenue, accounting for 44.8% and 45.2% of our revenue for the three months ended March 31, 2025 and 2024, respectively.

Medicaid is a state-administered program financed by both state funds and matching federal funds.

15 unchanged sentences

it is expected that Washington will continue to amend this law in the future.

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.

For state fiscal year 2024, Texas requires all nursing facilities must show that a portion of 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.

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.

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 being 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.

2 unchanged sentences

CMS continues to issue rules to implement the ACA, including most recently, new rules regarding the implementation of the anti-discrimination provisions and proposed rules requiring the disclosure of SNF ownership, organization, management and the identity of the real property owners from which the SNF leases or subleases its operating space.

With the passage of the IRA in August of 2022, Congress continues to expand and supplement the ACA, including through the continuation of federally funded insurance premium subsidies.

With the passage of the IRA in 2022, Congress expanded and supplemented the ACA, including through the continuation of federally funded insurance premium subsidies.

This modification of the ACA by the IRA indicates that Congress may continue to change and expand the ACA in the future.

The outcome of the 2024 presidential election and the commencement of the current Presidential Administration in January of 2025, changing control of the Presidency to the Republican party, may bring about further changes to the ACA, including reversing regulatory changes made under the Biden-Harris Administration.

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.

2 unchanged sentences

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.

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.

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.

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 under the current Presidential Administration, and the Senate, where the Republican party now holds a majority of seats.

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.

It is expected that the incoming Presidential Administration will make changes impacting the implementation and enforcement of the ACA, which could harm our business, operating results and financial condition.

We have already seen such changes with the Biden-Harris Administration's 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.

It is not possible to know whether, when, or how any or all of these regulations or their implementation will be changed, the manner in which any change may be effected, and the ultimate effects of such changes on our business.

If we are slow or unable to adapt to any such changes, our business, operating results and financial condition could be adversely affected.

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.

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.

In 2023, CMS issued a final rule that, requires SNFs to disclose certain information regarding their ownership and managerial relationships.

In 2023, CMS issued a final rule requiring SNFs to disclose certain information regarding their ownership and managerial relationships which was fully implemented in November of 2024.

This final rule is more invasive and comprehensive than the ownership information already disclosed through Medicare's Nursing Home Compare website.

6 unchanged sentences

However, it is possible these new laws may lower reimbursement or increase the cost of doing business and adversely affect our business.

The changes in Congress due to the U.S.

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.

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.

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.

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.

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.

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.

Anticipated changes in the U.S.

political environment, including those as a result of the change in Presidential administration and control of Congress, and to regulatory agencies, particularly HHS, may result in significant changes to regulatory framework, enforcements and reimbursements.

As a result of the 2024 presidential election, changes in control of in the Presidency and the Senate that took effect in January of 2025 may 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.

In particular, proposals regarding HHS and certain programs and regulation concerning health care, including Medicare, Medicaid, and the ACA, have indicated that the incoming Presidential Administration seeks to make changes to these programs and laws, as well as their implementation.

Other pending legislation, such as the proposed to be reintroduced Protecting America’s Seniors’ Access to Care Act and the reintroduced 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.

Changes to existing policies and rules regarding nursing facilities, including those recently instituted, in addition to anticipated new rule proposals, may result in significant regulatory changes, increased survey frequency and scope, and increased penalties for non-compliance.

With the changes in the presidential administration, we anticipate that there may be changes in legislative control and legislative priorities.

As a result, future legislation may be proposed or passed that may adversely affect our business, operating results and financial condition.

We continually monitor these developments in order to respond to the changing regulatory environment impacting our business.

While it is not possible to predict whether and when any such changes will occur, specific proposals discussed during and after the election, including a repeal or material amendment of the ACA (whether to increase or decrease its scope), could harm our business, operating results and financial condition.

While it is not possible to predict whether and when any such changes will occur, specific proposals discussed during and after the election, including a repeal or material amendment of the ACA, potential cuts to the Medicare or Medicaid programs by Congress through the budget reconciliation process, or other laws affecting the provision of healthcare services, could harm our business, operating results and financial condition.

If we are slow or unable to adapt to any such changes, our business, operating results and financial condition could be adversely affected.

3 unchanged sentences

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.

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.

This scrutiny may not change due to a change of Presidential Administration, including changes to the leadership of HHS and CMS.

The 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.

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 .

In 2022, CMS updated guidance for Phase 2 and 3 of the requirements of participation, discussed in greater detail in Item 2., under Government Regulation .

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.

17 unchanged sentences

Ongoing failure to demonstrate improvement towards meeting all claim filing and documentation requirements could ultimately lead to Medicare decertification.

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.

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, either pre- or post-payment.

We anticipate that these reviews could increase in frequency in the future.

29 unchanged sentences

These laws and regulations are subject to frequent change.

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.

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.

As noted above, the Biden-Harris Administration 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.

The change in Presidential Administration, including changes to the leadership of HHS and CMS, may not result in any change, abatement, or reduction in the enforcement of these policies, and instead could lead to even greater scrutiny.

CMS's ownership transparency rule, which was fully implemented by November of 2024, 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.

We believe that such regulations that may adversely affect our business, operation and profitability.

7 unchanged sentences

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.

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.

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.

1 unchanged sentence

Furthermore, should we lose licenses or certifications for a number of our facilities or other businesses as a result of regulatory action or legal proceedings, we could be deemed to be in default under some of our agreements, including agreements governing outstanding indebtedness.

Public and government calls for increased survey and enforcement efforts toward SNFs, and potential rulemaking that may result in enhanced enforcement and penalties, could result in increased scrutiny by state and federal survey agencies.

Public and government calls for increased survey and enforcement efforts toward SNFs, past and potential rulemaking that results in enhanced enforcement and penalties, could result in increased scrutiny by state and federal survey agencies.

In addition, potential sanctions and remedies based upon alleged regulatory deficiencies could negatively affect our financial condition and results of operations.

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.

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.

CMS's efforts to enhance its enforcement powers and increase enforcement activities towards SNFs, as discussed in Item 2., under Government Regulation , result in state survey agencies having more accountability for their survey and enforcement efforts.

Within the SNF PPS FY 2025 Final Rule, CMS obtained 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 represented further federal calls for transparency, oversight and penalties for low-ranked and underperforming SNFs.

These policies may prove to be popular, effective, or otherwise desirable and might not change with a new Presidential Administration, including under new leadership of HHS and CMS.

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.

7 unchanged sentences

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.

Furthermore, in some states, citation of one independent subsidiaries could negatively impact other independent subsidiaries in the same state.

Furthermore, in some states, citation of one independent subsidiary 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.

CMS’s proposed rules requiring disclosure of ownership, management and the owners of real property lessors or sublessors, which are greater and more intrusive than existing disclosure requirements heighten this risk.

CMS’s rules requiring disclosure of ownership, management and the owners of real property lessors or sublessors, which are greater and more intrusive than existing disclosure requirements heighten this risk.

Our failure to comply with applicable legal and regulatory requirements in any single facility could negatively impact our financial condition and results of operations.

From time to time, we have opted to voluntarily stop accepting new patients pending completion of a new state survey, in order to avoid possible denial of payment for new admissions during the deficiency cure period, or simply to avoid straining staff and other resources while retraining staff, upgrading operating systems or making other operational improvements.

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.

From time to time, we have opted to voluntarily stop accepting new patients pending completion of a revisit survey, in order to avoid possible denial of payment for new admissions during the deficiency cure period, or simply to avoid straining staff and other resources while retraining staff, upgrading operating systems or making other operational improvements.

If we elect to voluntarily 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.

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.

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.

We currently have no facility placed on SFF status.

We currently have one 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.

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.

As 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.

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.

In June of 2024, the OIG added the SFF program to its Work Plan for continued attention.

CMS clarified certain details of the SFF program updates in 2023 and how they are to be implemented by each state survey agency (SA).

3 unchanged sentences

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.

As of September 30, 2024, we have three facilities graduated from the SFF program within the past three years.

As of March 31, 2025, we have one facility that 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.

1 unchanged sentence

Second, for SNFs that have graduated from the SFF program, they are subject to a three-year period of enhanced scrutiny where adverse findings by a SA and a single survey’s finding of poor compliance may result in CMS discretionally terminating that facility’s Medicare and/or Medicaid participation, which would likely cause other payors to terminate their agreements with the facility as well.

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.

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 CMS imposes fines and penalties up to the termination of the facility’s Medicare and Medicaid participation.

As discussed above, Medicare and Medicaid represent significant sources of payment for our independent subsidiaries.

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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.

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.

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.

We may be required to hire substantially more staff members, particularly nurse practitioners, registered nurses, and nursing aides than currently staffed.

Currently, implementation of the Staffing Rule is stayed due to a judicial decision enjoining the rule’s implementation.

However, this ruling is expected to be appealed, and the Staffing Rule may yet be implemented, whether on the schedule set forth in the rule or on a different timeline.

Additionally, due to pending legislation in both the House of Representatives and the Senate, as well as the long phase-in of the Staffing Rule's requirements, the exact effects of the Staffing Rule cannot yet be ascertained.

Given the pending legislation before both houses of Congress, change in control of the Presidency, changes in leadership of HHS and CMS, and change in control of the Senate 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 unless or until it is repealed, enjoined, or otherwise prevented from taking effect.

If the Staffing Rule ultimately is implemented, we may be required to hire substantially more staff members, particularly nurse practitioners, registered nurses, and nursing aides than currently staffed.

Additionally, the Staffing Rule would place similar pressure on our competitors and result in sudden, expanded demand for nursing staff across the SNF industry.

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We are continuing our efforts to develop our non-Medicare and non-Medicaid sources of revenue and any changes in payment levels from current or future third-party payors could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.

Changes in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.

Reductions in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.

As discussed in greater detail in Item 2., under Government Regulation , MACRA revised the payment system for physician and non-physician services.

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.

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.

Under both the 2024 and 2025 PFS Final Rules, 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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Healthcare businesses are increasingly the target of cyberattacks whereby hackers disrupt business operations or obtain protected health information, often demanding large ransoms.

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.

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.

In 2024, healthcare was among the most-breached sector of the economy based on publicly disclosed information.

The frequency of this activity has increased precipitously.

Our business is dependent on the proper functioning and availability of our computer systems and networks.

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If a cyber-attack or other unauthorized attempt to access our systems or facilities were successful, it could also result in the theft, destruction, loss, misappropriation or release of confidential information or intellectual property, and could cause operational or business delays that may materially impact our ability to provide various healthcare services.

Any successful cyber-attack or other unauthorized attempt to access our systems or facilities also could result in negative publicity which could damage our reputation or brand with our patients, referral sources, payors or other third parties and could subject us to a number of adverse consequences, the vast majority of which are not insurable, including but not limited to, disruptions in our operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, Federal Trade Commission, Office of Civil Rights, the OIG or state attorneys general), fines, private litigation with those affected by the data breach (including class action litigation), loss of customers, disputes with payors and increased operating expense, which either individually or in the aggregate could have a material adverse effect on our business, financial position, results of operations, liquidity, and stock price.

Any successful cyber-attack or other unauthorized attempt to access our systems or facilities also could result in negative publicity which could damage our reputation or brand with our patients, referral sources, payors or other third parties and could subject us to a number of adverse consequences, the vast majority of which are not insurable, including but not limited to, disruptions in our operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, FTC, OCR, the OIG or state attorneys general), fines, private litigation with those affected by the data breach (including class action litigation), loss of customers, disputes with payors and increased operating expense, which either individually or in the aggregate could have a material adverse effect on our business, financial position, results of operations, liquidity, and stock price.

We may not be fully reimbursed for all services for which each facility bills through consolidated billing, which could adversely affect our revenue, financial condition and results of operations.

1 unchanged sentence

The consolidated billing requirement requires the SNF to effectively bill for the entire package of care that its patients receive in these situations.

Post-hospitalization skilled nursing services must be “bundled” into the hospital's diagnostic related group (DRG) payment in certain circumstances, in which case the hospital and SNF must effectively divide the payment that otherwise would have been made to the hospital.

Although this practice is uncommon, it adversely affects SNF utilization and payments, whether due to the practical difficulty of this apportionment or hospitals being reluctant to lose revenue by discharging patients to a SNF.

If more payments are required to be bundled in the future, this trend may continue, with our SNFs not receiving full reimbursement for all the services they provide, and have a further adverse effect on SNF utilization and revenue.

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We compete with various healthcare service providers, including other skilled nursing providers, in retaining and attracting qualified and skilled personnel.

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.

Our independent SNFs are located in the states of Alabama, Alaska, Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, Oregon, 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.

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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.

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.

Federal laws and regulations, such as the Staffing Rule (if implemented), 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.

The Biden-Harris Administration's desire to increase staffing level requirements for the nursing home industry and to tie reimbursement to the salary, benefits, and retention of staff also may increase our labor costs.

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.

The Biden-Harris Administration sought to increase staffing level requirements for the nursing home industry and to tie reimbursement to the salary, benefits, and retention of staff, which may increase our labor costs.

Current judicial actions staying implementation of the Staffing Rule may not be final or permanent.

Additionally, the change in Presidential Administration may not result in a change in this policy, and instead it is possible that HHS and CMS, under new leadership, could impose more stringent requirements for staffing.

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 regulations that increase our staffing requirements and labor costs or lower revenues.

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.

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Increased competition for, or a shortage of, nurses or other trained personnel, or general ongoing inflationary pressures may require that we enhance our pay and benefits packages to compete effectively for such personnel.

Turnover rates and the magnitude of the shortage of nurses or other trained personnel vary substantially from facility to facility, and may adversely affect those facilities' quality ratings based on data reported to CMS.

In addition, state laws regarding minimum wage increases, such as California’s minimum wage increases for both health care and fast-food workers, may intensify competition for unskilled labor in both skilled and unskilled settings.

Turnover rates and the magnitude of the shortage of nurses or other trained personnel vary substantially from operation to operation and may adversely affect those operations' quality ratings based on data reported to CMS.

In addition, state laws regarding minimum wage increases, such as California’s minimum wage increases for both healthcare and fast-food workers, may intensify competition for unskilled labor in both skilled and unskilled settings.

For skilled workers within the skilled care market where we operate, the costs of skilled labor, which are already greater than unskilled labor, could increase further.

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Annual caps and other cost-reductions for outpatient therapy services may reduce our future revenue and profitability or cause us to incur losses.

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.

Of specific concern has been CMS efforts to lower Medicare Part B reimbursement rates for outpatient therapy services.

Of specific concern has been CMS efforts to lower Medicare Part B reimbursement rates for outpatient therapy services, which are reduced by 2.83% in the 2025 PFS Final Rule.

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.

The OIG identified SNF compliance as an issue of concern in its 2021, 2022, 2023 and Spring 2024 semi-annual reports to Congress.

The OIG identified SNF compliance as an issue of concern in its 2021, 2022, 2023 and 2024 semi-annual reports to Congress.

In June 2024, the OIG continued to focus on SNFs, adding the SFF Program to its Work Plan.

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.

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.

Nursing homes were also a topic of discussion in the OIG’s 2023 semi-annual report to Congress, which emphasized the continued protection and oversight of care that nursing facilities provide to residents.

Among other things, the OIG recommended attention to the rate of reimbursement for professional services rendered within facilities.

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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.

Prior publications and statements by the Biden-Harris Administration have also called for greater scrutiny of SNF facilities.

Following the 2024 presidential election, it is not yet known whether the new Presidential Administration will follow the same policies and seek further or escalating scrutiny of SNFs, or whether it will retain any or all of the Biden-Harris Administration’s priorities regarding SNFs.

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.

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Due to California's influence on other states, other jurisdictions where we operate have enacted and may enact similar laws in the future.

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.

Similar to the potential incentive of increased damages caps, recent Supreme Court decisions 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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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.

Effective October 2024, California law SB525 will increase the minimum wage for healthcare workers.

However, the law will only impact SNFs upon passage of a companion bill imposing minimum spending requirements upon SNFs.

Effective October 2024, California law SB525 increased the minimum wage for healthcare workers.

However, the law will only impact SNFs upon passage of a companion bill imposing minimum direct spending requirements upon SNFs.

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.

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Changes to federal and state regulations and laws are discussed in more detail in Item 2., under Government Regulation.

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.

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.

The Biden-Harris Administration requested that 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.

The incoming Presidential Administration, as well as new leadership of HHS or CMS, may discontinue these studies, discontinue ongoing rulemaking activity, and may pursue significantly different policy-setting and rulemaking priorities that do not include any of the Biden-Harris Administration’s priorities.

Simultaneously, certain actions taken under the Biden-Harris Administration, such as increased enforcement authority by HHS and CMS, may be retained and utilized by the incoming Presidential Administration and its new leaders of HHS and CMS.

Other pending legislation, such as the HCBS Access Act, indicated a legislative priority of providing funding for care-based careers that may affect our pool of desired workers.

Due to a change of political party control of both houses of Congress, though, such legislation may have a lower likelihood of passing, even if reintroduced in a subsequent congress.

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.

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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.

Additionally, the Fair Housing Act and other similar state laws require that we do not advertise our services in a way that may be discriminatory.

We may be required, among other things, to change our marketing techniques to comply with these requirements.

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We generally receive higher reimbursement rates for high acuity patients, and payors reimburse us at different rates.

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.

For the three months ended March 31, 2025 and 2024, 69.5% and 71.6% 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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Additionally, trade publications within the healthcare industry have reported on the trend of payors using the No Surprises Act as a means to force re-negotiation of reimbursement rates for providers and facilities, leading to litigation between these providers and/or facilities against payors and it may adversely affect us as well.

As discussed under Item 2., Government Regulation , the Biden-Harris Administration has requested HHS and CMS conduct studies to evaluate potential staffing, data reporting, employee compensation and retention, and resident experience regulations that may result in a reduction of our revenue from Medicare and Medicaid.

As discussed under Item 2., Government Regulation , the Biden-Harris Administration requested HHS and CMS conduct studies to evaluate potential staffing, data reporting, employee compensation and retention, and resident experience regulations that may result in a reduction of our revenue from Medicare and Medicaid.

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.

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.

The change in Presidential Administration, including new leadership of HHS and CMS, may result in a change in these priorities, and this prior research and rulemaking may be materially altered or abandoned.

Certain results of the Biden-Harris Administration’s rulemaking, including enhanced enforcement ability, may be retained under the new Presidential Administration.

We continue to monitor this area and look for public disclosures from the incoming Presidential Administration and expected heads of HHS and CMS to better anticipate what policy priorities and changes we can expect regarding Medicare and Medicaid reimbursement, including payment models and factors affecting our independent subsidiaries’ reimbursement for the services they provide.

We are subject to litigation that could result in significant legal costs and large settlement amounts or damage awards.

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For example, there has been a general increase in the number of wage and hour class action claims filed in several of the jurisdictions where we operate, typically based on alleged failures to permit or properly compensate for meal and rest periods, or failure to pay for time worked.

If there were a significant increase in the number of these claims against us or an increase in amounts owing should plaintiffs be successful in their claims, this could have a material adverse effect to our business, financial condition, results of operations and cash flows.

If there were a significant increase in the number of these claims against us or an increase in amounts owing should plaintiffs be successful in their claims, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are 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.

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Due to these whistleblower incentives, qui tam lawsuits have become more frequent.

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.

For example, d espite the decision of the DOJ to decline to participate in litigation based on the subject matter of its issued CID, the involved qui tam relator moved forward with the complaint in December 2020.

Refer to Part II, Item 1., Legal Proceedings for additional information on this case.

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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.

No action has been taken since these referrals of the bill to these committees.

No action was taken in the prior Congress following referral of the bill to those committees.

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.

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These reviews sometimes detect instances of noncompliance which we attempt to correct, which can decrease our revenue.

As an operator of healthcare facilities, we have a program to help us comply with various requirements of federal and private healthcare programs.

As an operator of healthcare facilities through our independent subsidiaries, we have a program to aid them in complying with various requirements of federal and private healthcare programs.

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;

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From time to time our systems and controls highlight potential compliance issues, which we investigate as they arise.

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.

Historically, we have initiated, and will continue to do so in the future, 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.

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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.

To the extent we dispose of such a operation without simultaneously acquiring a operation in exchange, our revenue may decrease.

To the extent we dispose of such an operation without simultaneously acquiring an operation in exchange, our revenue may decrease.

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.

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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.

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.

During the three months ended March 31, 2025, we expanded our operations through a combination of long-term leases and real estate purchases, with the addition of 11 stand-alone skilled nursing operations, one stand-alone senior living operation and one campus operation.

This growth has placed and will continue to place significant demands on our current management resources.

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In addition, we might encounter unanticipated difficulties and expenditures relating to any of the acquired operations, including contingent liabilities.

For example, when we acquire a operations, we generally assume the operation's existing Medicare provider number for purposes of billing Medicare for services.

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.

For example, when we acquire operations, we generally assume the operation's existing Medicare provider number for purposes of billing Medicare for services.

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, CMS could hold us liable for repayment of the overpayments or fines.

We may be unable to improve every operation that we acquire.

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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.

Other states, including Iowa and California, have adopted similar statutes and regulations requiring the disclosure of this information, with California’s most recent regulations addressing this topic taking effect in March of 2024.

Other states, including Iowa and California, have adopted similar statutes and regulations requiring the disclosure of this information.

The publicly available information disclosed as a result of these laws and rules 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.

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.

CMS continues to increase quality measure thresholds, which are regularly increased every six months, making it more difficult to achieve upward and five-star ratings.

CMS increased its quality measure thresholds in 2022, making it more difficult for facilities to obtain or maintain four- and five-star ratings.

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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.

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 2022, CMS updated the scoring measures used for SNFs to include six dimensions of staffing and turnover.

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.

This change made it more competitive to obtain a five-star rating, and more difficult to maintain such a rating once achieved.

Only 10% of nursing facilities can receive a five-star rating in the state where it operates.

Only 10% of nursing facilities can receive a five-star rating in the state where they operate.

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.

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.

In April 2024, CMS announced the freezing of four quality measures, with one short-stay measure updated effective October 2024 with the new Discharge Function Score Measure and the other three measures unfrozen in January 2025.

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.

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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.

The Nursing Home Compare website has begun posting staffing level measures that use this methodology.

CMS will revise the staffing rating thresholds to maintain the same distribution of points for staffing measures that will be affected by this freeze and replacement.

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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.

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.

With few exceptions, general and professional, 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.

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Moreover, since over 21% 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 .

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.

In addition, our independent subsidiaries in certain states are more susceptible to revenue loss, cost increases or damage caused by natural disasters including hurricanes, fires, tornadoes and flooding.

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.

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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.

We previously indicated there may be forthcoming proposed rules from CMS, 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.

The outcome of the 2024 presidential election, including change in control of the Senate and Presidency from the Democratic to the Republican party, may result in a reversal of these orders, significant changes in HHS and CMS policy and rulemaking, and a reduced likelihood of successful legislation that seeks to provide more resources to creating pathways to care-based careers.

This change in Presidential Administration may also affect the favorability of unionization efforts before the Department of Labor.

If employees successfully 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.

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.

As of September 30, 2024, our independent subsidiaries operated 231 of our 322 facilities under long term lease arrangements.

As of March 31, 2025, our independent subsidiaries operated 233 of our 340 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).

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Our Credit Facility has a borrowing capacity of up to $600.0 million in aggregate principal amount.

As of September 30, 2024 and through the filing date of this report, we had no outstanding borrowings under our Credit Facility.

As of March 31, 2025 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 $146.0 million, which subjects these subsidiaries to HUD oversight and periodic inspections.

The terms of the mortgage loans range from 25- to 35-years.

We also have one outstanding promissory note with an aggregate principal amount of approximately $1.7 million as of September 30, 2024.

We also have one outstanding promissory note with an aggregate principal amount of approximately $1.4 million as of March 31, 2025.

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.

In addition, we had $2.9 billion of future operating lease obligations as of September 30, 2024.

In addition, we had $2.8 billion of future operating lease obligations as of March 31, 2025.

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.

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As we continue to acquire and lease real estate assets, we may not be successful in identifying and consummating these transactions.

As of September 30, 2024, we lease 30 of our properties to third-party operators.

As of March 31, 2025, we lease 33 of our properties to third-party operators.

In the future, we might expand our leasing property portfolio to additional tenants.

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treasury securities.

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.

As a result of the uncertain domestic and global political, economic, credit and financial market conditions, including the increases in the federal funds rate since 2021, with limited decreases in 2024, and Consumer Price Index increases above historical norms for 2024, 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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From time to time, we have experienced such delays as a result of government payors instituting planned reimbursement delays for budget balancing purposes or as a result of prepayment reviews.

Some states in which we operate are operating with budget deficits or could have budget deficit in the future, which may delay reimbursement in a manner that would adversely affect our liquidity.

Some states in which we operate are operating with budget deficits or could have budget deficits in the future, which may delay reimbursement in a manner that would adversely affect our liquidity.

In addition, from time to time, procedural issues require us to resubmit or appeal claims before payment is remitted, which contributes to our aged receivables.

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In forty-one states, including some of the largest where we operate, state Medicaid benefits are administered through MCOs.

Some states seek to direct more of their Medicaid participation to these MCOs in the future as a measure to combat fraud and abuse in the Medicaid system.

Typically, these MCOs manage commercial health and federal Medicare Advantage benefits under a managed care contract.

Nationally, MCOs cover approximately 57 million and 33 million Medicaid and Medicare Advantage beneficiaries, respectively.

Nationally, more than two-thirds of all Medicaid beneficiaries receive most or all of their care from MCOs.

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.

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The continued ownership of such common stock by our directors and executive officers following the spin-off creates, or may create, the appearance of a conflict of interest when these directors and executive officers are faced with decisions that could have different implications for us and Pennant.

If Standard Bearer fails to qualify or remain qualified as a REIT, it will be subject to U.S.

If Standard Bearer fails to remain qualified as a REIT, it will be subject to U.S.

federal income tax as a regular corporation and could face substantial tax liability.

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federal income tax purposes.

Standard Bearer has elected to be taxed as a REIT for U.S.

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.

If Standard Bearer fails to remain qualified to be taxed as a REIT in any year, it would be subject to U.S.

federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to its shareholders would not be deductible by it in computing its taxable income.

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federal income tax consequences to Standard Bearer or its investors of such qualification.

For instance, the Tax Cuts and Jobs Act (TCJA) significantly changed the U.S.

federal income tax laws applicable to businesses and their owners, including REITs and their shareholders.

Technical corrections or other amendments to the TCJA or administrative guidance interpreting the TCJA may be forthcoming at any time.

We cannot predict the long-term effect of the TCJA or any future law changes on REITs or their shareholders.

Changes to the U.S.

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

What changed 10-Q

Item 1A. Risk Factors