What changed in this filing

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Item 1. Business

2022-03-18 compared with 2021-03-30 · 100 added, 78 removed, 263 unchanged (40% of the section changed)

We are an externally managed real estate investment trust for U.S.

federal income tax purposes (“REIT”) that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate focused on medical office buildings (“MOBs,”), healthcare properties leased on a triple net basis (“NNN properties”) and senior housing operating properties (“SHOPs”).

federal income tax purposes (“REIT”) that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate focused on medical office and other healthcare-related buildings and senior housing operating properties.

Prior to December 31, 2021, we had three reportable segments:

1) medical office and outpatient buildings (“Former MOBs”), 2) triple-net lease healthcare properties (“Former NNN”) and 3) senior housing operating properties (“SHOPs”).

Culminating in the year ended December 31, 2021, we have completed several strategic property divestitures in our Former NNN segment, and transitioned certain properties reported in our Former NNN segment into our SHOP segment.

The remaining Former NNN properties are similar in nature, cash flows, and risk structure with the Former MOB segment, and are managed operationally and reported collectively.

Accordingly, in the fourth quarter of 2021, we reevaluated our segments and concluded that we now have two reportable segments.

We have combined the properties in our Former NNN segment with the properties in our Former MOB segment for segment reporting purposes and we now have two reportable segments, with activities related to investing in MOBs and SHOPs.

All prior periods presented in this Annual Report on Form 10-K have been conformed to the presentation of our new reportable segment structure.

As of December 31, 2021, we owned 202 properties located in 33 states and comprised of 9.2 million rentable square feet.

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(In thousands)

Medical office and outpatient 117 3,911,937 $ 1,087,266 41.8 %

Total Triple-Net Leased Healthcare (including Jupiter development property) 15 1,104,423 279,484 10.8 %

Medical Office and Other Healthcare-Related Buildings (1)

146 5,018,036 $ 1,424,581 55.0 %

Seniors Housing — Operating Properties (3)

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Total 202 9,151,202 $ 2,589,124 100.0 %

(1) Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2020) and assets held for sale at carrying value ($0.1 million total at December 31, 2020), net of gross market lease intangible liabilities ($22.1 million total at December 31, 2020).

(1) Includes other triple-net leased properties which were previously presented as a separate reportable segment in prior years.

(2) Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2021), net of gross market lease intangible liabilities ($23.5 million total at December 31, 2021).

Impairment charges are already reflected within gross asset value.

(3) As of December 31, 2021, we had 4,494 rentable units in our SHOP segment.

(4) Includes two land parcels.

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Geographic Region Number of Properties Annualized Rental Income (1)

Square Feet Rentable Units in SHOP Segment

(In thousands)

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We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties, primarily structured as SHOPs.

In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals including long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms.

While we may invest in facilities across the healthcare continuum, our primary investment focus going forward is MOBs and SHOPs.

In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals, long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms.

Our SHOP investments are held through a structure permitted under the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA").

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According to the National Health Expenditures Projections, 2019 - 2028 report by the Centers for Medicare and Medicaid Services (“CMS”):

(i) national health expenditures are projected to grow 5.2% in 2020 and at an average annual growth rate of 5.4% per year for 2019 through 2028 and (ii) the healthcare industry is projected to increase from 17.7% of U.S.

(i) national health expenditures are projected to grow 5.4% for 2021 through 2023 and at an average annual growth rate of 5.6% per year from 2024 through 2028 and (ii) the healthcare industry is projected to increase from 17.7% of U.S.

GDP in 2018 to 19.7% by 2028.

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17.7% 20.6% 25.2%

Georgia * * 10.1%

* 10.9% 13.1%

Pennsylvania * 10.4% *

* State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.

(1) We expect to sell the recently completed development project in Jupiter, Florida, in late March or second quarter 2021 pursuant to the definitive purchase and sale agreement (“PSA”) we entered into in August 2020.

In addition, in August 2020 we entered into a PSA to sell a skilled nursing facility in Wellington, Florida, which is expected to close later in 2021.

The PSAs are subject to conditions and there can be no assurance we will complete these transactions, or any future acquisitions or other investments, on a timely basis or on acceptable terms and conditions, if at all.

If these sales had been completed prior to December 31, 2020, Florida would have represented 10.0% of our consolidated annualized rental income on a straight-line basis.

(2) During the year ended December 31, 2020, we sold 11 SHOPs located in Michigan, seven of which were transferred to the buyer during the fourth quarter of 2020, and four of which remained classified as held for sale on our consolidated balance sheet as of December 31, 2020.

The remaining four properties were transferred to the buyer during the first quarter of 2021.

As of December 31 2019 we owned 14 SHOPs located in Michigan that were classified as assets held for sale on our consolidated balance sheet.

Three of the 14 properties that are still owned by us after the aforementioned sale, were reclassified

from held for sale to held for use in 2020.

For a complete description of the Michigan SHOP transaction, see N o te 3 — Real Estate Investments, Net - “Assets Held for Sale and Related Impairments” below.

Medical Office Building and Outpatient Facilities

As of December 31, 2020, we owned 117 MOBs and outpatient facilities totaling 3.9 million square feet.

These facilities typically contain physicians’ offices and examination rooms, and may also include pharmacies, hospital ancillary service space and outpatient services such as diagnostic imaging centers, rehabilitation clinics and ambulatory surgery centers.

These facilities can be located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms.

(1) In May 2021, the Company’s skilled nursing facility in Wellington, Florida, and the Company’s development property in Jupiter, Florida were sold.

In December 2020, the Company’s skilled nursing facility in Lutz, Florida was sold.

(2) During the year ended December 31, 2020, the Company sold 11 SHOPs located in Michigan, seven of which were transferred to the buyer during the fourth quarter of 2020 and the remaining four of which were transferred to the buyer during the first quarter of 2021.

Medical Office and Other Healthcare-Related Buildings

As of December 31, 2021, we owned 146 MOBs and other health care related buildings under lease totaling 5.0 million square feet.

These properties are leased to tenants that provide healthcare services that typically consist of:

• physicians’ offices and examination rooms,

• pharmacies,

• hospital ancillary service space and outpatient services such as diagnostic imaging centers, rehabilitation clinics and ambulatory surgery centers,

• post-acute care facilities,

• skilled nursing facilities (“SNFs”) and;

• other facilities.

Certain of our properties can be located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms.

In addition, MOBs are often built to accommodate higher structural loads for certain equipment and may contain specialized construction such as cancer radiation therapy vaults for cancer treatment.

Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals.

These facilities provide inpatient diagnosis and treatment, both medical and surgical, and provide a broad array of inpatient and outpatient services including surgery, rehabilitation therapy as well as diagnostic and treatment services.

Post-acute facilities offer restorative, rehabilitative and custodial care for people not requiring the more extensive and complex treatment available at acute care hospitals.

We include these types of assets in our MOB and other health care related segment when the property is leased to a tenant that operate the property.

There are a variety of types of MOBs:

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Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.

Seniors housing properties primarily consist of independent living facilities, assisted living facilities and memory care facilities.

Our seniors housing properties primarily consist of independent living facilities, assisted living facilities and memory care facilities.

These facilities cater to different segments of the elderly population based upon their personal needs and need for assistance with the activities of daily living.

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However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a TRS.

Hospitals, Post-Acute Care, Skilled Nursing and Other Facilities

Our hospitals, post-acute care, skilled nursing and other facilities are leased to tenants that provide healthcare services.

As of December 31, 2020, we owned 15 other healthcare-related assets, including hospitals, post-acute care, skilled nursing, and other facilities.

Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals.

Post-acute facilities offer restorative, rehabilitative and custodial care for people not requiring the more extensive and complex treatment available at acute care hospitals.

Ancillary revenues and revenues from sub-acute care services are derived from providing services beyond room and board and include occupational, physical, speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy, as well as sales of pharmaceutical products and other services.

Certain facilities provide some of the foregoing services on an outpatient basis.

Our post-acute care services may be provided by SNFs.

SNFs offer licensed therapy services, nutrition services, social services, activities, housekeeping and laundry services, medical services prescribed by physicians and rehabilitative services to residents in need of nursing care, but who do not require hospitalization.

Our post-acute care services may be provided by SNFs which offer licensed therapy services, nutrition services, social services, activities, housekeeping, laundry services, medical services prescribed by physicians and rehabilitative services to residents in need of nursing care, but who do not require hospitalization.

Inpatient rehabilitation services provided by our operators and tenants in these facilities are primarily paid for by private sources or through the Medicare and Medicaid programs.

During the years ended December 31, 2021 and 2020, we have undertaken efforts to divest from SNFs through our property dispositions, and we have also converted many SNF units to memory care units in our existing properties, which have significantly reduced our SNF operations.

As of December 31, 2021 our seniors housing properties included 31 SNF units.

Impact of COVID-19 Pandemic

Starting in early March 2020, we began to implement required and voluntary preventative actions at all our seniors housing properties in our SHOP segment, including restriction of visitation except in very limited and controlled circumstances, the practice of social distancing measures, increased infection control procedures and the immediate screening of individuals entering these facilities.

Some of the additional steps we have taken to address the COVID-19 pandemic include, among other things, enhanced training for staff members, the implementation of telehealth to help residents remain safe while keeping appointments with important, but non-emergency, health providers, virtual tours for potential new residents, and agreements between some of our facilities and local lab partners to provide testing services.

In the absence of visitors and outside vendors and in the observance of other precautionary measures, our on-site team members and caregivers have stepped in to provide care for our residents in addition to required medical care.

As with almost all senior housing providers, there have been cases of coronavirus infection among the residents and staff of our seniors housing properties but we believe the actions our SHOP segment has taken has limited those infections.

In addition, pursuant to guidelines from the Centers for Disease Control (“CDC”), health care personnel and residents of long-term care facilities, including SNFs and assisted living facilities are the highest priority group to receive COVID-19 vaccines.

Since its initial classification of the highest priority group, the CDC has expanded the recommended pool of eligible vaccine recipients to include frontline essential workers and people aged 75 years and older.

While the CDC guidelines are only recommendations, most states have adopted similar guidelines or otherwise identified elderly individuals as a group that should receive the vaccines first.

The COVID-19 stimulus bill (the “COVID-19 Stimulus”), which has been passed by Congress and signed into law by President Biden, provides, among other things, increased funding to improve vaccine distribution.

Improvements in vaccine distribution could directly affect our operations by increasing the vaccination rate amongst personnel and residents of long-term care facilities, as members of the highest priority group.

The extent to which the ongoing global COVID-19 pandemic, including the outbreaks that have occurred and may occur in markets where we own properties, impacts our operations and those of our tenants and third-party operators, will depend on future developments, including the scope, severity and duration of the pandemic, the willingness of residents to remain in and enter our facilities and remain able to pay for their stays, and the actions taken to contain COVID-19 or treat its impact, the effectiveness of the vaccines and the willingness of our healthcare personnel and residents to receive the vaccines and delays in distribution of the vaccines, among others, which are highly uncertain and cannot be predicted with confidence, but could be material.

The financial impact of the COVID-19 pandemic has been partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The Company received $3.6 million in these funds during the year ended December 31, 2020, related to four of our SHOPs and considered the funds to be a grant contribution from the government.

The full amounts received were recognized as a reduction of property operating expenses in our consolidated statement of operations for the year ended December 31, 2020 to offset the incurred COVID-19 expenses.

Subsequent to December 31, 2020, we received an additional $5.1 million in funds through the CARES Act.

In addition, the Company has applied for additional funds for other SHOP, assisted living or similar facilities.

However, those applications have not yet been approved.

The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across many sectors and areas of the global economy and financial markets, leading to significant adverse impacts on economic activity including volatility in financial markets.

The impact of the COVID-19 pandemic has evolved rapidly.

In many states and cities where our properties are located, measures including “shelter-in-place” or “stay-at-home” orders issued by local, state and federal authorities for much of 2020 and the early part of 2021 and social distancing measures have resulted in closure and limitations on the operations of many businesses and organizations.

While strict “shelter-in-place” and similar orders have generally been lifted, continued limitations on indoor occupancy or other restrictions applicable to in-person operations have been and may in future be re-instituted in some jurisdictions as rates of infection increase in those locations, including in light of the spread of the Delta and Omicron variants and other potentially more contagious variants of the SARS-CoV-2 virus.

As the COVID-19 pandemic continues, it is highly uncertain to what extent and when any such continuing restrictions will be lifted in various jurisdictions and could depend on numerous factors, including vaccination rates among the population, the effectiveness of COVID-19 vaccines against these variants and the response by governmental bodies and regulators.

Our tenants and SHOP properties operate businesses that require in-person interactions with their patients and residents.

Even for businesses that have not closed or have closed and reopened, concern regarding the transmission of COVID-19 has impacted, and will likely continue to impact, the willingness of persons to, among other things, live in or use facilities at our properties, and impact the revenues generated by our tenants which may further impact the ability of our tenants to pay their rent obligations to us when due.

The COVID-19 pandemic has impacted global economic activity.

Our ability to lease space and negotiate and maintain favorable rents and the results of operations at our SHOPs could also continue to be negatively impacted by a prolonged recession in the U.S.

economy as could the rates charged to residents at our SHOPs.

Moreover, the demand for leasing space at our MOB properties could decline further negatively impacting occupancy percentage, revenue and net income.

Additionally, downturns or stagnation the U.S.

housing market as a result of an economic downturn could adversely affect the ability, or perceived ability, of seniors to afford the resident fees and services at our seniors housing properties.

Starting in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways that vary by operating segment.

COVID-19 Impact — MOB Segment

The financial stability and overall health of our tenants is critical to our business.

The negative effects that the global pandemic has had on the economy includes the closure or reduction in occupancy activity at some of our MOBs.

The economic impact of the pandemic has impacted the ability of some of our tenants to pay their monthly rent either temporarily or in the long term.

We experienced delays in rent collections in the second, third and fourth quarters of 2020, although collections have been approximately 100% of original cash rent for the MOB segment throughout the year ended December 31, 2021.

We have taken a proactive approach to achieve mutually agreeable solutions with its tenants and in some cases, during the year ended December 31, 2020, we executed lease amendments providing for deferral of rent.

During the year ended December 31, 2021, we did not enter into any rent deferral agreements with any of our tenants, and all amounts previously deferred under prior rent deferral agreements have been collected.

COVID-19 Impact — SHOP Segment

In our SHOP portfolio, occupancy had trended lower since March 2020 and the declines only recently began to level off in June 2021.

Government policies and implementation of infection control best practices materially limited or closed communities to new resident move-ins which has affected our ability to fill vacancies.

We also experienced lower inquiry volumes and reduced in-person tours during the pandemic.

In addition, starting in mid-March 2020, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers.

At the SHOP facilities, we generally bear these cost increases, which were partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and to a lesser extent, cost recoveries for personal protective equipment from residents.

See below for additional information on the CARES Act.

These trends accelerated beginning in the second quarter of 2020, continued into early 2021 until stabilizing in the third quarter, and are expected to improve in 2022.

Future developments in the course of the pandemic may cause further adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have a material adverse effects on our revenues and income in the other quarters.

While the development of COVID vaccines may limit that effect, the effectiveness of vaccines and the willingness to receive vaccines are highly uncertain and cannot be predicted with confidence.

The financial impact of the COVID-19 pandemic on us has been partially offset by funds received under the CARES Act.

We received $5.1 million and $3.6 million in these funds during the years ended December 31, 2021 and 2020, respectively.

We consider these funds to be a grant contribution from the government.

The full amounts received were recognized as a reduction of property operating expenses in our consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively, to offset the incurred COVID-19 expenses.

In addition, we have applied for additional funds, however, those applications have not yet been approved.

There can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.

A smaller part of our business may involve originating or acquiring loans secured by or related to the same types of properties in which we may invest directly.

Likewise, we may invest in commercial mortgage-backed securities (“CMBS”), securities of publicly-traded and private companies primarily engaged in real estate businesses, including REITs and other real estate operating companies, and securities issued by pass-through entities of which substantially all of the assets consist of qualifying assets or real estate-related assets.

As of December 31, 2020, we do not own any assets of this type.

Organizational Structure

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(the “OP”), a Delaware limited partnership, and its wholly owned subsidiaries.

Our Advisor manages our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”) (the “Property Manager”).

Our Advisor manages our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”).

Our Advisor and Property Manager are under common control with AR Global Investments LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us.

We also reimburse these entities for certain expenses they incur in providing these services to us.

Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in us through ownership of interests in our OP.

Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, has an interest in us through ownership of interests in our OP.

We own our SHOPs through the RIDEA structure, pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by:

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Our debt and equity levels are determined by management in consultation with the Board.

For short-term purposes, we may borrow from our revolving credit facility (our

“Revolving Credit Facility”) and our Fannie Mae Master Credit Facilities, which include a secured credit facility (the “KeyBank Facility”) with KeyBank together with a secured credit facility (the “Capital One Facility”) with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (the Capital One Facility and the KeyBank Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”).

Our senior secured credit facility (our “Credit Facility”) consists of two components, our Revolving Credit Facility and our term loan (our “Term Loan”).

For short-term purposes, we may borrow from our revolving credit facility (our “Revolving Credit Facility”) and our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (the “KeyBank Facility”) and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (the “Capital One Facility”).

(The KeyBank Facility and Capital One Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”) if additional properties are added to the collateral pool.

Our senior secured credit facility with KeyBank National Association (our “Credit Facility”) consists of two components, our Revolving Credit Facility and our term loan (our “Term Loan”).

Our Credit Facility is secured by a pledged pool of the equity interests and related rights in wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base thereunder.

As of December 31, 2020, the Fannie Mae Master Credit Facilities are secured by mortgages on 21 properties, in aggregate.

We may seek and even replace current borrowings with longer-term capital such as senior secured or unsecured notes or other forms of long-term financing.

We may invest in properties subject to existing mortgage indebtedness, which we assume as part of the acquisition.

We may invest in properties subject to existing mortgage indebtedness, which we assume as part of the

In addition, we may obtain financing secured by previously unencumbered properties in which we have invested or may refinance properties acquired on a leveraged basis.

In our agreements with our lenders, we are subject to restrictions with respect to secured and unsecured indebtedness, including restrictions on permitted investments, distributions and maintenance of a maximum leverage ratio, among other things.

As of December 31, 2021 we were in compliance with these covenants.

As of December 31, 2021, our total debt leverage ratio (net debt divided by gross asset value) was approximately 40.1%.

Net debt totaled $1.0 billion, which represents gross debt ($1.1 billion) less cash and cash equivalents ($59.7 million).

Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion) and assets held for sale at carrying value ($0.1 million), net of gross market lease intangible liabilities ($22.1 million).

Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million).

Impairment charges are already reflected within gross asset value.

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The TRS is a wholly-owned subsidiary of the OP.

The market for MOBs, seniors housing and other healthcare-related real estate is highly competitive.

The market for MOB and SHOP real estate is highly competitive.

We compete in all of our markets based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed.

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In addition, these same entities seek financing through similar channels.

Healthcare Regulation

The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty.

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Fraud and abuse continues to be an enforcement priority at both the federal and state levels including, but not limited to, the Federal Anti-Kickback Statute, the Federal Physician Self-Referral Statute (commonly known as the “Stark Law”), the False Claims Act (“FCA”), the Civil Monetary Penalties Law (“CMPL”), and a range of other federal and state regulations relating to waste, cost control, and healthcare management.

The business and operations of our tenants and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, continued judicial and legislative changes to the ACA, future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.

Additionally, the ongoing political and legal challenges to the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”) leave its future uncertain.

The business and operations of our tenants and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, legislative changes or new judicial challenges to the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”), future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.

Our tenants and operators are subject to extensive federal, state, and local laws, regulations and industry standards which govern business operations, physical plant and structure, patient and employee health and safety, access to facilities, patient rights - including privacy, price transparency, fewer restrictions on access to care - and security of health information.

Our tenants’ and operators’ failure to comply with any of these laws could result in loss of licensure, denial of reimbursement, imposition of fines or other penalties, suspension or exclusion from the government sponsored Medicare and Medicaid programs, loss of accreditation or certification, reputational damage or closure of a facility.

In addition, both government and private third-party payors will likely continue their efforts to drive down reimbursement.

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Our tenants operate hospitals, assisted living facilities, skilled nursing facilities and other healthcare facilities that receive reimbursement for services from third-party payors, including the government sponsored Medicare and Medicaid programs and private insurance carriers.

To participate in the Medicare and Medicaid programs, operators of healthcare facilities must comply with the regulations previously referenced, as well as with licensing, certification and, in some states, with certificate of need (“CON”) requirements.

Licensing and certification requirements also subject our tenants to compliance surveys and audits which are critical to the ongoing operations of the facilities.

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Courts have interpreted the fraud and abuse laws broadly.

Sanctions for violating these federal laws include substantial criminal and civil penalties such as punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments, and exclusion from the Medicare and Medicaid programs.

These laws also impose an affirmative duty on operators to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.

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agreed, in addition to implementing various corrective measures, to pay a record $16.0 million to HHS’s Office for Civil Rights in settlement of HIPAA violations stemming from the largest healthcare data breach in United States history.

In September 2020, Premera Blue Cross agreed to pay a $6.9 million penalty, second only to the $16.0 million paid by Anthem, Inc., stemming from a 2014 data breach affecting over 10.0 million individuals.

Violations of federal and state privacy and security laws could have a material adverse effect on the operator’s financial condition or operations, which could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, its leases and other agreements with us.

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In November 2020, CMS announced its successes in reducing the 2020 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health and SNF claims.

In addition, CMS is currently in the midst of transitioning Medicare from a traditional fee for service reimbursement model to a capitated system, which means medical providers are given a set fee per patient regardless of treatment required, and value-based and bundled payment approaches, where the government pays a set amount for each beneficiary for a defined period of time, based on that person’s underlying medical needs, rather than based on the actual services provided.

Providers and facilities are increasingly responsible to care for and be financially responsible for certain populations of patients under the population health models and this shift in patient management paradigm is creating and will continue to create unprecedented challenges for providers.

In 2021, CMS again successfully reduced the 2021 Medicare improper payment rate.

In addition, CMS’s continuing transition of Medicare from a traditional fee for service reimbursement model to a capitated value-based and bundled payment approach, which shifts the financial responsibility of certain patients to providers, will continue to create unprecedented challenges for providers.

Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula, and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025.

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This could adversely impact the medical properties that house these physicians and medical technology providers.

In addition, on July 31, 2020, CMS announced a final rule that projects increased aggregate Medicare payments to SNF by 2.2 percent for fiscal year 2021.

In addition, on July 29, 2021, CMS announced a final rule that projects increased aggregate Medicare payments to SNF by 1.2% for fiscal year 2022.

If payments under Medicare to our tenants do not continue or increase, our tenants may have difficulty making rent payments to us.

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PDPM classifies SNF patients in Medicare Part A-covered stays into payment groups based on clinically relevant factors using diagnosis codes, rather than by the volume of services.

This shifts the focus from the amount of care provided to

instead use the patient’s condition and resulting care needs to determine Medicare reimbursement.

This shifts the focus from the amount of care provided to instead use the patient’s condition and resulting care needs to determine Medicare reimbursement.

Future changes to payment rates or methodology under the PDPM system could reduce the reimbursement our tenants receive.

For example, CMS has indicated that it is working toward a unified payment system for post-acute care services, including those provided by SNFs, home health agencies, and other long-term care providers.

During the years ended December 31, 2021 and 2020, we have undertaken efforts to divest from SNFs through our property dispositions, and we have also converted selected SNF units to memory care units in one of our existing properties, which have significantly reduced our SNF operations.

As of December 31, 2021 our seniors housing properties included 31 SNF units.

Certain of our facilities are also subject to periodic pre- and post-payment reviews and other audits by governmental authorities, which could result in recoupments, denials, or delay of payments.

Additionally, the introduction and explosion of new stakeholders competing with traditional providers in the health market, including companies such as Amazon.com Inc., JPMorgan Chase & Co., Apple Inc., CVS Health Corporation, as well as telemedicine, telehealth and mhealth, are disrupting the heath industry and could lead to new trends in payment.

Additionally, the introduction and explosion of new stakeholders competing with traditional providers in the health market, including companies such as Amazon.com Inc., JPMorgan Chase & Co., Apple Inc., CVS Health Corporation, as well as telemedicine, telehealth and mobile health, are disrupting the heath industry and could lead to new trends in payment.

All of the factors discussed-recoupment of past payments or denial or delay of future payments-could adversely affect an operator’s ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of its leases and other agreements with us.

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Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, the Americans with Disabilities Act of 1990, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity.

We did not make any material capital expenditures in connection with these regulations during the year ended December 31, 2021 and we do not expect that we will be required to make any such material capital expenditures during 2022.

We believe that we have all permits and approvals necessary under current law to operate our investments.

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Estimate of Net Asset Value

On April 3, 2020, we published a new estimate of per share asset value (“Estimated Per-Share NAV”) equal to $15.75 as of December 31, 2019.

On March 31, 2021, we published an estimate of per share asset value (“Estimated Per-Share NAV”) equal to $14.50 as of December 31, 2020.

Our previous Estimated Per-Share NAV was equal to $15.75 as of December 31, 2019.

Unlike the per

share amounts in this Annual Report on Form 10-K, the Estimated Per-Share NAV has not been retroactively adjusted to reflect the payment of dividends in the form of common stock and will not be adjusted for stock dividends paid or that may be paid in the future until the Board determines a new Estimated Per-Share NAV which is expected in early April 2021.

Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when dividends paid in stock are issued;

however, each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers.

The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in early April 2022.

however, because each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers.

We intend to publish Estimated Per-Share NAV periodically at the discretion of board of directors (the “Board”), provided that such estimates will be made at least once annually.

7 unchanged sentences

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

What changed 10-K

Item 1. Business