What changed in this filing

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Item 1. Business

2023-03-17 compared with 2022-03-18 · 94 added, 121 removed, 242 unchanged (47% 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 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.

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 (“MOBs”), and senior housing operating properties (“SHOPs”).

As described in further detail herein, we operate in two reportable business segments for management and internal financial reporting purposes:

MOBs and SHOPs.

As of December 31, 2022, we owned 202 properties located in 34 states and comprised of 9.1 million rentable square feet.

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Asset Value (1)

Gross Asset Value %

(In thousands)

Medical Office and Other Healthcare-Related Buildings 150 5,090,957 $ 1,423,804

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

Seniors Housing — Operating Properties (2)

52 (3) 4,030,413 1,140,608

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

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

Total Portfolio 202 9,121,370 $ 2,564,412

(1) Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2022), net of gross market lease intangible liabilities ($23.5 million total at December 31, 2022).

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West 31 46,862 1,486,109 594

Total 202 $ 308,515 9,151,202 4,494

Total Portfolio 202 $ 313,618 9,121,370 4,374

(1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2022, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs (as defined below) for the fourth quarter of 2022.

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Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”).

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 5.4% 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.

According to the National Health Expenditures Projections, 2021 - 2030 report prepared by the Centers for Medicare and Medicaid Services (“CMS”):

(i) national health expenditures are projected to grow on average 5.1% per year for 2021 through 2030 and at an average annual growth rate of 5.3% per year from 2025 through 2030 and (ii) the healthcare industry projected share of GDP is projected to decrease slightly from 19.7% of U.S.

GDP in 2020 to 19.6% by 2030.

This growth in expenditures is projected to lead to significant growth in healthcare employment.

The increase in expenditures is projected to lead to significant growth in healthcare employment.

According to the U.S.

Department of Labor’s Bureau of Labor Statistics, the healthcare industry was one of the largest industries in the United States, providing approximately 20.2 million seasonally adjusted jobs as of December 31, 2021.

Department of Labor’s Bureau of Labor Statistics (the “Bureau of Labor Statistics”), the healthcare industry was one of the largest industries in the United States, providing approximately 21 million seasonally adjusted jobs as of December 31, 2021.

According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare practitioners and technical occupations and healthcare support) is projected to grow 13% from 2021 to 2031, adding approximately 2 million new jobs.

This growth is expected due to an aging population and the projected increase in the number of individuals who have access to health insurance.

This growth is expected due to an aging population and the projected increase in the number of individuals who will have access to health insurance.

We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry.

Since the beginning of the COVID-19 pandemic, the senior housing industry has been experiencing ongoing staffing shortages;

however, the Bureau of Labor Statistics reported employment increases for nursing and assisted living facilities in 2022.

In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the COVID-19 pandemic, impact of government programs, regulatory changes and consumer preferences.

We believe these changes have increased the need for capital among healthcare providers and increased incentives for these providers to develop more efficient real estate solutions in order to enhance the delivery of quality healthcare.

The aging of the U.S.

population has a direct effect on the demand for healthcare as older persons generally utilize healthcare services at a rate well in excess of younger people.

According to the Centers for Disease Control and Prevention (the “CDC”), 7.0% of all adults aged 65 years and over during 2018 needed help with personal care from another person.

For both sexes combined, adults aged 85 years and over (21.1%) were nearly three times as likely as adults aged 75 to 84 (8.0%) to need help with personal care from other persons;

adults aged 85 and over were nearly six times as likely as adults aged 65 to 74 (3.9%) to need help with personal care from other persons.

We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for MOBs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities.

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Advances in research, diagnostics, surgical procedures, pharmaceuticals and a focus on healthier lifestyles have led to people living longer.

Finally, we believe that healthcare reform in the United States will continue to drive an increase in demand for medical services, and in particular, in the post-acute and long-term services which our tenants and operators provide.

Finally, we believe that healthcare reform in the U.S.

will continue to drive an increase in demand for medical services, and in particular, in the post-acute and long-term services which our tenants and operators provide.

We may invest in healthcare assets through development and joint venture partnerships.

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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

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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.

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

There are a variety of types of MOBs:

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As of December 31, 2022, we owned 52 seniors housing properties under the RIDEA structure in our SHOP segment.

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.

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

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 an independent qualifying management company, which we also refer to as an operator who qualifies as an eligible independent contractor.

Our seniors housing properties as of December 31, 2022 primarily consist of assisted living facilities (2,352 units), memory care facilities (1,109 units) and independent living facilities (882 units).

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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Levels of personal assistance are based in part on local regulations.

As of December 31, 2021, our seniors housing properties included approximately 2,352 assisted living units and 1,229 memory care units.

Independent living facilities are designed to meet the needs of seniors who choose to live in an environment surrounded by their peers with services such as housekeeping, meals and activities.

These residents generally do not need assistance with activities of daily living, however, in some of our facilities, residents have the option to contract for these services.

As of December 31, 2021, our seniors housing properties included 882 independent living units.

These residents generally do not need assistance with

activities of daily living, however, in some of our facilities, residents have the option to contract for these services.

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

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

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.

During the years ended December 31, 2021 and 2020, we took 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, 2022 our seniors housing properties included 31 SNF units.

Impact of COVID-19 Pandemic

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.

During the first quarter of 2020, the global COVID-19 pandemic that has spread around the world and to every state in the U.S.

The COVID-19 pandemic has had, and could continue to have, an adverse impact on economic conditions, including a global economic slowdown and recession that may continue for some time.

The rapid development and fluidity of the situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions.

The COVID-19 pandemic had, and another pandemic in the future could have, impacts 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.

Our MOB tenants and SHOP properties operate businesses that require in-person interactions with their patients and residents, and concern regarding the transmission of COVID-19 impacted the willingness of persons to, among other things, live in or use facilities at our properties, and impacted the revenues generated by our tenants.

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.

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

Additionally, downturns or stagnation of 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 SHOPs.

Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates have adversely impacted, and may continue to impact, our results of operations.

Moreover, these increases in the rate of inflation, the ongoing war in Ukraine and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of our tenants and residents to pay rent and hence our results of operations and liquidity.

For more information about the risks and uncertainties associated with inflation, the ongoing war in Ukraine and related sanctions and labor shortages, please see the sections “Inflation” and “Part II—Item 1A.

Risk Factors” below.

Beginning 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.

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

Since the year ended December 31, 2020, we have not entered into any rent deferral agreements with any of our tenants in this segment, 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.

In our SHOP segment, occupancy trended downward from March 2020 until June 2021 and has since stabilized and begun to recover.

We also experienced lower inquiry volumes and reduced in-person tours since the onset of the COVID-19 pandemic.

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

We generally bear these cost increases at our SHOPs, 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.

These cost increases became more prominent throughout the year ended December 31, 2022 from a combination of factors:

(i) we were impacted by rising inflation which generally increased the costs of services and supplies, (ii) we relied more on the use of temporary contract labor and agencies due to a shortage of qualified personnel and (iii) the amounts we paid to third party providers for wages, including overtime wages, and bonuses increased.

Future developments in the course of the pandemic, increases to inflation, labor shortages and supply chain disruptions may cause further adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have material adverse effects on our revenues and net income in future quarters.

While the continued development of COVID-19 vaccines may limit those effects, 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.

We received $4.5 million, $5.1 million and $3.6 million in these funds during the years ended December 31, 2022, 2021 and 2020, respectively.

For accounting purposes, we consider these funds as grant contributions 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, 2022, 2021 and 2020, respectively, to offset incurred COVID-19 expenses.

We do not anticipate that any further funds under the CARES Act will be received, and there can be no assurance that the CARES Act program will be extended or any further amounts received under currently effective or potential future government programs.

Organizational Structure

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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.

The KeyBank Facility and Capital One Facility are referred to herein together as the “Fannie Mae Master Credit Facilities”.

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”).

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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

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

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, a minimum fixed charge coverage ratio, among other things.

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, a minimum fixed charge coverage ratio, among other things.

As of December 31, 2022 we were in compliance with these covenants.

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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.

Cumulative impairment charges are already reflected within gross asset value.

We elected to be taxed as a REIT under Sections 856 through 860 of Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2013.

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Accordingly, we have formed a TRS that is wholly owned by the OP to lease its SHOPs and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf.

As of December 31, 2021, we owned 54 seniors housing properties, excluding two land parcels, which we lease to our TRS.

As of December 31, 2022, we owned 52 seniors housing properties, including two land parcels, which we lease to our TRS.

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

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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, 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.

The business and operations of our tenants and operators 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 SHOP segment derives minimal revenues from Medicare and Medicaid so the impact of federal enforcement relating to waste, cost control, and healthcare management is limited;

however, facilities may be subject to increased enforcement and scrutiny under state laws.

In our SHOP segment, only one property receives payments from Medicare and Medicaid, and a small percentage of our assisted living revenue is derived from Medicaid.

For our MOB segment, our tenants and operators could be effected, which could impact our tenants’ ability to pay rent.

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 and closure of a facility.

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

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

The Medicare and Medicaid programs have adopted a variety of initiatives which have been incorporated and expanded by private insurance carriers, including health maintenance organizations and other health plans, to extract greater discounts and impose more stringent cost controls upon healthcare provider operations.

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Our tenants and operators may also face significant limits on the scope of services reimbursed and on reimbursement rates and fees.

All of these changes could impact our operators’ and tenants’ ability to pay rent or other obligations to us.

All of these changes could impact our tenants’ ability to pay rent or other obligations to us.

Licensure, Certification and Certificate of Need

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, 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.

Our tenants operate hospitals, assisted living facilities, a skilled nursing facility and other healthcare entities and providers 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, tenants and operators of healthcare facilities and other healthcare providers must comply with the regulations previously referenced, as well as with licensing, certification and, in some states, certificate of need (“CON”) requirements.

In granting and renewing these licenses and certifications, the state regulatory agencies consider numerous factors relating to a facility’s operations, including, but not limited to, the plant and physical structure, admission and discharge standards, staffing, training, patient and consumer rights, medication guidelines and other rules.

If an operator fails to maintain or renew any required license, certification or other regulatory approval, or to correct serious deficiencies identified in compliance surveys, the operator could be prohibited from continuing operations at a facility.

A loss of licensure or certification, as well as a change in participation status, could also adversely affect an operator’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect the operator’s ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, its leases with us.

In the SHOP segment if a tenant and/or operator fails to maintain or renew any required license, certification or other regulatory approval, or to correct serious deficiencies identified in compliance surveys, the tenant and/or operator could be prohibited from continuing operations at a facility.

A loss of licensure or certification, as well as a change in participation status, could also adversely affect a tenant or operator’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect the tenant or operator’s ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, its leases with us.

In addition, if we have to replace an operator, we may experience difficulties in finding a replacement because our ability to replace the operator may be affected by federal and state laws governing changes in control and ownership.

Similarly, in order to receive Medicare and Medicaid reimbursement, our healthcare facilities must meet the applicable conditions of participation established by the U.S.

Department of Health and Human Services (“HHS”)relating to the type of facility and its equipment, personnel and standard of medical care, as well as comply with other federal, state and local laws and regulations.

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

Our healthcare facilities must meet licensing and Medicare or Medicaid certification requirement, to the extend applicable relating to the type of facility and its equipment, personnel and standard of medical care, as well as comply with other federal, state and local laws and regulations.

Healthcare facilities undergo periodic on-site licensure surveys, which generally are limited if the facility is accredited by The Joint Commission or other recognized accreditation organizations.

A loss of licensure or certification could adversely affect a facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with, the terms of the operator’s or facility’s leases with us.

In some states, healthcare facilities are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services.

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CONs, where applicable, can also be conditions to regulatory approval of changes in ownership or control of licensed facilities, addition of beds, investment in major capital equipment, introduction of new services, termination of services previously approved through the CON process and other control or operational changes.

CON laws and regulations may restrict an operator’s ability to expand properties and grow the operator’s business in certain circumstances, which could have an adverse effect on the operator’s or tenant’s revenues and, in turn, negatively impact their ability to make rental payments under, and otherwise comply with the terms of their leases with us.

CON laws and regulations may restrict a tenant and operator’s ability to expand properties and grow the tenant and operator’s business in certain circumstances, which could have an adverse effect on the tenant’s or operator’s revenues and, in turn, negatively impact their ability to make rental payments under, and otherwise comply with the terms of their leases with us.

Fraud and Abuse Enforcement

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The FCA also creates liability for people who conspire to violate the FCA;

• The CMPL (42 USC 1320a-7a for healthcare) authorizes HHS to impose civil penalties administratively for fraudulent acts.

• The CMPL (42 USC 1320a-7a for healthcare) authorizes the U.S.

Department of Health and Human Services (the “HHS”) to impose civil penalties administratively for fraudulent acts.

The scope of the Office of the Inspector General’s authority to enforce the CMPL was increased in 2016.

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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 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.

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

Many states have adopted laws similar to, or more expansive than, the federal fraud and abuse laws.

States have also adopted and are enforcing laws that increase the regulatory burden and potential liability of healthcare entities including, but not limited to, patient protections, such as minimum staffing levels, criminal background checks, sanctions for employing excluded providers, restrictions on the use and disclosure of health information, and these state laws have their own penalties which may be in addition to federal penalties.

In the ordinary course of their business, the operators at our properties are regularly subject to inquiries, audits and investigations conducted by federal and state agencies that oversee applicable laws and regulations.

In the ordinary course of their business, the tenants, and potentially operators at our properties are regularly subject to inquiries, audits and investigations conducted by federal and state agencies that oversee applicable laws and regulations.

Increased funding for investigation and enforcement efforts, accompanied by an increased pressure to eliminate government waste, has led to a significant increase in the number of investigations and enforcement actions over the past several years, a trend which is not anticipated to decrease considerably.

Significant enforcement activity has been the result of actions brought by regulators, who file complaints in the name of the United States (and, if applicable, particular states) under the FCA or equivalent state statutes.

Significant enforcement activity has been the result of actions brought by regulators, who file complaints in the name of the U.S.

(and, if applicable, particular states) under the FCA or equivalent state statutes.

Also, the qui tam and whistleblower provisions of the FCA allow private individuals to bring actions on behalf of the government alleging that the government was defrauded.

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Additionally, violations of the FCA can result in treble damages.

Violations of federal or state law or FCA actions against an operator of our properties could have a material adverse effect on the operator’s liquidity, financial condition or results of operations.

Such a negative impact on an operator’s financial health 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.

Federal and state fraud and abuse laws may also restrict the terms of our rental agreements with our tenants.

Violations of federal or state law or FCA actions against a tenant or operator of our properties could have a material adverse effect on the tenant’s and operator’s liquidity, financial condition or results of operations.

Such a negative impact on a tenant’s or operator’s financial health 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.

Federal and state fraud and abuse laws may also restrict the terms of agreements with tenants and operators.

Privacy and Security of Health Information

Various federal and state laws protect the privacy and security of health information.

For example, the Health Insurance Portability and Accountability Act of 1996, its implementing regulations and related federal laws and regulations (commonly referred to as “HIPAA”) protect the privacy and security of individually identifiable health information by limiting its use and disclosure.

For example, the Health Insurance Portability and Accountability Act of 1996, its implementing regulations and related federal laws and regulations (commonly referred to as “HIPAA”) to protect the privacy and security of individually identifiable health information by limiting its use and disclosure.

Many states have implemented similar laws to limit the use and disclosure of patient specific health information.

The federal government has increased its HIPAA enforcement efforts over the past few years, which has increased the number of audits and enforcement actions, some of which have resulted in significant penalties to healthcare providers.

For example, in October 2018, Anthem, Inc.

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.

Violations of federal and state privacy and security laws could have a material adverse effect on a tenant and 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.

Reimbursement

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The ACA has faced ongoing legal challenges, including litigation seeking to invalidate some or all of the law or the manner in which it has been interpreted.

While there are no current challenges to the ACA, that could change based on the make-up of Congress and the presidential administration.

The uncertain status of the ACA and of the state Medicaid programs, among other things, affect our ability to plan for the future.

Federal and state budget pressures also continue to escalate and, in an effort to address actual or potential budget shortfalls, Congress and many state legislatures may continue to enact reductions to Medicare and Medicaid expenditures through cuts in rates paid to providers or restrictions in eligibility and benefits.

In addition to legislative and executive actions relating to the scope of the ACA, increased enforcement will likely continue to impact the financial framework for healthcare operators and facilities.

In addition to legislative and executive actions relating to the scope of the ACA, increased enforcement will likely continue to impact the financial framework for healthcare tenants and facilities.

For example, CMS is focused on reducing what it considers to be payment errors by identifying, reporting, and implementing actions to reduce payment error vulnerabilities.

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

The risk of improper payments in our SHOP segment is limited as only one property receives Medicare and Medicaid payments and a small percentage of our revenues come from assisted living facilities participating in Medicaid.

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.

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The implications of MACRA continue to be uncertain and will depend on future regulatory activity and physician activity in the marketplace.

MACRA reporting requirements and quality metrics may encourage physicians to move from smaller practices to larger physician groups or hospital employment, leading to further consolidation of the industry.

MACRA reporting requirements and quality metrics may encourage physicians to move from smaller practices to

larger physician groups or hospital employment, leading to further consolidation of the industry.

These and other shifts in payment and risk sharing within an outcome-based model are leading to, among other trends, increasing use of management tools to oversee individual providers and coordinate their services.

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

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.

Under a program facilitated by the CMS known as the Skilled Nursing Facility Value-Based Purchasing Program, CMS began withholding 2% of SNF Medicare payments beginning October 1, 2018, to fund an incentive payment pool.

CMS then redistributes 60% of the withheld payments back to high performing SNFs.

The lowest ranked 40% of facilities receive payments that are less than what they otherwise would have received without the program.

As a result, certain of our tenants could receive less in Medicare reimbursement payments, which could adversely affect their ability to make rent payments to us.

Effective October 1, 2019, CMS finalized a new case-mix classification system, the Patient-Driven Payment Model (“PDPM”).

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.

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 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.

Additionally, the introduction and explosion of new stakeholders competing with traditional providers in the health market, 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 a tenant’s or 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.

Assisted and independent living services generally are not reimbursable under government reimbursement programs, such as Medicare and Medicaid.

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The rates for these residents are set by the facilities based on local market conditions and operating costs.

We regularly assess the financial implications of reimbursement rule changes on our tenants, but we cannot assure you that current rules or future updates will not materially adversely affect our operators and tenants, which, in turn, could have a material adverse effect on their ability to pay rent and other obligations to us.

“Risk Factors — Risks Related to the Healthcare Industry — Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us” and “— A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by certain of our tenants.”

We regularly assess the financial implications of reimbursement rule changes on our tenants and operators, but we cannot make any assurances that current rules or future updates will not materially adversely affect our tenants and operators, which, in turn, could have a material adverse effect on their ability to pay rent and other obligations to us.

“Risk Factors — Risks Related to the Healthcare Industry — Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us” and “A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.”

Other Regulations

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Under the terms of our lease and management agreements, we generally have a right to indemnification by the tenants, operators and managers of our properties for any contamination caused by them.

However, we cannot assure you that our tenants, operators and managers will have the financial capability or willingness to satisfy their respective indemnification obligations to us, and any such inability or unwillingness to do so may require us to satisfy the underlying environmental claims.

We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations in 2021 and do not expect that we will be required to make any such material capital expenditures during 2022.

However, we cannot make any assurances that our tenants, operators and managers will have the financial capability or willingness to satisfy their respective indemnification obligations to us, and any such inability or unwillingness to do so may require us to satisfy the underlying environmental claims.

We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations during the year ended December 31, 2022 and do not expect that we will be required to make any such material capital expenditures during 2023.

Human Capital Resources

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Estimate of Net Asset Value

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.

On April 1, 2022, we published an estimate of per share asset value (“Estimated Per-Share NAV”) equal to $15.00 as of December 31, 2021.

Our previous Estimated Per-Share NAV was equal to $14.50 as of December 31, 2020.

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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 increase when dividends paid in stock are issued.

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.

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

Available Information

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those filings with the Securities and Exchange Commission (“SEC”).

You may read and copy any materials we file with the SEC at the SEC’s Internet address located at http://www.sec.gov .

The website contains reports, proxy statements and information statements, and other information, which you may obtain free of charge.

One may read and copy any materials we file with the SEC at the SEC’s Internet address located at https://www.sec.gov .

The website contains reports, proxy statements and information statements, and other information, which one may obtain free of charge.

In addition, copies of our filings with the SEC may be obtained from our website www.healthcaretrustinc.com .

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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-K

Item 1. Business