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(iii) the impact of the novel coronavirus (“COVID-19”) on our business and the business of our operators, including without limitation, the extent and duration of the COVID-19 pandemic, increased costs and decreased occupancy levels experienced by operators of skilled nursing facilities (“SNFs”) and assisted living facilities (“ALFs”) in connection therewith, and the extent to which continued government support may be available to operators to offset such costs and the conditions related thereto;
−Removed: (iv) the ability of any of Omega’s operators in bankruptcy to reject unexpired lease obligations, modify the terms of Omega’s mortgages and impede the ability of Omega to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor’s obligations, and other costs and uncertainties associated with operator bankruptcies;
+Added: (iv) the ability of any of our operators in bankruptcy to reject unexpired lease obligations, modify the terms of our mortgages and impede our ability to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor’s obligations, and other costs and uncertainties associated with operator bankruptcies;
(v) our ability to re-lease, otherwise transition, or sell underperforming assets or assets held for sale on a timely basis and on terms that allow us to realize the carrying value of these assets;
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Omega Healthcare Investors, Inc.
−Removed: (“Omega”) was formed as a real estate investment trust (“REIT”) and incorporated in the State of Maryland on March 31, 1992.
+Added: (“Omega”) was incorporated in the State of Maryland on March 31, 1992, and has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes.
Omega is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through, its operating partnership subsidiary, OHI Healthcare Properties Limited Partnership (“Omega OP”).
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Our core portfolio consists of long-term leases and mortgage agreements.
−Removed: All of our leases are “triple-net” leases, which require the operators (we use the term “operator” to refer to our tenants and mortgagors and their affiliates who manage and/or operate our properties) to pay all property-related expenses.
+Added: All of our leases are “triple-net” leases, which require the operators (we use the term “operator” to refer to our tenants, mortgagors and their affiliates who manage and/or operate our properties) to pay all property-related expenses.
Our mortgage revenue derives from fixed rate mortgage loans, which are secured by first mortgage liens on the underlying real estate and personal property of the mortgagor.
3 unchanged sentences
Omega has exclusive control over Omega OP’s day-to-day management pursuant to the Partnership Agreement.
−Removed: As of June 30, 2020, Omega owned approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and investors owned approximately 3% of the Omega OP Units.
+Added: As of September 30, 2020, Omega owned approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and investors owned approximately 3% of the Omega OP Units.
Omega’s consolidated financial statements include the accounts of (i) Omega, (ii) Omega OP, (iii) all direct and indirect wholly owned subsidiaries of Omega and (iv) other entities in which Omega or Omega OP has a majority voting interest and control.
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Omega OP’s net earnings are reduced by the portion of net earnings attributable to the noncontrolling interest.
−Removed: As of June 30, 2020, our portfolio of real estate investments consisted of 981 healthcare facilities, located in 40 states and the U.K.
+Added: As of September 30, 2020, our portfolio of real estate investments consisted of 976 healthcare facilities, located in 40 states and the U.K.
and operated by 69 third-party operators.
−Removed: Our investment in these facilities, net of impairments and allowances, totaled approximately $9.8 billion at June 30, 2020, with approximately 97% of our real estate investments related to healthcare facilities.
−Removed: Our portfolio is made up of 767 SNFs, 114 ALFs, 28 specialty facilities, two medical office buildings, fixed rate mortgages on 57 SNFs, three ALFs and four specialty facilities and six facilities that are held for sale.
−Removed: At June 30, 2020, we also held other investments of approximately $434.7 million, consisting primarily of secured loans to third-party operators of our facilities and $195.5 million of investments in five unconsolidated joint ventures.
−Removed: As of June 30, 2020 and December 31, 2019, we do not have any material properties or operators with facilities that are not materially occupied.
−Removed: While the COVID-19 pandemic did not materially impact our rental revenue for the first two quarters of 2020 and we have collected substantially all of our contractual rents due during this time and in July 2020, the COVID-19 pandemic continues to have a significant impact on our operators.
−Removed: As of July 30, 2020, our operators reported 6,133 total confirmed cases of COVID-19 in our facilities which includes cases involving employees and residents, including patients known to be positive at the time of admission from a hospital or healthcare center.
−Removed: The total cases are within 415 facilities as of July 30, 2020, or 43.3%, of our 959 operating facilities as of June 30, 2020.
−Removed: The total confirmed cases reported by our operators may not be adjusted downward for recoveries, discharges or deaths, and may be significantly lower than or different from actual cases based on the availability of testing and the lag time involved in testing and reporting, as well as the accuracy of reporting.
+Added: Our investment in these facilities, net of impairments and allowances, totaled approximately $9.7 billion at September 30, 2020, with approximately 97% of our real estate investments related to healthcare facilities.
+Added: Our portfolio is made up of (i) 755 SNFs, 114 ALFs, 28 specialty facilities, two medical office buildings, (ii) fixed rate mortgages on 57 SNFs, three ALFs and four specialty facilities, and (iii) 13 facilities that are held for sale.
+Added: At September 30, 2020, we also held other investments of approximately $464.5 million, consisting primarily of secured loans to third-party operators of our facilities and $196.2 million of investments in five unconsolidated joint ventures.
+Added: As of September 30, 2020 and December 31, 2019, we do not have any material properties or operators with facilities that are not materially occupied.
+Added: For the first three quarters of 2020, we have collected substantially all of our contractual rents due.
+Added: However, the COVID-19 pandemic continues to have a significant impact on our operators.
+Added: As of October 22, 2020, our operators have reported (subject to the qualifications noted below) 7,735 total confirmed cases of COVID-19 in our facilities which includes cases involving employees and residents, including patients known to be positive at the time of admission from a hospital or healthcare center.
+Added: The total cases are located within 464 facilities, or 48.5%, of our 957 operating facilities as of September 30, 2020.
+Added: The total confirmed cases reported by our operators may in certain cases not be adjusted downward for recoveries, discharges or deaths, may for certain operators reflect cumulative cases rather than active cases, and may be significantly lower than or different from actual cases based on the availability of testing and the lag time involved in testing and reporting, as well as the accuracy of reporting.
We have not independently validated such facility virus incidence information and can provide no assurance regarding its accuracy or that there have not been any changes since the time the information was obtained from our operators;
we also undertake no duty to update this information.
−Removed: Many of our operators have reported incurring significant cost increases as a result of the pandemic, with dramatic increases for facilities with positive cases.
−Removed: We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of personal protective equipment (“PPE”) and supplies.
+Added: Many of our operators have reported incurring significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases.
+Added: We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of personal protective equipment, testing equipment and processes and supplies.
In terms of occupancy levels, many of our operators have reported experiencing declines, in part due to the elimination or suspension of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.
−Removed: While government relief measures at the federal and state levels, including expanded Medicaid reimbursements, have offered meaningful support to offset a portion of these cost increases and impacts to our SNF operators, we cannot at this time estimate the net impact going forward to these operators, and we cannot estimate the extent to which ALF operators will receive governmental relief.
+Added: While government relief measures at the federal and state levels, including expanded Medicaid reimbursements, have offered meaningful support to offset a portion of these cost increases and impacts to our SNF operators, and to a lesser extent our ALF operators, we cannot at this time estimate the net impact going forward to these operators, and we cannot estimate the extent to which operators will receive additional governmental relief.
+Added: To the extent government support is not sufficient or timely to offset these impacts, or to the extent these trends continue or accelerate and are not offset by additional government relief that is sufficient or timely, the operating results of our operators are likely to be adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.
+Added: Citing in part the impact of the COVID-19 pandemic and uncertainties regarding the continuing availability of sufficient government support, three of our operators, have noted in their financial statements substantial doubt regarding their ability to continue as going concerns.
There are a number of uncertainties we face as we consider the potential impact of COVID-19 on our business, including how long census disruption and elevated COVID-19 costs will last and the extent to which funding support from the federal government and the states will continue to offset these incremental costs.
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We expect that heightened clinical protocols for infection control within facilities, additional testing of employees and residents and the monitoring of employees, guests and others entering facilities will continue for some period;
−Removed: however, we do not know if future reimbursement rates will be sufficient to cover the increased costs of enhanced infection control and monitoring.
+Added: however, we do not know if future reimbursement rates or equipment provided by governmental agencies will be sufficient to cover the increased costs of enhanced infection control and monitoring.
In addition, we do not know how and when the implementation of new treatments or vaccines will impact our operators and their populations.
−Removed: As such, while we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more visibility into the costs our operators will experience and for how long, and the level of additional governmental support that will be available to them, as well as the potential support our operators may request from us.
−Removed: Given this uncertainty, we have taken several steps to enhance our capital position as a precautionary measure, including a partial draw on our $1.25 billion revolving credit facility in the amount of $300 million during the first quarter of 2020 which was subsequently repaid in the second quarter of 2020, as well as entering into $400 million (notional amount) of 10-year interest rate swaps at an average swap rate of 0.8675% that expire in 2024, which provides us with some cost certainty for the refinancing of our senior notes maturing in 2023.
−Removed: We believe the availability under our credit facility and hedging strategy support our liquidity and provide flexibility to manage the potential impact to our business.
−Removed: Accordingly, we have maintained our dividend level of $0.67 per share for the first and second quarters of 2020.
+Added: While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more visibility into the costs our operators will experience and for how long, and the level of additional governmental support that will be available to them, as well as the potential support our operators may request from us.
+Added: We believe the availability under our credit facility supports our liquidity and provides flexibility to manage the potential impact to our business.
+Added: Accordingly, we have maintained our dividend level of $0.67 per share for the first three quarters of 2020.
We will continue to evaluate any additional steps that may be needed to maintain adequate liquidity.
−Removed: Omega is a REIT for United States federal income tax purposes, and Omega OP is a pass through entity for United States federal income tax purposes.
Since our inception, Omega has elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code (“Code”).
−Removed: A REIT is generally not subject to federal income tax on that portion of its REIT taxable income which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed each tax year and certain other requirements are met, including asset and income tests.
+Added: A REIT is generally not subject to federal income tax on that portion of its REIT taxable income which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed each taxable year and certain other requirements are met, including asset and income tests.
So long as we qualify as a REIT under the Code, we generally will not be subject to federal income taxes on the REIT taxable income that we distribute to stockholders, subject to certain exceptions.
−Removed: If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes on its taxable income at regular corporate rates and dividends paid to our stockholders will not be deductible by us in computing taxable income.
−Removed: Further, we would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied, unless the Internal Revenue Service grants us relief under certain statutory provisions.
−Removed: Failing to qualify as a REIT could materially and adversely affect our net income;
−Removed: however, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.
−Removed: We test our compliance within the REIT taxation rules to ensure that we are in compliance with the REIT rules on a quarterly and annual basis.
−Removed: We review our distributions and projected distributions each year to ensure we have met and will continue to meet the annual REIT distribution requirements.
−Removed: In 2020, we expect to pay dividends in excess of our taxable income.
Subject to the limitation under the REIT asset test rules, we are permitted to own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”).
−Removed: We have elected for certain of our active subsidiaries to be treated as TRSs.
+Added: We have elected to treat certain of our active subsidiaries as TRSs.
Our domestic TRSs are subject to federal, state and local income taxes at the applicable corporate rates.
Our foreign TSRs are subject to foreign income taxes.
−Removed: As of June 30, 2020, one of our TRSs that is subject to federal, state and local income taxes at the applicable corporate rates had a net operating loss carry-forward of approximately $5.7 million.
−Removed: Up to 100% of the net operating loss carry-forwards arising in taxable years ending prior to January 1, 2018, may be used to reduce taxable income for any taxable year during the eligible carry-forward period.
−Removed: Changes made by the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) limited the amount of net operating loss (“NOL”) carry-forward arising in tax years ending subsequent to December 31, 2018, to reduce 80% of taxable income for any taxable year during the eligible carry-forward period.
−Removed: Our NOL carry-forward was fully reserved as of June 30, 2020, with a valuation allowance due to uncertainties regarding realization.
−Removed: Under current law, our NOL carryforwards generated up through December 31, 2017 may be carried forward for no more than 20 years, and our net operating loss carryforward generated in our taxable years ended December 31, 2019 and December 31, 2018 may be carried forward indefinitely.
+Added: As of September 30, 2020, one of our TRSs that is subject to federal, state and local income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately $5.7 million.
+Added: Up to 100% of the NOL carry-forwards arising in taxable years ending prior to January 1, 2018, may be used to reduce taxable income for any taxable year during the eligible carry-forward period.
+Added: Changes made by the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) limited the amount of taxable income that may be offset by a NOL carryforward to 80% of taxable income to the extent the NOL originated in tax years beginning after December 31, 2017 (the “80% Limitation”).
+Added: Our NOL carry-forward was fully reserved as of September 30, 2020, with a valuation allowance due to uncertainties regarding realization.
+Added: Under current law, our NOL carry-forwards generated up through December 31, 2017 may be carried forward for no more than 20 years, and our NOL carry-forwards generated in our taxable years ended December 31, 2019 and December 31, 2018 may be carried forward indefinitely.
However, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modified the NOL carryback rules and deferred the application for the NOL carry-forward rules.
−Removed: The CARES Act signed into law on March 27, 2020 modified the NOL carryforward rules applicable to certain of the NOL carryforwards possessed by our TRSs.
−Removed: First, the CARES Act defers the application of 80% of taxable income limitation, which was added to the Code by the 2017 Act, to our TRSs until their taxable years ended December 31, 2021, in addition to modifying the computation of the 80% limitation.
−Removed: Additionally, the CARES Act permits the carryback of NOLs generated by our TRSs in 2018, 2019, and 2020 for up to five years to offset taxable income reported in any of those prior tax years and recover income taxes paid in such prior tax years.
+Added: The CARES Act, which was signed into law on March 27, 2020, modified the NOL carry-forward rules applicable to certain of the NOL carry-forwards possessed by our TRSs.
+Added: First, the CARES Act defers the application of the 80% Limitation to our TRSs until their taxable years ended December 31, 2021, in addition to modifying the computation of the 80% Limitation.
+Added: Additionally, the CARES Act permits the carryback of NOLs generated by our TRSs in 2018, 2019, and 2020 for up to five years to offset taxable income reported in any of those prior taxable years and recover income taxes paid in such prior taxable years.
Other provisions of the CARES Act may also impact the computation of taxable income by any of our TRSs or Omega and Omega OP.
−Removed: The modifications to the NOL carryback rules do not permit the carryback of a NOL by a REIT and, thus, will not impact Omega.
−Removed: We do not anticipate that such changes will impact materially the computation of Omega’s taxable income, or the taxable income of any Omega entity, including our TRSs.
+Added: The modifications to the NOL carryback rules do not permit the carryback of an NOL by a REIT and, thus, will not impact Omega.
+Added: We do not anticipate that such changes will materially impact the computation of Omega’s taxable income, or the taxable income of any Omega entity, including our TRSs.
We also do not expect that Omega or any Omega entity, including our TRSs, will realize a material tax benefit as a result of the changes to the provisions of the Code made by the CARES Act.
−Removed: For the three months ended June 30, 2020 and 2019, we recorded approximately $0.2 million and $0.3 million, respectively, of state and local income tax provisions.
−Removed: For the six months ended June 30, 2020 and 2019, we recorded approximately $0.6 million and $0.4 million, respectively, of state and local income tax provisions.
−Removed: For the three months ended June 30, 2020 and 2019, we recorded approximately $0.7 million and $0.5 million, respectively, of tax provisions for foreign income taxes.
−Removed: For the six months ended June 30, 2020 and 2019, we recorded approximately $1.3 million and $1.1 million, respectively, of tax provisions for foreign income taxes.
+Added: For the three months ended September 30, 2020 and 2019, we recorded approximately $0.2 million and $0.3 million, respectively, of state and local income tax provisions.
+Added: For the nine months ended September 30, 2020 and 2019, we recorded approximately $0.8 million and $0.7 million, respectively, of state and local income tax provisions.
+Added: For the three months ended September 30, 2020 and 2019, we recorded approximately $0.5 million and $0.2 million, respectively, of tax provisions for foreign income taxes.
+Added: For the nine months ended September 30, 2020 and 2019, we recorded approximately $1.8 million and $1.3 million, respectively, of tax provisions for foreign income taxes.
The expenses were included in income tax expense on our Consolidated Statements of Operations.
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Additionally, emergency legislation, including the CARES Act enacted on March 27, 2020 and discussed below, and temporary changes to regulations and reimbursement issued by the current administration in response to the COVID-19 pandemic, continue to have a significant impact on the operations and financial condition of our operators.
−Removed: The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, as well as the difference in how the pandemic may impact SNFs in contrast to ALFs, all of which developments and impacts are uncertain and difficult to predict.
−Removed: Due to the speed with which the situation is changing, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.
−Removed: The following is a discussion of certain laws and regulations generally applicable to our operators, and in certain cases, to us.
−Removed: Healthcare Reform .
−Removed: A substantial amount of rules and regulations have been issued under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the “Healthcare Reform Law”).
−Removed: The current administration has brought several Congressional efforts to repeal and replace the Affordable Care Act.
−Removed: We expect additional rules, regulations and judicial interpretations in response to legal and other constitutional challenges to be issued that may materially affect our operators’ financial condition and operations.
−Removed: Even if the Healthcare Reform Law is not ultimately amended or repealed, the current administration or Congress could propose changes impacting implementation of the Healthcare Reform Law.
−Removed: The ultimate composition and timing of any legislation enacted under the current administration that would impact the current implementation of the Healthcare Reform Law remains uncertain.
−Removed: Given the complexity of the Healthcare Reform Law and the substantial requirements for regulation thereunder, the impact of the Healthcare Reform Law on our operators or their ability to meet their obligations to us cannot be predicted, whether in its current form or as amended, repealed or interpreted.
−Removed: Reform Requirements for Long-Term Care Facilities .
−Removed: As part of the Healthcare Reform Law, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule on October 4, 2016 modifying the conditions of participation in Medicare and Medicaid for SNFs.
−Removed: The extensive changes included provisions related to staff training, discharge planning, infection prevention and control programs, and pharmacy services, among others.
−Removed: While many of the regulations have become effective, the implementation and enforcement of some provisions, particularly with respect to the Quality Assurance Program Improvement (“QAPI”) and compliance and ethics related requirements of the Phase 3 regulations did not become effective until November 28, 2019.
−Removed: Reimbursement Generally .
+Added: The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the sufficiency and timeliness of additional governmental relief, the duration, spread and intensity of the outbreak, as well as the difference in how the pandemic may impact SNFs in contrast to ALFs, all of which developments and impacts are uncertain and difficult to predict.
+Added: Due to these uncertainties, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.
A significant portion of our operators’ revenue is derived from government-funded reimbursement programs, consisting primarily of Medicare and Medicaid.
As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs by government payors will likely continue, which may result in reductions in reimbursement at both the federal and state levels.
−Removed: Additionally, new and evolving payor and provider programs, including but not limited to Medicare Advantage, dual eligible, value-based purchasing and bundled payments, could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations.
+Added: Additionally, new and evolving payor and provider programs, including but not limited to Medicare Advantage, dual eligible, value-based purchasing, payments to providers that are tied to quality and efficiency such as the Patient Driven Payment Model, and bundled payments, could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations.
Significant limits on the scope of services reimbursed and/or reductions of reimbursement rates could have a material adverse effect on our operators’ results of operations and financial condition, which could adversely affect our operators’ ability to meet their obligations to us.
−Removed: Changes Related to COVID-19.
−Removed: SNFs have continued to be impacted by the Bipartisan Budget Act of 2018, which extended Medicare sequestration and Medicare reimbursement cuts to providers and plans by 2% across the board through 2027.
−Removed: However, the CARES Act temporarily suspends Medicare sequestration for the period of May 1 through December 31, 2020, resulting in an increase in fee-for-service Medicare payments by approximately 2% as compared to what providers would have otherwise received during this period.
−Removed: In exchange for this temporary suspension, the CARES Act also extends the mandatory sequestration policy by an additional one year, i.e., through 2030.
+Added: The following is a discussion of certain laws and regulations generally applicable to our operators, and in certain cases, to us.
+Added: Reimbursement Changes Related to COVID-19:
+Added: Temporary Medicaid FMAP Increase.
On March 18, 2020, the Families First Coronavirus Response Act was enacted, which provides a temporary 6.2% increase to each qualifying state and territory’s Medicaid Federal Medical Assistance Percentage (“FMAP”) effective January 1, 2020.
+Added: As part of the requirements for receiving the temporary FMAP increase, states must cover testing services and treatments for COVID-19 and may not impose deductibles, copayments, coinsurance or other cost sharing charges for any quarter in which the temporary increased FMAP is claimed.
The temporary FMAP increase will extend through the last day of the calendar quarter in which the COVID-19 public health emergency declared by the U.S.
Department of Health and Human Services (“HHS”), including any extensions, terminates .
−Removed: As part of the requirements for receiving the temporary FMAP increase, states must cover testing services and treatments for COVID-19 and may not impose deductibles, copayments, coinsurance or other cost sharing charges for any quarter in which the temporary increased FMAP is claimed.
−Removed: HHS announced on July 23, 2020 that the public health emergency, which was currently set to expire on July 31, 2020, would be extended until October 31, 2020.
+Added: HHS announced on October 2, 2020 that, effective October 23, 2020 the public health emergency, which had been set to expire on October 31, 2020, would be extended until December 31, 2020.
In addition to maintaining the increased FMAP, this extension also allows the temporary Section 1135 waivers, including suspension of the three-day prior hospital stay coverage requirement and the relaxation of telehealth restrictions, to continue.
−Removed: Additionally, the CARES Act allocates $100 billion to a Public Health and Social Services Emergency Fund to “reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.” Nursing facility operators participating in Medicare and Medicaid may be eligible to receive compensation for costs incurred in the course of providing medical services, such as those related to obtaining PPE, COVID-19 related testing supplies, and increased staffing or training, provided that such costs are not compensated by another source.
−Removed: While “lost revenue” is not defined in the CARES Act, it is anticipated that it could include lost revenue due to a decrease in resident census or a change in the margin of services provided to residents.
−Removed: The Secretary of the HHS has broad authority and discretion to determine payment eligibility and the amount of such payments.
−Removed: Further, Congress appropriated $75 billion for healthcare providers through the Paycheck Protection Program and Health Care Enhancement Act.
−Removed: HHS is distributing this money through the Provider Relief Fund, and these payments do not need to be repaid.
−Removed: As of June 2020, HHS had announced distributions of congressional relief funds to healthcare providers, including approximately $50 billion to participants in the Medicare program equivalent to 2% of their annual revenue, as well as $15 billion in funding to providers that participate in Medicaid and the Children's Health Insurance Program (up to 2% of their annual revenues) but that had not received funding in the initial rounds.
+Added: States will make individual determinations about how this additional Medicaid reimbursement will be applied to SNFs, if at all.
+Added: CARES Act and Provider Funds Appropriating $175 Billion.
+Added: In further response to the pandemic, on March 27, 2020, the President signed into law the CARES Act.
+Added: The CARES Act allocates $100 billion to a Public Health and Social Services Emergency Fund to “reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.” Nursing facility operators participating in Medicare and Medicaid may be eligible to receive compensation for costs incurred in the course of providing medical services, such as those related to obtaining personal protective equipment, COVID-19 related testing supplies, and increased staffing or training, provided that such costs are not compensated by another source.
+Added: The Secretary of HHS has broad authority and discretion to determine payment eligibility and the amount of such payments.
+Added: Congress additionally appropriated $ 75 billion for healthcare providers through the Paycheck Protection Program and Health Care Enhancement Act , which was signed into law on April 24, 2020 .
+Added: HHS is distributing this money through the Provider Relief Fund, and these payments do not need to be repaid to the extent they are used in compliance with the applicable requirements.
+Added: Certain provisions of the CARES Act related to SNFs are summarized below.
+Added: Distribution of Relief Funds:
+Added: ● Phases 1, 2, 3 General Distributions of $88 Billion to Healthcare Providers :
+Added: From April to June 2020, HHS announced distributions of congressional relief funds to healthcare providers, including a Phase 1 General Distribution of approximately $50 billion to participants in the Medicare program equivalent to 2% of their annual revenue, as well as a Phase 2 General Distribution including $18 billion in funding to providers that participate in Medicaid and the Children’s Health Insurance Program (up to 2% of their annual revenues) but who had not received funding in the initial rounds.
The ultimate allocation of these distributions to healthcare providers may differ from the methodology initially announced by HHS, in which distributions would be based on prior Medicare reimbursements or historical net patient revenue.
+Added: In October 2020, HHS announced a Phase 3 General Distribution of $20 billion funding for frontline healthcare providers dealing with the COVID-19 pandemic;
+Added: these funds are intended to take into account financial losses and changes in operating expenses caused by COVID-19.
+Added: Providers that have already received relief fund payments may also apply for these funds.
+Added: In addition, in October 2020, HHS announced that certain behavioral health specialists as well as previously ineligible health care providers will be eligible to receive funds from the Provider Relief Fund.
+Added: The allocation of any of these funds will not be determined until all applications are received and reviewed.
In addition, distributions may be conditioned on and subject to operators meeting certain compliance obligations.
−Removed: In July 2020, CMS announced that it will devote $5 billion of the Provider Relief Fund authorized by the CARES Act to qualified Medicare-certified long term care facilities to address critical needs in nursing homes, such as the hiring of additional staff, implementing infection control “mentorship” programs with subject matter experts, increased testing, and providing additional technology services to residents who are unable to receive visitors.
−Removed: This new funding is in addition to the $4.9 billion previously announced to offset revenue losses and assist nursing homes with additional costs related to responding to the COVID-19 public health emergency and the shipments of PPE provided to nursing homes by the Federal Emergency Management Agency.
−Removed: CMS additionally announced that it will begin requiring, rather than recommending, that all nursing homes in states with a 5% positivity rate or greater test all nursing home staff each week, although no final rule has been promulgated and the requirement may ultimately be modified.
−Removed: While we believe that to date, the payouts under the Provider Relief Fund and Public Health and Social Services Emergency Fund have primarily benefited Medicare providers, with more limited funding for Medicaid providers and for senior housing operators, we cannot predict the extent to which any of our operators will receive such funds, what the financial impact of receiving such funds would be on their operations, and whether operators will be able to meet the compliance requirements associated with the funds.
+Added: ● Additional Targeted SNF Distributions of Approximately $9.5 Billion :
+Added: In May 2020, HHS announced targeted distributions to skilled nursing facilities of approximately $4.9 billion from the Provider Relief Fund to offset revenue losses and assist nursing homes with additional costs related to responding to the COVID-19 public health emergency.
+Added: From August through September 2020, HHS announced additional targeted distributions of $4.5 billion from the Provider Relief Fund in total to skilled nursing facilities to address critical needs in nursing homes related to infection control, such as the hiring of additional staff, implementing infection control “mentorship” programs with subject matter experts, increased testing, and providing additional technology services to residents who are unable to receive visitors.
+Added: The $4.5 billion of distributions included an initial $2.5 billion to be paid out to all Medicare certified skilled nursing facilities, as well as a second distribution of approximately $2 billion to be paid out over four months as performance-based incentive payments, based on each nursing home’s relative infection and mortality rates, with the infection control component accounting for 80% of the incentive payment dollars and the mortality component accounting for 20% of the incentive payment.
+Added: In addition, in August 2020, CMS released a Medicaid Informational Bulletin that provided guidance to states on flexibilities that are available to increase Medicaid reimbursement for nursing facilities that implement specific infection control practices, such as designating a quarantine or isolation wing for COVID-19 patients.
+Added: ● Availability of ALF Funding :
+Added: In September 2020, HHS announced that assisted living facilities may apply for funding under the Provider Relief Fund Phase 2 General Distribution allocation.
+Added: HHS continues to evaluate and provide allocations of, and issue regulation and guidance regarding, grants made under the CARES Act.
+Added: There are substantial uncertainties regarding the extent to which our operators will receive such funds, the financial impact of receiving such funds on their operations or financial condition, and whether operators will be able to meet the compliance requirements associated with the funds.
+Added: Temporary Suspension of Medicare Sequestration:
+Added: SNFs have continued to be impacted by the Bipartisan Budget Act of 2019, which extended Medicare sequestration and Medicare reimbursement cuts to providers and plans by 2% across the board through 2029.
+Added: However, the CARES Act temporarily suspends Medicare sequestration for the period of May 1 through December 31, 2020, resulting in an increase in fee-for-service Medicare payments by approximately 2% as compared to what providers would have otherwise received during this period.
+Added: In exchange for this temporary suspension, the CARES Act also extends the mandatory sequestration policy by an additional one year, i.e., through 2030.
+Added: Temporary suspension of certain patient coverage criteria and documentation and care requirements :
+Added: The CARES Act and a series of temporary waivers and guidance issued by the CMS suspend various Medicare patient coverage criteria as well as documentation and care requirements to provide regulatory relief to ensure patients continue to have adequate access to care notwithstanding the burdens placed on healthcare providers due to the COVID-19 pandemic.
+Added: These regulatory actions could contribute to a change in census volumes and skilled nursing mix that may not otherwise have occurred.
+Added: It remains uncertain when federal and state regulators will resume enforcement of those regulations which are waived or otherwise not being enforced during the public health emergency due to the exercise of enforcement discretion.
+Added: Medicare Accelerated and Advanced Payment Program:
+Added: In an effort to increase cash flow to providers impacted by COVID-19, CMS had temporarily expanded the Accelerated and Advance Payment Programs from March 28, 2020 until April 26, 2020 in order to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider or supplier who submitted a request to the appropriate Medicare Administrative Contractor and met the required qualifications.
+Added: Traditionally repayment of these advance/accelerated payments is set to begin at 90 days, however CMS initially extended the repayment of these accelerated/advance payments to begin 120 days after the date of issuance of the payment and in October 2020, further extended the repayment to begin one year after payment was issued and occur over an extended period of time.
+Added: Payroll Tax Deferral:
The CARES Act additionally provided payroll tax relief for employers allowing them to defer payment of employer Social Security taxes that are otherwise owed for wage payments made after March 27, 2020 through the end of the calendar year.
Instead of depositing these taxes on a next-day or semi-weekly basis, the deposit due date for 50% of the taxes is deferred to December 31, 2021, with the remaining 50% deferred until December 31, 2022.
−Removed: In an effort to increase cash flow to providers impacted by COVID-19, CMS had temporarily expanded the Accelerated and Advance Payment Programs on March 28, 2020.
−Removed: CMS is authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider or supplier who submits a request to the appropriate Medicare Administrative Contractor (“MAC”) and meets the required qualifications.
−Removed: Traditionally repayment of these advance/accelerated payments is set to begin at 90 days, however CMS has extended the repayment of these accelerated/advance payments to begin 120 days after the date of issuance of the payment.
−Removed: However, CMS announced on April 26, 2020 that it would not be accepting any new applications for the Advance Payment Program and would be reevaluating all pending and new applications for Accelerated Payments in consideration of the direct payments made available to providers through the HHS Provider Relief Fund.
−Removed: We cannot predict the impact of these programs on the business or financial condition of any of our operators.
−Removed: In addition to COVID-19 reimbursement changes, the current administration announced several quality of care related initiatives on April 30, 2020 related to addressing the COVID-19 pandemic in long-term care facilities.
−Removed: One of the initiatives is the formation of the Coronavirus Commission for Safety and Quality in Nursing Homes, a special task force created for the purpose of addressing the rising death toll of residents in nursing homes.
−Removed: The task force is composed of leading industry experts, doctors and scientists, resident and patient advocates, family members, infection and prevention control specialists, and state and local authorities.
−Removed: A second announcement was made which advised that the Federal Emergency Management Agency would begin shipping two weeks’ worth of PPE to each of the nation’s 15,400 nursing homes, with all nursing homes receiving a total of 14 days’ worth of PPE no later than July 4, 2020.
−Removed: The current administration additionally released an interim final regulation regarding the requirement for nursing home operators to report COVID-19-related data directly to the Centers for Disease Control and Prevention in addition to CMS.
−Removed: Nursing home providers will be required to report infections and death data at least weekly to federal authorities, and by 5 p.m.
+Added: Quality of Care Initiatives Related to COVID-19:
+Added: In addition to COVID-19 reimbursement changes, the current administration and CMS have announced several regulatory initiatives focused on addressing quality of care in long-term care facilities, including those related to COVD-19 testing and infection control protocols, staffing levels, reporting requirements and visitation policies.
+Added: ● April 30, 2020:
+Added: CMS announced that approximately $81 million in CARES Act funding would be provided to State Agencies through September 20, 2023 to increase their inspections of nursing homes.
+Added: ● April 2020:
+Added: The current administration announced the formation of the Coronavirus Commission for Safety and Quality in Nursing Homes, a special task force created for the purpose of addressing the rising death toll of residents in nursing homes that is composed of leading industry experts, doctors and scientists, resident and patient advocates, family members, infection and prevention control specialists, and state and local authorities.
+Added: Recommendations from the task force were released on September 16, 2020 and provided a list of steps that both providers and regulators should take to address future pandemic conditions or public health emergencies.
+Added: ● April 2020:
+Added: The current administration released Interim final regulation regarding the requirement for nursing home operators to report COVID-19-related data directly to the Centers for Disease Control and Prevention in addition to CMS.
+Added: Nursing home providers are required to report infections and death data at least weekly to federal authorities, and by 5 p.m.
the next day to residents and family members.
−Removed: An additional announcement was made that CMS will provide states with $81 million from the CARES Act to increase their inspections of nursing homes.
−Removed: To ensure effective oversight is achieved, CMS will allocate the CARES Act funding based on performance-based metrics.
−Removed: On July 10, 2020, CMS announced plans to deploy Quality Improvement Organizations across the U.S.
−Removed: to provide immediate assistance to nursing homes in the COVID-19 hotspot areas as identified by the White House Coronavirus Task Force.
−Removed: CMS subsequently announced on July 14, 2020 a large-scale procurement of rapid point-of-care diagnostic testing supplies to be distributed to nursing homes in the COVID-19 hotspots areas.
−Removed: However, due to the lower sensitivity and specificity of these test devices, not all state public health departments allow for their use, and many have requirements in place for using these tests appropriately.
−Removed: This initiative is a one-time procurement of devices and tests targeted toward facilitating on-site testing among nursing home residents and staff.
−Removed: Following initial distribution of testing supplies from CMS, nursing homes will be able to procure additional tests directly from the respective manufacturers.
+Added: In July 2020, CMS announced that it would begin requiring, rather than recommending, that all nursing homes in states with a specified positivity rate or greater test all nursing home staff on a regular basis, and in August 2020, CMS issued the testing requirement.
+Added: ● August 26, 2020:
+Added: CMS released guidance for nursing homes and clinical laboratories to assist in enhancing their abilities to prevent the spread of COVID-19 to nursing home residents and their front line staff.
+Added: The nursing home guidance memo outlines steps that facilities must take under the new testing requirements, including instruction on terms of frequency, reporting, documentation and other requirements and a revised facility survey tool for program compliance.
+Added: On September 23, 2020, CMS updated this guidance to adjust the frequency of testing in order to reduce the burden on skilled nursing facilities.
+Added: ● September 17, 2020:
+Added: CMS issued new guidance regarding visitation policies and procedures in nursing homes during the COVID-19 public health emergency.
+Added: While CMS indicated that SNFs may still restrict visitation under certain circumstances, a facility’s failure to facilitate visitation, without adequate reason related to clinical necessity or resident safety, would constitute a potential violation of 42 CFR 483.10(f)(4), and the facility would be subject to citation and enforcement actions.
+Added: ● Beginning in July 2020, CMS has announced various measures to supply PPE, via the Federal Emergency Management Agency, and testing equipment to nursing home providers, and in October 2020, announced measures to facilitate and prioritize distribution of vaccines, once available, to nursing homes.
+Added: CMS announced that the distribution of testing equipment was designed to reduce the costs required with the mandatory testing.
On June 16, 2020, the U.S.
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for-profit nursing home operators related to COVID-19 cases and deaths, testing, PPE, staffing levels and pay, legal violations, and efforts to prevent further infections, as well as additional transparency regarding the use of federal funds by nursing homes during the pandemic.
−Removed: State budgetary concerns, coupled with the implementation of rules under the Healthcare Reform Law, or prospective changes to the Healthcare Reform Law under the current administration or Congress, may result in additional significant changes in healthcare spending at the state level.
+Added: State budgetary concerns, coupled with the implementation of rules under the Healthcare Reform Law (described further below), or prospective changes to the Healthcare Reform Law under the current administration or Congress, may result in additional significant changes in healthcare spending at the state level.
Additionally, the need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in Medicaid due to unemployment and declines in family incomes resulting from the COVID-19 pandemic.
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On June 29, 2020, Florida Governor Ron DeSantis signed a $92.2 billion state budget for FY 2020-2021 into law, which includes a total Medicaid rate increase of $105 million for nursing centers.
−Removed: At June 30, 2020, 14% of our investments were in Florida.
−Removed: Texas, which represents 9% of our investments as of June 30, 2020, presents a difficult operating environment for SNF operators as a result of lower statewide occupancy levels, as compared to other states, and a Medicaid rate reimbursement that we believe is among the lowest in the United States.
+Added: At September 30, 2020, 14% of our investments were in Florida.
+Added: Texas, which represents 9% of our investments as of September 30, 2020, presents a difficult operating environment for SNF operators as a result of lower statewide occupancy levels, as compared to other states, and a Medicaid rate reimbursement that we believe is among the lowest in the United States.
Several of our operators have experienced lower operating margins on their SNFs in Texas, as compared to other states, as a result of the foregoing and labor costs.
−Removed: Additionally, in mid-November 2019, CMS proposed the Medicaid Fiscal Accountability Rule (“MFAR”), which would modify and refine the current federal portion of Medicaid funding for two programs commonly referred to as the upper payment limit (“UPL”) and provider taxes.
−Removed: As proposed, MFAR would further regulate and in some cases materially reform, eliminate or prompt the replacement of certain state Medicaid supplemental payment systems and other allowable financing arrangements that currently benefit healthcare providers.
−Removed: We have operators in two states, Indiana and Texas, that participate in UPL programs and operators in 36 states who received provider tax reimbursements as of June 30, 2020.
−Removed: Based on our analysis of MFAR and discussions with our operators and other industry leaders, we believe MFAR as proposed would eliminate the incremental UPL funds and that most, if not all, states are or will be able to become compliant under the revised provider tax program.
−Removed: The proposed MFAR is currently in a comment period and may be changed before a final rule is adopted, or may not be adopted at all.
−Removed: We believe the ultimate potential impact of MFAR on our facilities in Indiana and Texas is uncertain at this time, in part as we expect any reductions in revenues may be at least partially offset by expense reductions.
−Removed: If ultimately implemented, MFAR could reduce reimbursement to our operators in those states affected by the rule, which could ultimately have a material adverse effect on the financial condition of those operators.
+Added: In mid-November 2019, CMS proposed the Medicaid Fiscal Accountability Rule (“MFAR”), which would have modified and refined the current federal portion of Medicaid funding for two programs commonly referred to as the upper payment limit (“UPL”) and provider taxes.
+Added: However, the CMS withdrew the proposed rule from the regulatory agenda on September 14, 2020 in response to concerns that had been raised by states and providers about potential unintended consequences of the proposed rule, including significant funding cuts to the Medicaid program annually.
On July 31, 2020, CMS issued a final rule regarding the government fiscal year (“FY”) 2021 Medicare payment rates and quality payment programs for SNFs, with aggregate payments projected to increase by $750 million, or 2.2%, for FY 2021 compared to FY 2020.
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The CMS applied a five percent cap on any decreases in a provider’s wage index from FY 2020 to FY 2021.
−Removed: Payments to providers are being increasingly tied to quality and efficiency.
+Added: Payments to providers continue to be increasingly tied to quality and efficiency.
The Patient Driven Payment Model (“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the whole patient, rather than the volume of services the patient receives, became effective October 1, 2019 (FY 2020).
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In response to industry stakeholder comments, the CMS finalized changes to the ICD-10 code mappings as part of the FY 2021 SNF prospective payment system final rule, effective October 1, 2020.
−Removed: Beginning October 1, 2019, group therapy is defined as a qualified rehabilitation therapist or therapy assistant treating two to six patients at the same time who are performing the same or similar activities.
−Removed: Also effective October 1, 2019, CMS established a 25% cap for concurrent and group therapy.
−Removed: Additional changes to reimbursement for group therapy were included in the Bipartisan Budget Act of 2018, which permanently repealed the therapy caps that applied to Medicare Part B therapy services provided as of January 1, 2018 and reduced the reimbursement rate for Medicare Part B therapy services performed by therapy assistants to 85% of the physician fee schedule beginning January 1, 2022.
+Added: Effective October 1, 2019, CMS revised the definition of group therapy provided in SNFs so that it aligns with the group therapy definition used in the inpatient rehabilitation facility setting.
+Added: The new definition defines group therapy as a qualified rehabilitation therapist or therapy assistant treating two to six patients at the same time who are performing the same or similar activities.
+Added: CMS additionally established under the PDPM a 25% cap for concurrent and group therapy Additional changes to reimbursement for Medicare Part B therapy were included in the Bipartisan Budget Act of 2018, which permanently repealed the therapy caps that applied to Medicare Part B therapy services provided as of January 1, 2018 and reduced the reimbursement rate for Medicare Part B therapy services performed by therapy assistants to 85% of the physician fee schedule beginning January 1, 2022.
The former cap amounts were retained as a threshold above which claims must include confirmation that services are medically necessary as justified by appropriate documentation in the medical record.
+Added: Included within the proposed Physician Fee Schedule Rule for FY 2021, was a nine percent (9%) cut to reimbursement 9% from Medicare payments for Medicare Part B services.
+Added: On May 27, 2020, CMS added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers for the Medicare Part B programs provided by a skilled nursing facility as a part of the COVID-19 1135 waiver provisions.
+Added: The COVID-19 1135 waiver provisions also allow for the facility to bill an originating site fee to CMS for telehealth services provided to Medicare Part B beneficiary residents of the facility when the services are provided by a physician from an alternate location, effective March 6, 2020 through the end of the public health emergency.
Prior to COVID-19, we believed that certain of our operators could realize efficiencies and cost savings from increased concurrent and group therapy under PDPM and some had reported early positive results.
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These reimbursement changes have had and may in the future have an adverse effect on the operations and financial condition of some operators and could adversely impact the ability of operators to meet their obligations to us.
+Added: Healthcare Reform .
+Added: A substantial number of rules and regulations have been issued under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the “Healthcare Reform Law”).
+Added: The current administration has brought several Congressional efforts to repeal and replace the Affordable Care Act.
+Added: We expect additional rules, regulations and judicial interpretations in response to legal and other constitutional challenges to be issued that may materially affect our operators’ financial condition and operations.
+Added: Even if the Healthcare Reform Law is not ultimately amended or repealed, the current administration or Congress could propose changes impacting implementation of the Healthcare Reform Law.
+Added: The ultimate composition and timing of any legislation enacted under the current administration that would impact the current implementation of the Healthcare Reform Law remains uncertain.
+Added: Given the complexity and uncertainty regarding the future of the Healthcare Reform Law, the future impact on our operators or their ability to meet their obligations to us cannot be predicted, whether in its current form or as amended, repealed or interpreted.
+Added: As part of the Healthcare Reform Law, CMS issued a final rule on October 4, 2016 modifying the conditions of participation in Medicare and Medicaid for SNFs.
+Added: The extensive changes included provisions related to staff training, discharge planning, infection prevention and control programs, and pharmacy services, among others.
+Added: While many of the regulations have become effective, the implementation and enforcement of some provisions, particularly with respect to the Quality Assurance Program Improvement and compliance and ethics related requirements of the Phase 3 regulations did not become effective until November 28, 2019.
Quality of Care Initiatives .
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SNFs are required to provide information for the CMS Nursing Home Compare website regarding staffing and quality measures.
−Removed: Recent updates to the Nursing Home Care website and the Five Star Quality Rating System include revisions to the inspection process and the implementation of new quality measures.
+Added: Recent updates to the Nursing Home Care website and the Five Star Quality Rating System include revisions to the inspection process, adjustment of staffing rating thresholds and the implementation of new quality measures.
However, as a result of the COVID-19 pandemic, CMS made changes to, or temporarily suspended the collection and reporting of, certain survey inspection, staffing levels and quality measures, which impacted the information posted on the Nursing Home Compare website and used in the Five Star Quality Rating System calculation.
+Added: In responding to the COVID-19 pandemic, CMS announced a new, targeted inspection plan to focus inspections on urgent patient safety threats and infection control, therefore causing a shift in the number of nursing homes inspected and how the inspections are conducted.
It is possible that these rating changes or any other ranking system could lead to future reimbursement policies that reward or penalize facilities on the basis of the reported quality of care parameters.
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The OIG has additionally reviewed the staffing levels reported by SNFs as part of its August 2018 and February 2019 Work Plan updates, and included a review of involuntary transfers and discharges from nursing homes in the June 2019 Work Plan updates.
−Removed: Regional Recovery Audit Contractor program auditors along with the OIG and Department of Justice are expected to continue their efforts to evaluate SNF Medicare claims for any excessive therapy charges.
+Added: In August 2020, the OIG released its findings regarding its review of staffing levels in SNFs from 2018.
+Added: The OIG recommended that CMS enhance efforts to ensure nursing homes meet daily staffing requirements and explore ways to provide consumers with additional information on nursing homes’ daily staffing levels and variability.
+Added: The OIG indicated that while the review was initiated before the COVID-19 pandemic emerged, the 2020 pandemic reinforces the importance of sufficient staffing for nursing homes, as inadequate staffing can make it more difficult for nursing homes to respond to infectious disease outbreaks like COVID-19.
+Added: It is unknown what impact, if any, enhanced scrutiny of staffing levels by OIG and CMS will have on our operators.
Department of Justice .
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On June 1, 2020, the CMS announced the imposition of civil monetary penalties for nursing homes with persistent infection control violations and increased enforcement actions for nursing homes with lower level infection control deficiencies.
+Added: The CMS announced on August 14, 2020 that the agency has imposed more than $15 million in civil money penalties (CMPs) to more than 3,400 nursing homes during the public health emergency for noncompliance with infection control requirements and the failure to report coronavirus disease 2019 (COVID-19) data.
+Added: On March 4, 2020, CMS prioritized its inspection protocols to allow inspectors to focus on the most serious health and safety threats like infectious diseases and abuse.
+Added: Since March 4, 2020, CMS and the state survey agencies have completed infection control surveys in over 99.2% of nursing homes.
+Added: These surveys have resulted in more than 180 immediate jeopardy level findings for infection control, which is triple the rate of such deficiencies found in 2019.
+Added: CMS imposed civil monetary penalties (“CMPs”) for these violations totaling nearly $10 million to nursing homes across 22 states, with the average CMP imposed in the amount of $55,000.
+Added: Such enforcement activities are unpredictable and may develop over lengthy periods of time.
+Added: An adverse resolution of any of these enforcement activities or investigations incurred by our operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on their reputation, business, results of operations and cash flows.
Medicare and Medicaid Program Audits.
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CMS contracts with Recovery Audit Contractors on a contingency basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program, to managed Medicare plans and in the Medicaid program.
+Added: Regional Recovery Audit Contractor program auditors along with the OIG and Department of Justice are expected to continue their efforts to evaluate SNF Medicare claims for any excessive therapy charges.
CMS also employs Medicaid Integrity Contractors to perform post-payment audits of Medicaid claims and identify overpayments.
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It is anticipated that our operators will continue to face additional federal and state regulatory requirements related to the operation of their facilities in response to the COVID-19 pandemic.
+Added: Such proceedings are unpredictable and may develop over lengthy periods of time.
General and Professional Liability.
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The rule prohibits providers from requiring residents to sign binding arbitration agreements as a condition for receiving care and requires that the agreements specifically grant residents the explicit right to rescind the agreement within thirty calendar days of signing.
−Removed: In addition, certain states have enacted protections from certain types of liability in connection with the provision of COVID-19 related services provided by SNFs and other healthcare providers.
+Added: A growing number of professional liability and employment related claims have been filed or are threatened to be filed against long-term care providers related to COVID-19.
+Added: While such claims may be subject to liability protection provisions within various state executive orders or legislation and/or federal legislation, an adverse resolution of any of legal proceeding or investigations against our operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on our operators’ reputation, business, results of operations and cash flows.
Critical Accounting Policies and Estimates
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The following is our discussion of the consolidated results of operations, financial position and liquidity and capital resources, which should be read in conjunction with our unaudited consolidated financial statements and accompanying notes.
−Removed: Three Months Ended June 30, 2020 and 2019
+Added: Three Months Ended September 30, 2020 and 2019
Operating Revenues
−Removed: Our operating revenues for the three months ended June 30, 2020 totaled $256.4 million, an increase of approximately $31.1 million over the same period in 2019.
−Removed: The $31.1 million increase was primarily the result of (i) a $7.0 million increase in rental income resulting from the May 17, 2019, merger with MedEquities Realty Trust, Inc.
−Removed: (the “MedEquities Merger”), $18.1 million of rental income from the October 31, 2019, $735 million acquisition of 60 SNFs (the “Encore Portfolio Acquisition”) and $2.3 million of additional rental income from other facility acquisitions, facilities placed in service, facility transitions and lease amendments in 2019 and 2020, offset by decreases in rental income resulting from facility sales and rent from cash basis operators, (ii) a $2.8 million increase in mortgage income primarily related to mortgages acquired in the MedEquities Merger and new loans or notes and additional funding to existing operators made throughout 2019 and 2020 and (iii) a $1.8 million increase in miscellaneous income which is primarily related to an operator’s late fees.
+Added: Our operating revenues for the three months ended September 30, 2020 totaled $119.2 million, a decrease of approximately $114.0 million over the same period in 2019.
+Added: Our third quarter 2020 operating revenue of $119 million includes primarily non-cash charges, on a net basis of $135 million, which reflects the write-off of contractual rent receivables, straight-line rent receivables and lease inducements, partially offset by the repayment of lease inducements and the acceleration of certain in-place lease liabilities.
+Added: Specifically, the decrease in operating revenue was primarily the result of a $142.3 million non-cash decrease in the accounting for rental income resulting from placing three operators on a cash basis during the third quarter of 2020 and reserving the contractual receivables, straight-line rent receivables and lease inducements related to those operators.
+Added: Also impacting the quarter’s operating income were a $6.7 million decrease resulting from facility sales and transitions, offset by increases in rental income of $17.3 million from the $735 million acquisition of 60 SNFs on October 31, 2019 (the “Encore Portfolio Acquisition”), a $7.8 million of additional rental income from facilities placed in service and other lease amendments in 2019 and 2020, as well as, a $5.5 million increase in mortgage and other investment income related to new mortgages and other investments to existing operators made throughout 2019 and 2020.
Operating Expenses
−Removed: Operating expenses for the three months ended June 30, 2020 totaled $112.7 million, an increase of approximately $14.2 million over the same period in 2019.
+Added: Operating expenses for the three months ended September 30, 2020 totaled $157.9 million, an increase of approximately $58.8 million over the same period in 2019.
The $58.8 million increase was primarily due to:
−Removed: (i) a $9.9 million increase in depreciation expense primarily resulting from facilities acquired in the MedEquities Merger, the Encore Portfolio Acquisition and other facility acquisitions and (ii) a $6.3 million increase in impairment on real estate properties related to ten facilities to reduce their book values to their estimated fair value less costs to sell or fair value.
−Removed: These increases were partially offset by (i) a $1.0 million decrease in acquisition and merger related costs from the MedEquities Merger and (ii) a $0.8 million recovery related to our direct financing leases upon final liquidation of the Orianna Health Systems Distribution Trust.
+Added: (i) a $24.3 million increase in impairment on real estate properties related to seven facilities to reduce their books values to their estimated fair value less costs to sell or fair value, (ii) a $32.1 million increase in provision for credit losses which primarily relates to a $28.2 million reserve related to our term loans with Agemo Holdings, LLC (“Agemo”) and our adoption of ASU 2016-13 on January 1, 2020, and (iii) a $4.4 million increase in depreciation expense primarily resulting from facilities acquired in the Encore Portfolio Acquisition, other facility acquisitions, capital additions and assets placed in service.
+Added: These increases were partially offset by (i) a $0.9 million decrease in acquisition and merger related costs from the MedEquities Merger and (ii) a $1.8 million decrease in real estate taxes related to facility sales and transitions and lease amendments.
Other Income (Expense)
−Removed: For the three months ended June 30, 2020, total other expenses were $55.1 million, an increase of approximately $4.1 million over the same period in 2019.
−Removed: The increase was mainly due to a $4.4 million increase in interest expense primarily related to increased debt balances resulting from our investments made during 2019, which includes the HUD debt assumed in the fourth quarter of 2019 from the Encore Portfolio Acquisition, partially offset by a $0.3 million increase in interest income and other - net primarily related to the change in the fair value of warrants we hold to potentially acquire shares of another public company.
−Removed: Six Months Ended June 30, 2020 and 2019
+Added: For the three months ended September 30, 2020, total other expenses were $55.2 million, an increase of approximately $3.1 million over the same period in 2019.
+Added: The increase was mainly due to (i) a $1.9 million increase in interest expense primarily related to increased debt balances resulting from our investments made during 2019, which includes the $500 million senior unsecured bonds issued in the third quarter of 2019 and the U.S.
+Added: Department of Housing and Urban Development (“HUD”) debt assumed in the fourth quarter of 2019 from the Encore Portfolio Acquisition, and (ii) a $0.9 million increase in interest refinancing costs primarily related to the early extinguishment of two HUD loans in the third quarter of 2020.
+Added: Nine Months Ended September 30, 2020 and 2019
Operating Revenues
−Removed: Our operating revenues for the six months ended June 30, 2020 totaled $509.4 million, an increase of approximately $60.5 million over the same period in 2019.
−Removed: The $60.5 million increase was primarily the result of (i) a $17.8 million increase in rental income resulting from, the MedEquities Merger on May 17, 2019, $36.3 million of rental income from the Encore Portfolio Acquisition on October 31, 2019 and $21.4 million of additional rental income from other facility acquisitions, facilities placed in service, facility transitions and lease amendments in 2019 and 2020, offset by decreases in rental income resulting from facility sales and rent from cash basis operators, (ii) a $4.4 million increase in mortgage income primarily related to mortgages acquired in the MedEquities Merger and new loans or notes and additional funding to existing operators made throughout 2019 and 2020 and (iii) a $1.5 million increase in miscellaneous income which is primarily related to an operator’s late fees.
+Added: Our operating revenues for the nine months ended September 30, 2020 totaled $628.6 million, a decrease of approximately $53.6 million over the same period in 2019.
+Added: The $53.6 million decrease was primarily the result of (i) an approximate $139.0 million decrease in rental income resulting from placing three operators on a cash basis during the third quarter of 2020 and reserving the contractual receivables, straight-line rent receivables and lease inducements related to those operators, and (ii) a $17.2 million decrease in rental income from facility sales and a cash basis operator offset by (i) a $58.6 million increase in rental income from the Encore Portfolio Acquisition on October 31, 2019, (ii) a $17.8 million increase in rental income from the MedEquities Merger on May 17, 2019, (iii) a $12.8 million increase from facility transitions and other lease amendments in 2019 and 2020, (iv) a $8.6 million increase in mortgage income primarily related to mortgages acquired in the MedEquities Merger and new mortgages and additional funding to existing operators made throughout 2019 and 2020, and (v) a $1.2 million increase in miscellaneous income which is primarily related to an operator’s late fees.
Operating Expenses
−Removed: Operating expenses for the six months ended June 30, 2020 totaled $219.8 million, an increase of approximately $19.8 million over the same period in 2019.
+Added: Operating expenses for the nine months ended September 30, 2020 totaled $377.7 million, an increase of approximately $78.6 million over the same period in 2019.
The $78.6 million increase was primarily due to:
−Removed: (i) a $21.7 million increase in depreciation expense primarily resulting from facilities acquired in the MedEquities Merger, the Encore Portfolio Acquisition and other facility acquisitions, (ii) a $9.9 million increase in impairment on real estate properties related to 13 facilities to reduce their book values to their estimated fair value less costs to sell or fair value and (iii) a $1.5 million increase related to our provision for credit losses.
−Removed: These increases were partially offset by (i) a $8.5 million decrease in impairments on our direct financing leases and (ii) a $4.2 million decrease in acquisition and merger related costs from the MedEquities Merger.
+Added: (i) a $26.1 million increase in depreciation expense primarily resulting from the Encore Portfolio Acquisition and other facility acquisitions, (ii) a $34.2 million increase in impairment on real estate properties related to 18 facilities to reduce their book values to their estimated fair value less costs to sell or fair value and (iii) a $33.6 million increase related to our provision for credit losses which primarily relates a $28.2 million reserve related to our term loans with Agemo and our adoption of ASU 2016-13 on January 1, 2020.
+Added: These increases were partially offset by (i) a $8.8 million recovery on our direct financing leases related to the final settlement of the Oriana bankruptcy and (ii) a $5.0 million decrease in acquisition and merger related costs from the MedEquities Merger.
Other Income (Expense)
−Removed: For the six months ended June 30, 2020, total other expenses were $111.1 million, an increase of approximately $10.1 million over the same period in 2019.
−Removed: The increase was due to a (i) $9.1 million increase in interest expense primarily related to increased debt balances resulting from our investments made during 2019, which includes the HUD debt assumed in the fourth quarter of 2019 from the Encore Portfolio Acquisition and (ii) a $0.7 million increase in interest income and other - net primarily related to the change in the fair value of warrants we hold to potentially acquire shares of another public company.
+Added: For the nine months ended September 30, 2020, total other expenses were $166.3 million, an increase of approximately $13.2 million over the same period in 2019.
+Added: The increase was due to a (i) $11.0 million increase in interest expense primarily related to increased debt balances resulting from our investments made during 2019, which includes the $500 million senior unsecured bonds issued in the third quarter of 2019 and the HUD debt assumed in the fourth quarter of 2019 from the Encore Portfolio Acquisition, (ii) a $0.9 million increase in interest refinancing costs related to the early extinguishment of two HUD loans in the third quarter of 2020, and (iii) a $0.6 million increase in amortization of deferred financing costs primarily related to fees on the $500 million senior unsecured bonds issued in the third quarter of 2019.
National Association of Real Estate Investment Trusts Funds From Operations
−Removed: Our funds from operations (“Nareit FFO”) for the three months ended June 30, 2020 was $186.5 million compared to $157.2 million for the same period in 2019.
−Removed: Our Nareit FFO for the six months ended June 30, 2020 was $367.5 million compared to $301.3 million for the same period in 2019.
−Removed: We calculate and report Nareit FFO in accordance with the definition of Funds from Operations and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“Nareit”), and, consequently, Nareit FFO is defined as net income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairment on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures and changes in the fair value of warrants.
+Added: Our funds from operations (“Nareit FFO”) for the three months ended September 30, 2020 was $15.1 million compared to $163.1 million for the same period in 2019.
+Added: Our Nareit FFO for the nine months ended September 30, 2020 was $382.6 million compared to $464.4 million for the same period in 2019.
+Added: We calculate and report Nareit FFO in accordance with the definition of Funds from Operations and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“Nareit”), and, consequently, Nareit FFO is defined as net (loss) income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairment on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures and changes in the fair value of warrants.
Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis.
7 unchanged sentences
We offer this measure to assist the users of our financial statements in evaluating our financial performance under GAAP, and Nareit FFO should not be considered a measure of liquidity, an alternative to net income or an indicator of any other performance measure determined in accordance with GAAP.
−Removed: Investors and potential investors in our securities should not rely on this measure as a substitute for any GAAP measure, including net income.
−Removed: The following table presents our Nareit FFO results for the three and six months ended June 30, 2020 and 2019:
+Added: Investors and potential investors in our securities should not rely on this measure as a substitute for any GAAP measure, including net (loss) income.
+Added: The following table presents our Nareit FFO results for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
(in thousands)
−Removed: (Deduct gain) add back loss from real estate dispositions
+Added: Net (loss) income
+Added: Add back loss (deduct gain) from real estate dispositions
Deduct gain from real estate dispositions - unconsolidated joint ventures
3 unchanged sentences
Add back impairments on real estate properties
−Removed: Add back (deduct) unrealized loss (gain) on warrants
+Added: Add back unrealized loss on warrants
Nareit FFO (a)
1 unchanged sentence
Portfolio and Recent Developments
−Removed: The following tables summarize the significant asset acquisitions that occurred during the first six months of 2020:
+Added: The following table summarizes the significant asset acquisitions that occurred during the first nine months of 2020:
Building & Site
2 unchanged sentences
(1) The initial annual cash yield reflects the initial cash rent divided by the purchase price.
+Added: During the third quarter of 2020, we acquired one parcel of land (not reflected in the table above) for approximately $1.3 million.
On May 1, 2020, we amended our initial $415 million amortizing master mortgage (the “Master Mortgage”) with Ciena Healthcare (“Ciena”) to (i) increase the interest rate on the Master Mortgage to 10.67% per annum and (ii) add an additional $83.5 million mortgage note related to eight SNFs and one ALF located in Michigan.
2 unchanged sentences
The mortgage note matures on June 30, 2029 and bears an initial annual interest rate of 10.31% which increases each year by 2%.
−Removed: As of June 30, 2020, the outstanding principal balance of this mortgage note is approximately $83.4 million.
+Added: As of September 30, 2020, the outstanding principal balance of this mortgage note is approximately $83.4 million.
In June 2020, we entered into a loan agreement with subsidiaries of Ciena to provide $43.2 million of mortgage notes related to two SNFs located in Ohio.
The mortgage notes mature on June 30, 2021 and bear an initial annual interest rate of 9.5%.
−Removed: As of June 30, 2020, the outstanding principal balance of these mortgage notes is approximately $43.2 million.
−Removed: As of June 30, 2020, our total outstanding mortgages notes receivable with Ciena total $665.4 million.
+Added: As of September 30, 2020, the outstanding principal balance of these mortgage notes is approximately $43.2 million.
+Added: As of September 30, 2020, our total outstanding mortgage notes receivable with Ciena total $672.4 million.
On April 17, 2020, we provided a $17.6 million unsecured loan to a subsidiary of Second Spring Healthcare Investments (an entity in which we have an approximate 15% ownership interest).
The loan bears interest at the greater of the prime interest rate or 3-month LIBOR plus 2.75% per annum and is due on demand.
−Removed: As of June 30, 2020, the loan bears interest at 3.25% per annum and has a total outstanding balance of $17.6 million.
−Removed: Other Recent Development
−Removed: During the third quarter of 2020, we amended our master lease with Maplewood Real Estate Holdings, LLC (“Maplewood”), an operator of primarily senior housing facilities, and provided a new credit facility to Maplewood.
−Removed: The new credit facility expanded Maplewood’s borrowing capacity by approximately $100 million to $220 million, in part to provide Maplewood additional liquidity in view of expected ongoing delays and costs associated with COVID-19.
−Removed: Maplewood refinanced existing notes and certain other funded obligations to us of approximately $120 million in aggregate via borrowings from the new credit facility.
+Added: As of September 30, 2020, the loan bears interest at 3.25% per annum and has a total outstanding balance of $17.6 million.
+Added: In 2015 and 2017, we entered into two separate $50.0 million and $15.0 million secured revolving credit facilities with Maplewood Real Estate Holdings, LLC (“Maplewood”) and its subsidiaries.
+Added: These revolving credit facilities bore interest at approximately 6.66% per annum and 9.5% per annum, respectively, and were initially scheduled to mature in 2023.
+Added: As a part of an overall restructuring with this operator, the Company entered into a $220.5 million secured revolving credit facility with Maplewood on July 31, 2020, of which $132.1 million was drawn at closing.
+Added: The funds drawn at closing were used to repay the prior credit facilities with Maplewood, as well as other lease obligations owed to the Company, of which approximately $55.4 million was scheduled to be repaid at termination of the master lease.
+Added: Loan proceeds under the new credit facility may also be used to fund Maplewood’s working capital needs.
+Added: Loans made under this facility bear interest at a fixed rate of 7% per annum and mature on June 30, 2030.
+Added: As of September 30, 2020, $132.1 million remains outstanding on this credit facility to Maplewood.
+Added: Other Recent Developments
+Added: On November 1, 2020, we acquired seven facilities from an unrelated third-party for $78 million.
+Added: The seven facilities consist of six SNFs and one ALF representing 876 operating beds located in Virginia, were simultaneously added to an existing operator’s triple net master lease with initial annual contractual cash rent of $7.4 million.
+Added: On October 9, 2020, we issued $700 million aggregate principal amount of our 3.375% Senior Notes due 2031 (the “2031 Senior Notes”).
+Added: The 2031 Senior Notes mature on February 1, 2031.
+Added: The 2031 Senior Notes were sold at an issue price of 98.249% of their face value before the underwriters’ discount.
+Added: Our net proceeds from the 2031 Senior Notes offering, after deducting underwriting discounts and expenses, were approximately $680.5 million.
+Added: We used the net proceeds from the 2031 Senior Notes offering to repay the outstanding balance on our U.S.
+Added: term loan and 2015 term loan and partially paydown the Omega OP term loan and revolving line of credit .
+Added: As a result of the repayment of the 2015 term loan and the partial paydown of the Omega OP term loan, on October 14, 2020, we settled certain interest rate swaps (interest rate swaps originated in 2015 and/or assumed in 2019) with an aggregate notional value of $275 million related to the 2015 term loan and the Omega OP term loan and paid our swap counterparties approximately $11 million.
Asset Held for Sale
−Removed: As of June 30, 2020, we have six facilities, totaling $70.5 million classified as assets held for sale.
+Added: As of September 30, 2020, we have 13 facilities, totaling $35.9 million classified as assets held for sale.
We expect to sell these facilities over the next twelve months.
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During the first quarter of 2020, we sold six facilities subject to operating leases for approximately $18.1 million in net cash proceeds, recognizing a net gain of approximately $1.8 million.
−Removed: During the second quarter of 2020, we sold 15 facilities subject to operating leases and one facility subject to a direct financing lease for approximately $38.0 million in net cash proceeds recognizing a net gain of approximately $12.8 million.
+Added: During the second quarter of 2020, we sold 15 facilities (see Portfolio and Recent Developments above) subject to operating leases and one facility subject to a direct financing lease for approximately $38.0 million in net cash proceeds, recognizing a net gain of approximately $12.8 million.
+Added: During the third quarter of 2020, we sold six facilities and a parcel of land subject to operating leases for approximately $61.0 million in net cash proceeds, recognizing a net loss of approximately $0.7 million.
During the first quarter of 2020, we recorded impairments on real estate properties of approximately $3.6 million on three facilities.
During the second quarter of 2020, we recorded impairments on real estate properties of approximately $12.0 million on 10 facilities.
+Added: During the third quarter of 2020, we recorded impairments of approximately $28.1 million on seven facilities.
+Added: Our impairments for the third quarter of 2020 were offset by approximately $3.5 million of insurance proceeds related to a facility that was previously destroyed and impaired.
Our recorded impairments were primarily the result of decisions to exit certain non-strategic facilities and/or operators.
−Removed: We reduced the net book value of the impaired facilities to their estimated fair values.
+Added: We reduced the net book value of the impaired facilities to their estimated fair values or, with respect to the facilities reclassified to held for sale, to their estimated fair values less costs to sell.
To estimate the fair value of the facilities, we utilized a market approach which considered binding sale agreements (a Level 1 input) and/or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).
−Removed: On May 26, 2020, we executed an Agreement of Purchase and Sale to sell an acute care hospital located in Nevada to an unrelated third-party for $56.5 million.
−Removed: Pursuant to the Agreement of Purchase and Sale, the sale remains subject to a 60-day due diligence period which expired in July 2020.
−Removed: During the second quarter of 2020, we recorded an impairment of approximately $2.2 million (which is included in the $12.0 million above) related to this facility to reduce its net book value to its fair value less costs to sell of approximately $55.3 million and reclassified the facility to assets held for sale.
−Removed: In July of 2020, we agreed with the third-party buyer to lower the purchase price to approximately $49.0 million.
−Removed: The reduction in the purchase price will result in an additional impairment and/or loss on sale of approximately $7.4 million during the third quarter of 2020.
−Removed: Contractual Receivables and Other Receivables and Lease Inducements
−Removed: As of June 30, 2020, we have approximately $27.6 million of contractual receivables outstanding.
−Removed: Of the $27.6 million of contractual receivables outstanding, approximately $18.2 million relates to Agemo Holdings LLC (“Agemo,” an entity formed in May 2018 to silo our leases and loans formerly held by Signature Healthcare).
−Removed: In addition to the contractual receivables, we have approximately $60.0 million of straight-line rent receivables and/or lease inducements associated with Agemo as of June 30, 2020.
−Removed: In May 2018, we reached an out-of-court restructuring agreement with Agemo that provided for the deferral of rent, the extension of the maturity of our lease and loans, and a working capital loan.
−Removed: If Agemo’s operations deteriorate and they are unable to meet their contractual obligations to us, we may be required to account for rental income from them on a cash basis and reserve approximately $78.2 million of contractual receivables, straight-line rent receivables and lease inducements.
−Removed: For the three months ended June 30, 2020 and 2019, we recorded rental income of approximately $14.8 million and $15.6 million, respectively, and other investment income of $1.3 million and $1.1 million, respectively, from Agemo.
−Removed: For the six months ended June 30, 2020 and 2019, we recorded rental income of approximately $30.1 million and $30.3 million, respectively, and other investment income of $2.5 million and $2.1 million, respectively, from Agemo.
+Added: On May 26, 2020, we executed an agreement to sell an acute care hospital located in Nevada to an unrelated third-party for $56.5 million.
+Added: The agreement provided that the sale was subject to a 60-day due diligence period which expired in July 2020.
+Added: During the second quarter of 2020, we recorded an impairment of approximately $2.2 million related to this facility to reduce its net book value to its fair value less costs to sell of approximately $55.3 million and reclassified the facility to assets held for sale.
+Added: In July 2020, we agreed with the third-party buyer to lower the purchase price to approximately $49.0 million.
+Added: The reduction in the purchase price resulted in an additional impairment of approximately $7.4 million in July 2020, and the facility was subsequently sold in September 2020.
+Added: Contractual Receivables, Other Receivables and Lease Inducements
+Added: A summary of our net receivables by type is as follows:
+Added: September 30,
+Added: (in thousands)
+Added: Contractual receivables – net
+Added: Effective yield interest receivables
+Added: Straight-line rent receivables
+Added: Lease inducements
+Added: Other receivables and lease inducements
+Added: During the first quarter of 2020, we provided approximately $16.0 million of funding to four operators, which was accounted for as lease inducements.
+Added: Of the $16.0 million, $12.9 million was funded to an operator for development and start-up related costs.
+Added: During the second quarter of 2020, we provided approximately $12.9 million of funding to three operators, which was accounted for as lease inducements.
+Added: Of the $12.9 million, $11.0 million was funded to an operator for development and start-up related costs.
+Added: During the third quarter of 2020, we wrote-off approximately $142.3 million of contractual receivables, straight-line rent receivables, and lease inducements to rental income as a result of placing three operators on a cash basis resulting from a change in our evaluation of the collectability of future rent payments due under the respective lease agreements as we considered information the Company received from these three operators regarding substantial doubt as to their ability to continue as a going concern.
+Added: Of the $142.3 million, $64.9 million related to Genesis Healthcare, Inc.
+Added: (“Genesis”), $75.3 million related to Agemo and $2.1 million related to another operator which leases two facilities from the Company.
+Added: During the third quarter of 2020, we also wrote-off approximately $1.0 million of straight-line rent receivable to rental income as a result of transitioning facilities to another existing operator.
+Added: In addition, during the third quarter of 2020, we received a one-time rent payment of approximately $55.4 million from Maplewood, in conjunction with the restructuring of its master lease and loans with Omega (see Portfolio and Recent Developments above).
+Added: This payment was accounted for as an adjustment to straight-line rent receivables and is being amortized over the remaining term of the master lease.
+Added: For the three months ended September 30, 2020 and 2019, we recorded rental income of approximately $(63.1) million and $15.1 million, respectively, and other investment income of $1.1 million and $1.2 million, respectively, from Agemo.
+Added: For the nine months ended September 30, 2020 and 2019, we recorded rental income of approximately $(33.0) million and $45.5 million, respectively, and other investment income of $3.6 million and $3.3 million, respectively, from Agemo.
+Added: For the three months ended September 30, 2020 and 2019, we recorded rental income of approximately $(43.6) million and $15.7 million, respectively, and other investment income of $2.7 million and $2.5 million, respectively, from Genesis.
+Added: For the nine months ended September 30, 2020 and 2019, we recorded rental income of approximately $(12.5) million and $48.1 million, respectively, and other investment income of $7.8 million and $7.2 million, respectively, from Genesis.
In addition, we have accounted for Daybreak Venture LLC (“Daybreak”) on a cash basis of accounting since 2017.
See “Daybreak” below.
−Removed: We have previously written-off our contractual rents receivable, straight-line rents receivable and lease inducements, and therefore, we have no net receivables or inducements related to Daybreak as of June 30, 2020.
−Removed: For the three and six months ended June 30, 2020, we did not record any rental income from Daybreak.
−Removed: For the three and six months ended June 30, 2019, we recorded rental income of approximately $5.8 million and $11.1 million, respectively, from Daybreak.
−Removed: In July of 2020, we executed a Forbearance and Transition Agreement with Daybreak which, among other things, sets forth the parties’ plan to sell or re-lease the Daybreak portfolio, which plan contemplates the potential sale of 28 facilities currently leased to Daybreak to a non-Omega party for $100 million, and the Company’s agreement to forbear from exercising certain default remedies during the transition period.
−Removed: Consistent with the terms of the Forbearance and Transition Agreement with Daybreak, we have transitioned seven Daybreak facilities to existing operators during the first half of 2020 and one additional facility transitioned from Daybreak to an existing operator in July 2020.
+Added: We have previously written-off our contractual rents receivable, straight-line rents receivable and lease inducements, and therefore, we have no net receivables or inducements related to Daybreak as of September 30, 2020.
+Added: For the three and nine months ended September 30, 2020, we did not record any rental income from Daybreak.
+Added: For the three and nine months ended September 30, 2019, we recorded rental income of approximately $0.8 million and $11.1 million, respectively, from Daybreak.
+Added: Other Investments
+Added: On September 30, 2016, we acquired and amended a term loan of approximately $37.0 million with Agemo.
+Added: A $5.0 million tranche of the term loan that bore interest at 13% per annum was repaid in August 2017.
+Added: The remaining $32.0 million tranche of the term loan (the “$32.0 million term loan”) bears interest at 9% per annum and matures on December 31, 2024.
+Added: The $32.0 million term loan and the $1.7 million term loan (discussed below) are secured by a security interest in certain collateral of Agemo.
+Added: On November 5, 2019, we provided Agemo a $1.7 million term loan (which was added to the $32.0 million term loan) that bears interest at a fixed rate of 9% per annum and was initially scheduled to mature on March 31, 2020.
+Added: On February 10, 2020, we extended the maturity of this loan to January 1, 2021.
+Added: During the third quarter of 2020, the Company concluded that both the $32.0 million term loan and $1.7 million term loan were impaired, based in part on our consideration of information the Company received from the operator regarding substantial doubt as to its ability to continue as a going concern.
+Added: We recorded a provision for credit loss of $24.4 million to reduce the carrying value of these loans to the fair value of the underlying collateral, which was limited to our $9.3 million letter of credit (a Level 1 input).
+Added: We also fully reserved approximately $3.8 million of contractual interest receivable related to the $32.0 million term loan (see Note 1 – Basis of Presentation and Significant Accounting Policies).
+Added: As of September 30, 2020, approximately $9.3 million is outstanding on these term loans.
+Added: On September 1, 2020, we placed both the $32.0 million and the $1.7 million term loans on a cash basis for purposes of revenue recognition.
+Added: On May 7, 2018, the Company provided Agemo a $25.0 million secured working capital loan bearing interest at 7% per annum and matures on April 30, 2025.
+Added: The working capital loan is primarily secured by a collateral package that includes a second lien on the accounts receivable of the borrowers.
+Added: The proceeds of the working capital loan were used to pay operating expenses, settlement payments, fees, taxes and other costs approved by the Company.
+Added: As of September 30, 2020, approximately $25.0 million is outstanding on this working capital loan.
+Added: During the third quarter of 2020, no incremental provision for credit loss was recorded for this loan given the underlying collateral value.
+Added: On February 28, 2020, we provided an affiliate of Agemo a $3.5 million term loan bearing interest at a fixed rate of 10% per annum (with the interest paid-in-kind) and matures on February 28, 2021.
+Added: As of September 30, 2020, $3.5 million is outstanding on this term loan.
+Added: During the third quarter of 2020, no incremental provision for credit loss was recorded for this loan given the underlying collateral value.
+Added: At September 30, 2020, the total carrying value of our loans with Agemo and its affiliates, net of allowances for credit losses, is approximately $37.8 million.
+Added: On July 29, 2016, we provided Genesis a $48.0 million secured term loan bearing interest at a rate equal to the Eurodollar base rate (determined using reference rates, subject to a floor of 1.0%) or an alternative base rate (determined using reference rates, subject to a floor of 2.0%), plus in each case a specified applicable margin.
+Added: The initial applicable margin for the Eurodollar base rate loans is 13.0% per annum and the initial applicable margin for the alternative base rate loans is 12.0% per annum.
+Added: This loan was initially scheduled to mature on July 29, 2020.
+Added: On May 9, 2019, we extended the maturity of this loan to November 30, 2021.
+Added: This term loan (and the 2018 term loan discussed below) is secured by a first priority lien on and security interest in certain collateral of Genesis.
+Added: On March 6, 2018, we amended certain terms of the 2016 term loan to Genesis.
+Added: Commencing February 22, 2018, the 2016 term loan bears interest at a fixed rate of 14% per annum, of which 9% per annum shall be paid-in-kind.
+Added: Additionally, the amended term loan does not require monthly payments of principal.
+Added: All principal and accrued and unpaid interest will be due at maturity on November 30, 2021.
+Added: Prior to the amendment, the term loan had required monthly principal payments of $0.25 million through July 2019, and $0.5 million from August 2019 through maturity, with a portion of the monthly interest accrued to the outstanding principal balance of the loan.
+Added: In addition, in November 2017, we had provided Genesis forbearance through February 2018, which had allowed for the deferral of principal payments and permitted Genesis to accrue all interest due to the outstanding principal balance of the loan.
+Added: As of September 30, 2020, approximately $63.8 million is outstanding on this term loan.
+Added: Also on March 6, 2018, we provided Genesis an additional $16.0 million secured term loan bearing interest at a fixed rate of 10% per annum, of which 5% per annum is paid-in-kind, that was initially scheduled to mature on July 29, 2020.
+Added: On May 9, 2019, we extended the maturity of this loan to November 30, 2021.
+Added: As of September 30, 2020, approximately $18.2 million is outstanding on this term loan.
+Added: As of September 30, 2020, our total other investments outstanding with Genesis approximate $81.9 million.
+Added: We evaluated our loans with Genesis for impairment during the third quarter of 2020, with no incremental provision for credit loss recognized given the underlying collateral value.
+Added: In July 2020, we executed a Forbearance and Transition Agreement with Daybreak which, among other things, sets forth the parties’ plan to sell or re-lease the Daybreak portfolio (which plan contemplates the potential sale of 28 facilities currently leased to Daybreak to a non-Omega party for $100 million), and the Company’s agreement to forbear from exercising certain default remedies during the transition period.
+Added: Consistent with the terms of the Forbearance and Transition Agreement with Daybreak, we have transitioned 14 Daybreak facilities to existing operators during the first nine months of 2020.
During the fourth quarter of 2019, we transitioned two Daybreak facilities to an existing operator.
The total annual contractual rent from the 16 transitioned facilities is approximately $6.1 million.
−Removed: In addition, we expect to transition an additional eight facilities to a new operator and/or existing operator during the third and fourth quarters of 2020 and expect annual contractual rent on these facilities of approximately $2.0 million.
−Removed: During the first six months of 2020, Daybreak did not pay rent to us and we recorded impairments of approximately $11.0 million on nine Daybreak facilities that we plan to sell.
−Removed: As of June 30, 2020, the 28 facilities contemplated to be sold under the Forbearance and Transition Agreement have a net book value of approximately $147 million.
−Removed: As of August 7, 2020, we have not entered into a definitive agreement for the sale of these facilities.
−Removed: We evaluated the facilities for impairment as of June 30, 2020 and concluded that the facilities were not currently impaired, as we believe our projected probability-weighted cash flows exceeded the current net book value of the 28 facilities.
−Removed: In projecting the probability-weighted cash flows, we considered the potential sale of the facilities for $100 million and the potential transition of the facilities to other operators to the extent that the sale to the third party does not ultimately close.
−Removed: As of June 30, 2020, we estimated a lower probability of such contemplated sale due to lack of a definitive sale agreement and evidence of buyer financing.
−Removed: To the extent that our assessment of the probability of a potential sale increases in the future, we may be required to record an impairment of approximately $47 million on the 28 facilities to reduce the net book value of the 28 facilities to their estimated fair value or fair value less cost to sell and/or record a loss on the sale.
−Removed: Accordingly, we remain in ongoing discussions with several other Texas-based operators about selling and/or leasing the remaining facilities.
+Added: In addition, we expect to transition an additional facility to an existing operator during the fourth quarter of 2020 and expect annual contractual rent on this facility of approximately $0.3 million.
+Added: Additionally, during the first nine months of 2020, Daybreak did not pay rent to us and we recorded impairments of approximately $11.0 million on nine Daybreak facilities that we have sold or plan to sell.
+Added: During the third quarter of 2020, discussions terminated on the contemplated sale transaction for $100 million, and in October 2020 the Forbearance and Transition Agreement was amended and restated to continue the forbearance.
+Added: The Company is in negotiations with other third-party operators to re-lease these 28 facilities, along with three additional facilities.
+Added: Further, the Company expects to re-lease or sell one additional Daybreak facility with a net book value of $0.1 million either in connection with or separate from these transactions.
+Added: As of September 30, 2020, the 31 facilities subject to current re-lease negotiations have a net book value of approximately $147 million.
+Added: We evaluated the facilities for impairment as of September 30, 2020 and concluded that the facilities were not impaired, as we believe that our expected annual nominal cash flows from re-leasing these facilities exceed our current net book value of the 31 facilities.
+Added: To the extent certain of these 31 facilities are not re-leased to a third-party operator and are instead identified for sale, we may be required to record an impairment to the extent the sales price for a facility is less than its net book value.
+Added: Accordingly, we remain in ongoing discussions with several other operators about re-leasing the remaining facilities.
Any such transitions, will of course, be subject to third-party operator due diligence, regulatory approvals, legal documentation and the cooperation of Daybreak.
1 unchanged sentence
However, our ability to complete the restructuring and secure the approvals necessary to do so and the ultimate rental income following any potential transition of select Daybreak facilities to other operators, may be less favorable than expected, and there can be no assurance whether or when such benefits or transition will occur.
−Removed: If we are unable to complete the restructuring of the Daybreak portfolio on the terms we expect, we could be required to impair our remaining assets currently leased to Daybreak in addition to the potential impairment charge noted above.
+Added: If we are unable to complete the restructuring of the Daybreak portfolio on the terms we expect, we could be required to impair our remaining assets currently leased to Daybreak.
We continue to closely monitor the performance of all of our operators, as well as industry trends and developments generally.
Liquidity and Capital Resources
−Removed: At June 30, 2020, we had total assets of $9.7 billion, total equity of $4.2 billion and debt of $5.3 billion, representing approximately 55.8% of total capitalization.
+Added: At September 30, 2020, we had total assets of $9.4 billion, total equity of $3.9 billion and debt of $5.2 billion, representing approximately 57.0% of total capitalization.
Financing Activities and Borrowing Arrangements
+Added: HUD Mortgage Loan Payoffs
+Added: On August 26, 2020, we paid approximately $13.7 million to retire two mortgage loans guaranteed by HUD.
+Added: The loans were assumed as part of an acquisition in 2019, and had an average interest rate of 3.08% per annum with maturities in 2051 and 2052.
+Added: The payoff included a $0.9 million prepayment fee which is included in interest – refinancing costs on our Consolidated Statements of Operations.
Subordinated Debt
9 unchanged sentences
The swaps are effective on August 1, 2023 and expire on August 1, 2033 and were issued at a fixed rate of approximately 0.8675%.
+Added: In October 2020, we issued the 2031 Senior Notes and discontinued hedge accounting.
+Added: Amounts reported in accumulated other comprehensive loss related to these discontinued cash flow hedging relationships will be reclassified to interest expense as interest payments are made on the Company’s debt.
+Added: Simultaneously, we re-designated these swaps in new cash flow hedging relationships of interest rate risk associated with interest payments on another forecasted issuance of long-term debt.
We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).
Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants.
−Removed: As of June 30, 2020 and December 31, 2019, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.
+Added: As of September 30, 2020 and December 31, 2019, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.
Omega OP, the guarantor of Parent’s outstanding senior notes, does not directly own any substantive assets other than its interest in non-guarantor subsidiaries.
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Omega has no obligation to repurchase any amount of its common stock, and such repurchases, if any, may be discontinued at any time.
−Removed: Omega did not repurchase any of its outstanding common stock during the six months ended June 30, 2020.
+Added: Omega did not repurchase any of its outstanding common stock during the nine months ended September 30, 2020.
$500 Million Equity Shelf Program
−Removed: For the three months ended June 30, 2020, no shares were issued under our $500 Million Equity Shelf Program.
−Removed: For the three months ended June 30, 2019, we issued approximately 0.7 million shares of our common stock at an average price of $35.90 per share, net of issuance costs, generating net proceeds of $26.3 million under our $500 Million Equity Shelf Program.
−Removed: For the six months ended June 30, 2020 and 2019, we issued approximately 49 thousand and 3.0 million, respectively, shares of our common stock at an average price of $36.18 per share and $34.82 per share, respectively, net of issuance costs, generating net proceeds of $1.8 million and $102.9 million, respectively, under our $500 Million Equity Shelf Program.
+Added: For the three months ended September 30, 2020, no shares were issued under our $500 Million Equity Shelf Program.
+Added: For the three months ended September 30, 2019, we issued approximately 0.1 million shares of our common stock at an average price of $33.91 per share, net of issuance costs, generating net proceeds of $4.2 million under our $500 Million Equity Shelf Program.
+Added: For the nine months ended September 30, 2020 and 2019, we issued approximately 49 thousand and 3.1 million, respectively, shares of our common stock at an average price of $34.64 per share and $34.78 per share, respectively, net of issuance costs, generating net proceeds of $1.7 million and $107.0 million, respectively, under our $500 Million Equity Shelf Program.
Dividend Reinvestment and Common Stock Purchase Plan
On March 23, 2020, we announced that we suspended our Dividend Reinvestment and Common Stock Purchase Plan.
−Removed: For the three months ended June 30, 2020, no shares were issued under our Dividend Reinvestment and Common Stock Purchase Plan.
−Removed: For the three months ended June 30, 2019, we issued approximately 0.6 million shares of our common stock at an average price of $37.02 per share through our Dividend Reinvestment and Common Stock Purchase Plan for gross proceeds of approximately $21.8 million.
−Removed: For the six months ended June 30, 2020 and 2019, we issued approximately 90 thousand and 1.5 million, respectively, shares of our common stock at an average price of $41.80 per share and $36.52 per share, respectively, through our Dividend Reinvestment and Common Stock Purchase Plan for gross proceeds of approximately $3.7 million and $54.1 million, respectively.
+Added: For the three months ended September 30, 2020, no shares were issued under our Dividend Reinvestment and Common Stock Purchase Plan.
+Added: For the three months ended September 30, 2019, we issued approximately 1.0 million shares of our common stock at an average price of $37.87 per share through our Dividend Reinvestment and Common Stock Purchase Plan for gross proceeds of approximately $37.7 million.
+Added: For the nine months ended September 30, 2020 and 2019, we issued approximately 90 thousand and 2.5 million, respectively, shares of our common stock at an average price of $41.80 per share and $37.06 per share, respectively, through our Dividend Reinvestment and Common Stock Purchase Plan for gross proceeds of approximately $3.7 million and $91.8 million, respectively.
We have committed to fund the construction of new leased and mortgaged facilities, capital improvements and other commitments.
We expect the funding of these commitments to be completed over the next several years.
−Removed: Our remaining commitments at June 30, 2020, are outlined in the table below (in thousands):
+Added: Our remaining commitments at September 30, 2020, are outlined in the table below (in thousands):
Total commitments
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(1) Includes finance costs.
+Added: (2) This amount excludes our remaining commitments to fund under our other investments of approximately $109.3 million.
In order to qualify as a REIT, we are required to distribute dividends (other than capital gain dividends) to our stockholders in an amount at least equal to (A) the sum of (i) 90% of our “REIT taxable income” (computed without regard to the dividends paid deduction and our net capital gain), and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income.
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To the extent that we do not distribute all of our net capital gain or do distribute at least 90%, but less than 100% of our “REIT taxable income” as adjusted, we will be subject to tax thereon at regular ordinary and capital gain corporate tax rates.
−Removed: For the six months ended June 30, 2020, we paid dividends of approximately $307.2 million to our common stockholders.
−Removed: On the 14 th of February 2020, we paid dividends of $0.67 per outstanding common share to common stockholders of record as of the last business day of January 2020.
−Removed: On the 15 th of May 2020, we paid dividends of $0.67 per outstanding common share to common stockholders of record as of the last business day of April 2020.
−Removed: For the six months ended June 30, 2020, Omega OP paid distributions of approximately $11.9 million to holders of Omega OP Units other than Omega.
+Added: For the nine months ended September 30, 2020, we paid dividends of approximately $459.7 million to our common stockholders.
+Added: On February 14, 2020, May 15, 2020, and August 14, 2020 we paid dividends of $0.67 per outstanding common share, respectively, to the common stockholders of record as of the last business day of the preceding month.
+Added: For the nine months ended September 30, 2020, Omega OP paid distributions of approximately $16.4 million to holders of Omega OP Units other than Omega.
The Omega OP Unit holders received the same distributions per unit as those paid to the common stockholders of Omega.
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Changes in the capital markets environment may impact the availability of cost-effective capital and affect our plans for acquisition and disposition activity.
−Removed: Cash, cash equivalents and restricted cash totaled $41.5 million as of June 30, 2020, an increase of $8.2 million as compared to the balance at December 31, 2019.
+Added: Cash, cash equivalents and restricted cash totaled $40.1 million as of September 30, 2020, an increase of $6.7 million as compared to the balance at December 31, 2019.
The following is a discussion of changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows.
−Removed: Operating Activities – Operating activities generated $329.4 million of net cash flow for the six months ended June 30, 2020, as compared to $265.4 million for the same period in 2019, an increase of $64.0 million, which is primarily due to facility acquisitions and transitions, acquired mortgages and other investments.
−Removed: Investing Activities – Net cash flow from investing activities was an outflow of $96.7 million for the six months ended June 30, 2020, as compared to an outflow of $15.0 million for the same period in 2019.
−Removed: The $81.7 million change in cash used in investing activities related primarily to (i) an $83.0 million change in mortgages – net, (ii) a $73.8 million decrease in proceeds from sale of direct financing lease and related trust, (iii) a $56.1 million change in other investments – net and (iv) a $19.5 million increase in real estate acquisitions.
+Added: Operating Activities – Operating activities generated $510.9 million of net cash flow for the nine months ended September 30, 2020, as compared to $405.8 million for the same period in 2019, an increase of $105.1 million, which is primarily due to facility acquisitions and transitions, acquired mortgages and other investments.
+Added: Investing Activities – Net cash flow from investing activities was an outflow of $56.0 million for the nine months ended September 30, 2020, as compared to an inflow of $71.5 million for the same period in 2019.
+Added: The $127.5 million change in cash flow from investing activities related primarily to (i) a $84.6 million change in mortgages – net, (ii) a $73.5 million decrease in proceeds from sale of direct financing lease and related trust, (iii) a $21.1 million change in other investments – net and (iv) a $68.8 million decrease in proceeds from the sales of real estate investments.
Offsetting these changes were:
−Removed: (i) a $59.6 million outflow of cash to complete the MedEquities Merger in the second quarter of 2019, (ii) a $47.1 million increase in proceeds from the sales of real estate investments, (iii) a $28.3 million decrease in investment in construction in progress and (iv) a $24.5 million acquisition related deposit in the second quarter of 2019.
−Removed: Financing Activities – Net cash flow from financing activities was an outflow of $224.1 million for the six months ended June 30, 2020, as compared to an outflow of $227.8 million for the same period in 2019.
−Removed: The $3.7 million change in cash used in financing activities was primarily related to a $194.6 million change in our credit facility borrowings – net offset by (i) a $101.1 million decrease in cash proceeds from the issuance of common stock in 2020, as compared to the same period in 2019, (ii) a $50.4 million decrease in net proceeds from our dividend reinvestment plan in 2020, as compared to the same period in 2019, (iii) a $33.4 million increase in dividends paid and (iv) a $6.0 million change in other long-term borrowings – net.
+Added: (i) a $59.6 million outflow of cash to complete the MedEquities Merger in the second quarter of 2019, (ii) a $48.7 million decrease in investment in construction in progress and capital expenditures and (iii) a $22.1 million acquisition related deposit in the second quarter of 2019.
+Added: Financing Activities – Net cash flow from financing activities was an outflow of $447.5 million for the nine months ended September 30, 2020, as compared to an outflow of $446.2 million for the same period in 2019.
+Added: The $1.3 million change in cash used in financing activities was primarily related to a $644.6 million change in our credit facility borrowings – net offset by (i) a $105.3 million decrease in cash proceeds from the issuance of common stock in 2020, as compared to the same period in 2019, (ii) a $88.1 million decrease in net proceeds from our dividend reinvestment plan in 2020, as compared to the same period in 2019, and (iii) a $413.3 million change in other long-term borrowings – net.
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
−Removed: During the quarter ended June 30, 2020, there were no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2019.
+Added: During the quarter ended September 30, 2020, there were no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2019.
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.