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The COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition.
−Removed: The COVID-19 pandemic has significantly and adversely impacted, and may continue to impact SNFs and long-term care providers due to higher rates of virus transmission and fatality among the elderly and frail populations these facilities serve.
+Added: The COVID-19 pandemic has continued to significantly and adversely impact, and may continue to impact SNFs and long-term care providers due to higher rates of virus transmission and fatality among the elderly and frail populations these facilities serve.
As a result, many of our operators have been, and may continue to be, significantly impacted by the pandemic.
See Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview.
−Removed: During the nine months ended September 30, 2021, three of our operators (one during the quarter ended September 30, 2021) have either missed contractual payments for a period or have informed us that they would be unable to pay us rent for the foreseeable future.
−Removed: We also placed four operators, including two of the non-paying operators, on a cash basis of revenue recognition during the nine months ended September 30, 2021, as collection of substantially all contractual lease payments with these four operators was no longer probable.
−Removed: We believe these operators were impacted by, among other things, reduced revenue as a result of lower occupancy and increased expenses resulting from the COVID-19 pandemic, as well as uncertainties regarding the availability of sufficient government support.
−Removed: In connection with these developments, we have written off approximately $20.8 million in aggregate of straight-line receivables to rental income for the nine month period ended September 30, 2021, and taken impairments of $16.7 million for the same period in connection with loans outstanding with one of these operators.
−Removed: These operators collectively represent 7.6% and 9.3% of our total revenue, respectively, for the nine months ended September 30, 2021 and 2020 (excluding the impact of write-offs in 2021 and 2020).
−Removed: Continued uncertainty exists relating to our other operators’ ability to meet their payments obligations generally or meet their payment obligations to us, including due to continued uncertainty regarding the availability of sufficient government support, the persistence of staffing shortages that have impacted, and may continue to impact, our operators’ occupancy levels and profitability, the impact of governmental vaccine mandates for staff on ongoing staffing shortages, and other factors that may impact virus transmission in our facilities, as well as the commencement in April 2021 for many of our operators of the repayment of accelerated payments of Medicare funds that were previously received as Advanced Medicare payments in 2020, and the expected commencement in December 2021 of repayment of deferred FICA obligations.
+Added: Continued uncertainty exists relating to our other operators’ ability to meet their payments obligations generally or meet their payment obligations to us, including due to continued uncertainty regarding the availability of sufficient government support, the persistence of staffing shortages that have impacted, and may continue to impact, our operators’ occupancy levels and profitability, the impact of governmental vaccine mandates for staff on ongoing staffing shortages, and other factors that may impact virus transmission in our facilities, including the impact of genetic mutations of the virus into new variants, as well as the commencement in April 2021 for many of our operators of the repayment of accelerated payments of Medicare funds that were previously received as Advanced Medicare payments in 2020, and the commencement in December 2021 of repayment of deferred FICA obligations.
To the extent our operators are unable to meet their payment obligations, we may record additional impairment charges with respect to straight-line rent receivables associated with any such operator or with respect to outstanding loans and our financial condition could be adversely impacted.
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Our operators have been, and continue to be, impacted by the pandemic in numerous ways.
−Removed: In addition to experiencing outbreaks of positive cases and deaths of residents and employees during the pandemic, our operators have been required to, and continue to, adapt their operations rapidly throughout the pandemic to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, staffing levels, PPE, quality of care, visitation protocols, and reporting, among other regulations, throughout the pandemic while facing staffing shortages that have accelerated during from the pandemic and that may impede the delivery of care.
−Removed: The federal government announced in August and September 2021 that it would be requiring SNF and health care workers to be vaccinated against COVID-19 and has issued an emergency implementing regulation effective November 5, 2021 requiring covered health care facilities to ensure eligible staff have received a first vaccine dose as of December 5, 2021 and a second dose of a two-dose vaccine as of January 4, 2022, with certain permitted exemptions in alignment with federal law.
−Removed: Significant uncertainty remains regarding the potential impact such mandates may have on ongoing staffing shortages in our facilities, which have caused some operators to limit admissions.
−Removed: In addition, it remains uncertain when and to what extent vaccination programs for COVID-19, which have been implemented in most of our facilities, will continue to mitigate the effects of COVID-19 in our facilities, or how effective existing vaccines and booster doses will be against the variants of the COVID-19 virus;
+Added: In addition to experiencing outbreaks of positive cases and deaths of residents and employees during the pandemic, our operators have been required to, and continue to, adapt their operations rapidly throughout the pandemic to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, staffing levels, PPE, quality of care, visitation protocols, and reporting, among other regulations, throughout the pandemic while facing staffing shortages that have accelerated during the pandemic and that may impede the delivery of care.
+Added: Significant uncertainty remains regarding the impact of vaccine mandates for SNF and healthcare workers on ongoing staffing shortages in our facilities, which have caused some operators to limit admissions.
+Added: In addition, it remains uncertain to what extent vaccination programs for COVID-19, which have been implemented in most of our facilities, will continue to mitigate the effects of COVID-19 in our facilities, or how effective existing vaccines and booster doses will be against the variants of the COVID-19 virus;
the impact of these programs will depend in part on the continued speed, distribution, efficacy and delivery of the vaccine and booster doses in our facilities, compliance with staff vaccination requirements as well as participation levels in vaccination programs among the residents and employees of our operators.
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We believe these increases primarily stem from elevated labor costs, in part as a result of staffing shortages, including the increased use of overtime and bonus pay and reliance on agency staffing, as well as a significant increase in both the cost and usage of PPE, testing equipment and processes and supplies, as well as implementation of new infection control protocols and delivery of the vaccine.
−Removed: In addition, many of our operators have reported experiencing declines in occupancy levels as a result of the pandemic.
+Added: In addition, many of our operators have experienced declines in occupancy levels as a result of the pandemic.
We believe these declines may be in part due to staffing shortages, which in some cases have required operators to limit admissions, as well as COVID-19-induced fatalities at the facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.
We continue to monitor the impact of occupancy levels at many of our operators, and it remains uncertain whether and when demand and occupancy levels will return to pre-COVID-19 levels.
−Removed: Federal relief efforts for SNFs and ALFs have been limited in 2021 as have relief efforts in certain states, and further government support will likely be needed to continue to offset these impacts.
−Removed: It is unclear whether and to what extent such government support has been and will continue to be sufficient and timely to offset these impacts.
−Removed: In particular, it remains unclear whether relief will be distributed to our operators in any meaningful way or whether additional Medicaid funds will ultimately support reimbursement to our operators.
+Added: Federal relief efforts for SNFs and ALFs have been limited since 2021 as have been relief efforts in certain states, and further government support will likely be needed to continue to offset these impacts.
+Added: It is unclear whether and to what extent such government support, which may take the form of stimulus or reimbursement rate adjustments to reflect sustained cost changes experienced by operators, has been and will continue to be sufficient and timely to offset these impacts.
+Added: In particular, it remains unclear whether relief will be distributed to our operators in any meaningful way or whether additional Medicaid or Medicare funds will ultimately support reimbursement to our operators.
Further, to the extent the impacts of the pandemic continue or accelerate and are not offset by continued government relief that is sufficient and timely, we anticipate that the operating results of certain of our operators would be materially and 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.
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Numerous state and local governments and the federal government have initiated efforts that may also affect landlords’ and/or mortgagees’ ability to collect payments due or enforce remedies for the failure to pay amounts due.
−Removed: Additionally, 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 the COVID-19 pandemic.
+Added: Additionally, a number of professional liability and employment related claims have been filed or are threatened to be filed against long-term care providers related to the COVID-19 pandemic.
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 reputation, business, results of operations and cash flows.
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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.
−Removed: We face possible risks and costs associated with severe weather conditions, natural disasters or the physical effects of climate change.
−Removed: A large number of our properties are located in areas particularly susceptible to revenue loss, cost increase or damage caused by severe weather conditions or natural disasters such as hurricanes, earthquakes, tornadoes, fires and floods, as well as the effects of climate change.
−Removed: To the extent that climate change impacts changes in weather patterns, our markets could experience more frequent and severe natural disasters.
−Removed: Operationally, such events could cause a major power outage, leading to a disruption of our operators’ operations or require them to incur additional cost associated with evacuation plans.
−Removed: Over time, any of these conditions could result in increased operator costs, delays in construction, resulting in increased construction costs, or in the inability of our operators to operate our facilities at all.
−Removed: Climate change and severe weather may also have indirect effects on our business by increasing the cost to our operators of, or decreasing the availability to our operators of, property insurance on terms they find acceptable, and by increasing the cost of energy, maintenance, repair of water and/or wind damage, and snow removal at our properties.
−Removed: In the event of a loss in excess of insured limits, we could lose our incremental capital invested in the affected property.
−Removed: Although Congress has not yet enacted comprehensive federal legislation to address climate change, numerous states and municipalities have adopted laws and policies on climate change and emission reduction targets.
−Removed: Changes in federal, state and local legislation and regulation based on concerns about climate change could result in increased capital expenditures on our existing properties and our new development properties (for example, to improve their energy efficiency and/or resistance to severe weather) without a corresponding increase in revenue, resulting in adverse impacts to our net income.
−Removed: There can be no assurance that climate change and severe weather will not have a material adverse effect on our properties, operations, or business.
+Added: Inflation could adversely impact our operators and our results of operations.
+Added: Inflation, both real or anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services to our operators or borrowers.
+Added: Our long-term leases and loans typically contain provisions such as rent and interest escalators that are designed to mitigate the adverse impact of inflation on Omega’s results of operations.
+Added: However, these provisions may have limited effectiveness at mitigating the risk of high levels of inflation due to contractual limits on escalation which exist on substantially all of our escalation provisions.
+Added: Our leases are triple-net and typically require the operator to pay all property operating expenses and, therefore, increases in property-level expenses at our leased properties generally do not directly affect us.
+Added: However, increased operating costs resulting from inflation could have an adverse impact on our operators and borrowers if increases in their operating expenses exceed increases in their revenue, which may adversely affect our operators’ or borrowers’ ability to pay rent or other obligations owed to us.
+Added: An increase in our operators’ expenses and a failure of their revenues to increase at least with inflation could adversely impact our operators’ and our financial condition and our results of operations.
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.