What changed in this filing

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Item 1. Business

2025-02-13 compared with 2024-02-12 · 110 added, 126 removed, 267 unchanged (47% of the section changed)

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Omega became a publicly traded company listed on the New York Stock Exchange in 1992.

Our primary objective is to provide strong returns to our investors, while serving as the preferred capital partner to our healthcare operating companies and affiliates (collectively, our “operators”) so they can concentrate on providing a high level of care for their resident-patients.

Our primary objective is to provide strong returns to our investors, while serving as the preferred capital partner to our third-party healthcare operating companies and affiliates (collectively, our “operators”) and other third-party high quality healthcare operators so they can concentrate on providing a high level of care for their resident-patients.

Parent, together with its consolidated subsidiaries (collectively, “Omega” or “Company”) has elected to be taxed as a REIT for federal income tax purposes.

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We maintain a portfolio of long-term healthcare facilities, mortgages and other real estate loans on healthcare facilities located in the U.S.

Our investments are generally geographically diverse and operated by a diverse group of established, middle-market healthcare operators that we believe meet our standards for quality and experience of management and creditworthiness.

Our criteria for evaluating potential investments includes but is not limited to:

Our investments are generally geographically diverse and operated by a diverse group of operators that we believe meet our standards for quality and experience of management and creditworthiness.

Our criteria for evaluating potential investments include but are not limited to:

the quality and experience of management and the creditworthiness of the operator of the facility;

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In addition to our U.S.-based investments, we expect to continue to pursue investments in alternative jurisdictions such as the U.K.

As part of our continuous evaluation of our portfolio and in connection with certain operator workout transactions, we expect to continue to opportunistically sell assets, or portfolios of assets, from time to time.

In addition, as the long-term care industry evolves and adapts to new protocols, we have made and may continue to make select ancillary investments in companies that enhance the technology and infrastructure of long-term care providers and our operators.

As part of our continuous evaluation of our portfolio and in connection with certain operator workout transactions, we may opportunistically sell assets, or portfolios of assets, from time to time.

In addition, as the long-term care industry evolves and adapts to new protocols, we have made and may continue to make select ancillary investments, including equity investments, in companies that enhance the technology and infrastructure of long-term care providers and our operators.

We typically seek substantial liquidity deposits, covenants regarding minimum working capital and net worth, liens on accounts receivable and other operating assets, and various provisions for cross-default, cross-collateralization and corporate and/or personal guarantees for our investments when appropriate.

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Substantially all of our leases are triple-net operating leases and require the operator to pay rent and all additional charges incurred in the operation of the leased facility.

Additionally, our triple-net leases generally require our operators to fund a minimum amount of capital expenditures.

At December 31, 2024, we had one direct financing lease.

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At December 31, 2024, our average annualized yield from operating leases was approximately 10.0%.

At December 31, 2023, approximately 82% of our operating leases have initial lease terms expiring after 2028.

At December 31, 2024, approximately 85.4% of our operating leases have lease terms expiring after 2029.

The majority of our leased real estate properties are leased under provisions of master lease agreements that govern more than one facility, and to a lesser extent, we lease facilities under single facility leases.

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Certain of our leases also contain operator purchase options or landlord put options.

We direct a significant amount of our capital back into existing assets, which we believe sets the stage for our long-term strategic success.

Some of our leases provide our operators with advances for the construction of facilities or capital expenditures for strategic facility enhancements.

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Construction and upgrades made under these lease clauses are capitalized within our real estate assets.

We direct a significant amount of our capital back into existing assets, which we believe sets the stage for our long-term strategic success.

Certain interest costs associated with funds used for the construction of facilities owned by us are capitalized.

The amount capitalized into our real estate assets is based upon the amount advanced during the construction period using an interest rate that approximates our cost of financing.

Interest expense is reduced by the amount capitalized.

As of December 31, 2024, we had $210.9 million of investments related to the construction of new facilities and we are committed to construction and capital expenditures of $221.8 million under lease agreements.

Real Estate Loans

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We enter into real estate loans for existing facilities and for the construction of facilities.

At December 31, 2023, our average annualized yield on these investments was approximately 10.2%.

At December 31, 2023, approximately 69.6% of our real estate loans have initial terms that expire after 2028.

From time to time, we may provide loans that allow us to participate in the expected residual profits of a facility through the sale, refinancing or acquisition of the property.

At December 31, 2024, our average annualized yield on real estate loan investments was approximately 10.9%.

At December 31, 2024, approximately 60.8% of our real estate loans have maturity dates that expire after 2029.

Investments in Unconsolidated Joint Ventures

From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.

From time to time, we also acquire equity interests in joint ventures or entities that own or provide financing for real estate assets and/or support the long-term healthcare industry and our operators.

These are investments in entities that we do not consolidate but for which we can exercise significant influence over operating and financial policies and are reported under the equity method of accounting.

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At December 31, 2024, our average annualized yield on these investments was approximately 9.6%.

At December 31, 2023, approximately 31.1% of our non-real estate loans have initial terms that expire after 2028.

At December 31, 2024, approximately 24.8% of our non-real estate loans have maturity dates that expire after 2029.

Portfolio and Investment Summary

As of December 31, 2024, our portfolio of real estate investments included 1,026 healthcare facilities that are operated by 87 third-party operators in 42 states and the U.K.

and that consists of the following:

and consists of the following:

● real estate assets, subject to operating leases, that include 588 SNFs, 290 ALFs, 19 ILFs, 18 specialty facilities and one MOB;

● an investment in a direct financing lease on one SNF;

● real estate loans, including first lien mortgages, on 45 SNFs, seven ALFs, two specialty facilities and one ILF;

● real estate loans, including first lien mortgages, on 52 SNFs, 43 ALFs, one specialty facility and one ILF;

● 12 facilities held for sale.

We also maintain investments in unconsolidated joint ventures that hold 5 SNFs, 64 ALFs and two specialty facilities.

We also maintain investments in unconsolidated joint ventures that hold five SNFs, one ALF and one specialty facility.

In addition, we maintain a portfolio of non-real estate loans, as noted in the table below.

Included below is a summary of our total investment assets, excluding accumulated depreciation, as of December 31, 2024 and 2023 (dollars in thousands):

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Rental income

Income from direct financing leases

Real estate loans interest income

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We face competition in making and pricing new investments from other public and private REITs, investment companies, private equity and hedge fund investors, healthcare operators, lenders, developers and other institutional investors, some of whom may have greater resources and lower costs of capital than us.

In addition, a significant amount of our rental and loan interest income is generally derived from facilities in states that require state approval for development and expansion of healthcare facilities.

We believe that such state approvals may reduce competition for our operators and enhance the value of our properties.

In addition, a significant amount of our rental and loan interest income is generally derived from facilities in jurisdictions that require approval for development and expansion of healthcare facilities.

We believe that such approvals may reduce competition for our operators and enhance the value of our properties.

Our operators compete on a local and regional basis with operators of facilities that provide comparable services and, in certain cases, home and community health solutions.

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Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our objectives.

Our ability to compete is also impacted by national and local economic trends, availability of investment alternatives, availability and cost of capital, our financial condition, construction and renovation costs, existing laws and regulations, new legislation, healthcare trends and population trends.

Our ability to compete is also impacted by global, national and local economic trends, availability of investment alternatives, availability and cost of capital, our financial condition, construction and renovation costs, existing laws and regulations, new legislation, healthcare trends and population trends.

Taxation of Omega

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The healthcare industry is heavily regulated.

Our operators, which are primarily based in the U.S., are subject to extensive and complex federal, state and local healthcare laws and regulations;

we also have several U.K.-based operators which are subject to a variety of laws and regulations in their jurisdiction.

Our U.S.-based operators, which comprise the majority of our operators, are subject to extensive and complex federal, state and local healthcare laws and regulations;

our U.K.-based operators are also subject to a variety of laws and regulations in their jurisdictions.

These laws and regulations are subject to frequent and substantial changes resulting from the adoption of new legislation, rules and regulations, and administrative and judicial interpretations of existing law.

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Changes in laws and regulations impacting our operators, in addition to regulatory non-compliance by our operators, can have a significant effect on the operations and financial condition of our operators, which in turn may adversely impact us.

There is the potential that we may be subject directly to healthcare laws and regulations because of the broad nature of some of these regulations, such as the Anti-kickback Statute and False Claims Act, among others.

The COVID-19 public health emergency declared by the U.S.

Department of Health and Human Services (“HHS”) in January 2020, and which expired on May 11, 2023, allowed HHS to provide temporary regulatory waivers and new reimbursement rules, such as a temporary increase in the Medicaid Federal Medical Assistance Percentage and other rules designed to equip providers with flexibility to respond to the COVID-19 pandemic by suspending various Medicare patient coverage criteria and documentation and care requirements, including, for example, suspension of the three-day prior hospital stay coverage requirement and expanding the list of approved services which may be provided via telehealth.

The three-day prior hospital stay waiver was a significant benefit to the skilled nursing industry during the height of the pandemic, as the reimbursement associated with the ability to skill in place helped to offset some of the increased costs connected with managing the pandemic.

These regulatory actions contributed to a change in census volumes and skilled nursing mix that may not otherwise have occurred.

Following the termination of the public health emergency declaration, we believe federal and state regulators have resumed enforcement of those regulations which were waived or otherwise not enforced during the public health emergency.

These temporary changes to regulations and reimbursement, as well as emergency legislation, including the CARES Act enacted on March 27, 2020 and discussed below, have had a significant impact on the operations and financial condition of our operators.

The extent of the COVID-19 pandemic’s continued effect, including through prolonged labor shortages, slow occupancy recovery and expense increases, on the Company’s and our operators’ operational and financial performance will depend on future developments, including the recovery in occupancy and availability of labor, the ultimate scope and impact of proposed federal minimum staffing rules for SNFs, the sufficiency and timeliness of additional governmental relief and reimbursement rate setting in offsetting cost increases, and the continued efficacy of infection control measures, all of which are uncertain and difficult to predict and may continue to adversely impact our business, results of operations, financial condition and cash flows.

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.

The long-term care industry continues to recover from the impacts of the COVID-19 pandemic although a certain level of labor shortages, lower occupancy and certain expense increases that began during the COVID-19 pandemic persist, with certain operators continuing to experience these challenges in a much more profound way.

In addition, the impact of these ongoing challenges such as labor pressures and inflationary cost increases may depend on future developments, including the ultimate scope, implementation timeline and impact of the federal minimum staffing rules for SNFs that were issued in April 2024, the sufficiency of reimbursement rate setting and the continued efficacy of infection control measures and regulations, all of which are uncertain and difficult to predict and may continue to adversely impact our business, results of operations, financial condition and cash flows.

A significant portion of our operators’ revenue is derived from government-funded reimbursement programs, consisting primarily of Medicare and Medicaid in the U.S.

and local authority funding in the U.K.

As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs by government payors, such as the U.S.

Centers for Medicare and Medicaid Services (“CMS”) push towards Medicare Advantage programs and the potential for Medicaid reforms, will likely continue.

Significant limits on the scope of services reimbursed and/or reductions of reimbursement rates could therefore have a material adverse effect on our operators’ results of operations and financial condition.

Additionally, new and evolving payor and provider programs that are tied to quality and efficiency could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations, and there can be no assurance that payments under any of these government healthcare programs are currently, or will be in the future, sufficient to fully reimburse the property operators for their operating and capital expenses.

In addition to quality and value-based reimbursement reforms, the U.S.

Centers for Medicare and Medicaid Services (“CMS”) has implemented a number of initiatives focused on the reporting of certain facility specific quality of care indicators that could affect our operators, including publicly released quality ratings for all of the nursing homes that participate in Medicare or Medicaid under the CMS “Five Star Quality Rating System.” Facility rankings, ranging from five stars (“much above average”) to one star (“much below average”) are updated on a monthly basis.

Changes in presidential administrations and/or congressional makeup at the federal level can increase the political focus on entitlement program changes which can create uncertainty with respect to the level of reimbursement available or the extent of regulation of the industry.

In addition to quality and value-based reimbursement reforms, CMS has implemented a number of initiatives focused on the reporting of certain facility-specific quality of care indicators that could affect our operators, including publicly released quality ratings for all of the nursing homes that participate in Medicare or Medicaid under the CMS “Five Star Quality Rating System.” Facility rankings, ranging from five stars (“much above average”) to one star (“much below average”) are updated on a monthly basis.

These rating changes have impacted referrals to SNFs, and it is possible that changes to this system or other ranking systems could lead to future reimbursement policies that reward or penalize facilities on the basis of the reported quality of care parameters.

SNFs are required to comply with new reporting requirements, effective as of January 16, 2024, relating to ownership by and affiliations with private equity firms and REITs, as well as provide information for the CMS Nursing Home Care Compare website regarding staffing and quality measures.

SNFs are required to comply with new reporting requirements, effective as of January 16, 2024, relating to ownership by and affiliations with private equity firms and REITs, as well as provide information for inclusion on the CMS Nursing Home Care Compare website regarding staffing and quality measures.

Any of these reporting requirements may impact occupancy at our properties and our business, results of operations, financial condition and cash flows.

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laws and regulations generally applicable to our operators, and in certain cases, to us.

Reimbursement Changes Related to COVID-19:

Federal Stimulus Funds and Financial Assistance for Healthcare Providers .

In response to the pandemic, Congress enacted a series of economic stimulus and relief measures.

The CARES Act and related legislation authorized distributions of approximately $185 billion to reimburse eligible healthcare providers for healthcare related expenses or lost revenues that were attributable to coronavirus.

In addition, federal legislation made other forms of financial assistance available to healthcare providers, which impacted our operators to varying degrees.

We do not expect our operators will receive any additional funding from HHS in connection with the pandemic, although certain of our operators continue to receive distributions at the state level from funding appropriated under the CARES Act and the American Rescue Plan Act of 2021.

Among these forms of financial assistance, on March 18, 2020, the Families First Coronavirus Response Act (“FFCRA”) was enacted in the U.S., providing a temporary 6.2% increase to each qualifying state and territory’s Medicaid Federal Medical Assistance Percentage (the “FMAP”) reimbursement, which was phased out as of December 31, 2023 following the expiration of the public health emergency on May 11, 2023.

In exchange for receiving the enhanced federal funding, the FFCRA included a requirement that Medicaid programs keep beneficiaries enrolled through the end of the month in which the public health emergency terminated.

However, Congress decoupled the Medicaid continuous enrollment from the public health emergency and terminated this provision effective March 31, 2023.

Beginning April 1, 2023, states that complied with federal rules regarding beneficiary renewals were eligible to begin the phase-down of the enhanced federal funding according to the following schedule:

6.2 percentage points through March 2023;

5 percentage points through June 2023;

2.5 percentage points through September 2023 and 1.5 percentage points through December 2023.

Following termination of the continuous enrollment provision, total Medicaid enrollment, which had grown substantially during the pandemic, has declined.

The Budget Control Act of 2011 established a Medicare Sequestration of 2%, which is an automatic reduction of certain federal spending as a budget enforcement tool.

Originally, the sequester was intended to be in effect from FY 2013 to FY 2021.

However, most recently, the Infrastructure Investment and Jobs Act extended the sequester through FY 2031.

The full 2% Medicare sequestration went into effect as of July 1, 2022 and gradually increases to 4% from 2030 through 2031.

Quality of Care Initiatives and Additional Requirements Related to COVID-19 .

In addition to COVID-19 reimbursement changes, several regulatory initiatives announced from 2020 to 2022 focused on addressing quality of care in long-term care facilities, including those related to COVID-19 testing and infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies, as well as increased inspection of nursing homes.

Quality of Care and Staffing Initiatives .

Several regulatory initiatives announced from 2020 to 2022 focused on addressing quality of care in long-term care facilities, including those related to COVID-19 testing and infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies, as well as increased inspection of nursing homes.

In addition, the CMS Nursing Home Care Compare website and the Five Star Quality Rating System were updated to include revisions to the inspection process, adjustment of staffing rating thresholds, the implementation of new quality measures and the inclusion of a staff turnover percentage (over a 12-month period).

Additionally, on September 1, 2023, CMS issued proposed rules regarding minimum staffing requirements and increased inspections at nursing homes.

Under the proposed rules, nursing homes participating in Medicare and Medicaid would be required, in a phased in approach described below, to provide residents with a minimum of 0.55 hours of care from a registered nurse per resident per day, and 2.45 hours of care from a nurse aide per resident per day, which CMS estimates exceed existing standards in nearly all states.

In addition, nursing homes would be required to ensure a registered nurse is onsite 24 hours per day, seven days per week, and to complete facility assessments on staffing needs.

CMS also announced certain nursing home workforce initiatives, including investing $75 million in financial incentives such as scholarships and tuition reimbursement, as well as Medicaid institutional payment transparency initiatives related to reporting on compensation of workers as a percentage of Medicaid payments.

Further, CMS proposed certain enforcement initiatives, including expanding audits of nursing home data, increasing facility inspections, reviewing related party transactions, regulating certain prescription practices and addressing nursing home emergency preparedness.

CMS proposed that implementation of the final requirements would occur in phases over a three-year period for urban facilities, with registered nurse availability requirements beginning two years after the final rule publication and minimum staffing hour requirements beginning three years from final rule publication.

For rural facilities, staffing requirements regarding registered nurse availability would begin three years from final rule publication and minimum staffing hour requirements would begin five years from final rule publication.

It is uncertain when the proposed rules will be finalized and become effective, what the ultimate scope and timing of the staffing requirements will be thereunder and whether any such requirements will be accompanied by additional funding for our operators to offset any increased costs associated with meeting these requirements.

Depending on the ultimate level of staffing required, an unfunded mandate to increase staff in SNFs may have a material and adverse impact on the financial condition of our operators, with CMS estimating at the time of the proposed rule that three quarters (75%) of nursing homes would have to increase staffing in their facilities under the proposed rules.

Additionally, on April 22, 2024, CMS issued a final rule regarding minimum staffing requirements and increased inspections at SNFs, which CMS estimates exceed existing staffing standards in nearly all states.

The final rule is being implemented on a staggered phase-in basis based on geographic location and will require nursing homes participating in Medicare and Medicaid to maintain a total nurse staffing standard of 3.48 hours per resident day (“HPRD”), which must include at least 0.55 HPRD of direct registered nurse care and 2.45 HPRD of direct nurse aide care.

Facilities would be permitted to use any combination of nurse staff (registered nurse, licensed practical nurse and licensed vocational nurse or nurse aide) to account for the additional 0.48 HPRD required to comply with the total nurse staffing standard.

In addition, the final rule requires SNFs to ensure a registered nurse is onsite 24 hours per day, seven days per week, although CMS indicated that a director of nursing role could fulfill such requirement.

The final rule also provides possible hardship exemptions for qualifying facilities for some parts of these requirements based on workforce unavailability and other factors.

The final rule was not accompanied by additional funding for our operators to offset the costs associated with meeting these increased staffing requirements in an industry that is already facing staffing shortages.

Multiple lawsuits have been filed in federal court to overturn the minimum staffing requirements on the basis that CMS exceeded its authority.

The increased staffing requirements, if not overturned legislatively or by legal action, or if not accompanied by increased state reimbursement to offset the increased financial burden, may have a future adverse impact on the financial condition of many of our operators, which may be material, but which likely would not be experienced until closer to the point of delayed implementation, ranging from within 90 days and five years of the final rule publication.

Further, on March 30, 2023, CMS issued a memorandum revising and enhancing enforcement efforts for infection control deficiencies found in nursing homes that are targeted at higher-level infection control deficiencies that result in actual harm or immediate jeopardy to residents.

Similar to other serious survey deficiencies, penalties for the most serious infection control deficiencies include civil monetary penalties and discretionary payment denials for new resident admissions.

The Biden Administration additionally announced in March 2022 a focus on reviewing private equity investment specifically in the skilled nursing sector.

Further, on November 15, 2023, CMS issued a final rule, effective January 16, 2024, that requires SNFs participating in the Medicare or Medicaid programs to disclose certain ownership and managerial information regarding their relationships with certain entities that lease real estate to SNFs, including REITs.

On November 15, 2023, CMS issued a final rule, effective January 16, 2024, that requires SNFs participating in the Medicare or Medicaid programs to disclose certain ownership and managerial information regarding their relationships with certain entities that lease real estate to SNFs, including REITs.

The CMS announcement noted concerns regarding the quality of care provided at SNFs owned by private equity firms, REITs and other investment firms.

There have also been congressional hearings examining the impact of private equity in the U.S.

healthcare system, including the impact on quality of care provided within the skilled nursing industry, the COVID-19 response of nursing homes and the use of federal funds by nursing homes during the pandemic.

These initiatives, as well as additional calls for government review of the role of private equity in the U.S.

healthcare industry, could result in additional requirements on our operators.

Further, in 2024, several U.S.

senators proposed legislation that would, if enacted, restrict certain investors, including REITs and private equity firms, from investing in healthcare facilities or impose penalties on certain landlords or private equity investors in healthcare facilities whose operators subsequently enter into bankruptcy proceedings.

On January 8, 2025, the State of Massachusetts enacted a law that requires notification for certain transactions involving SNFs and REITs and restricts new licenses to hospitals with certain facilities leased from REITs.

In addition, in January 2025, HHS and the Senate Budget Committee issued reports that found private equity investment in healthcare has had negative consequences for patients and providers .

These initiatives, as well as additional calls for federal and state governmental review of the role of private equity in the U.S.

healthcare industry and proposed legislation related to certain SNF financial arrangements with REITs, if enacted, could result in additional requirements or restrictions on our operators or us.

The likelihood of any of these measures passing at the federal level remains uncertain.

In addition, on April 22, 2024, CMS issued the Ensuring Access to Medicaid Services final rule, which requires that, beginning six years after the effective date of the final rule, states generally ensure that at least 80% of Medicaid home and community-based services (“HCBS”) payments be put toward compensation for direct care workers.

The final rule also requires more transparency regarding how much states pay for HCBS and how those rates are set.

It is uncertain what the ultimate impact of the final rule, as well as similar initiatives at the state level, will be on providers of Medicaid HCBS services, given uncertainty related to how HCBS providers are currently spending Medicaid dollars, how many providers fall below the required 80% threshold and how well regulators can measure and track spending by HCBS providers.

In addition, it remains unclear whether similar requirements, including those establishing minimum allocations of Medicaid or other reimbursements to direct care workers, will be proposed for SNFs, ALFs and other senior care providers;

any such requirements, if enacted, could have a material adverse impact on the financial condition of our operators.

Reimbursement Generally

Most of our SNF operators derive a substantial portion of their revenue from state Medicaid programs.

Whether and to what extent the level of Medicaid reimbursement covers the actual cost to care for a Medicaid eligible resident varies by state.

Whether and to what extent the level of Medicaid reimbursement covers the actual cost to care for a Medicaid eligible resident varies by state and depends on federal matching levels.

While periodic rate setting occurs and, in most cases, has an inflationary component, the state rate setting process does not always keep pace with inflation or, even if it does, there is a risk that it may still not be sufficient to cover all or a substantial portion of the cost to care for Medicaid eligible residents.

Additionally, rate setting is subject to changes based on state budgetary constraints and political factors, both of which could result in decreased or insufficient reimbursement to the industry even in an environment where costs are rising.

Since our operators’ profit margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement or an increase in the percentage of Medicaid patients has in the past, and may in the future, adversely affect our operators’ results of operations and financial condition, which in turn could adversely impact us.

The CARES Act and American Rescue Plan Act contained several provisions designed to increase coverage, expand benefits, and adjust federal financing for state Medicaid programs.

While the CARES Act provided for a 6.2% FMAP add-on to the Medicaid program during the public health emergency, which was phased out as of December 31, 2023, only certain states passed any of this benefit directly to SNF operators either via an enhanced rate or lump sum payments.

Additionally, the American Rescue Plan Act provided for a 10% FMAP add-on for state home and community-based service expenditures from April 1, 2021 through March 30, 2022 in an effort to assist seniors and people with disabilities to receive services safely in the community rather than in nursing homes and other congregate care settings.

Both programs came with conditions that states had to meet to be eligible for the FMAP add-on.

There may be future initiatives proposed to allocate funding available for reimbursement away from SNFs in favor of home health agencies and community-based care.

The risks of insufficient Medicaid reimbursement rates along with possible initiatives to push residents historically cared for in SNFs to alternative settings may impact us more acutely in states where we have a larger presence, including Florida and Texas (our states with the largest concentration of investments).

In Texas, several of our operators have historically experienced lower operating margins on their SNFs, as compared to other states, as a result of lower Medicaid reimbursement rates and higher labor costs.

Texas did provide for a sizeable increase in rate during the public health emergency based on the FMAP add-on.

The Medicaid reimbursement rate in Texas was approved to be increased effective September 1, 2023 by at least the same amount.

In Florida, added support to our operators during the pandemic was generally limited, with approximately $100 million in additional FMAP funds announced in November 2021, payable over a three-month period through increased Medicaid rates.

A revised Florida State budget for 2023-2024 was approved, which increased Medicaid reimbursement rates effective October 1, 2023 by up to 5%, with a portion of such rate increase relating to a quality care add-on.

This rate increase comes after a 7.8% increase effective October 1, 2022, which was somewhat offset by required increased wages for certain nursing home staff.

In addition, on April 6, 2022, the State of Florida enacted staffing reforms for SNFs that may provide additional flexibility to our operators in meeting minimum staffing requirements by using supplemental staff.

We continue to monitor rate adjustment activity in other states in which we have a meaningful presence;

however, it is difficult to assess whether rates will generally keep pace with increased operator costs.

Additionally, rate setting is subject to changes based on state budgetary constraints and national and state level political factors, both of which could result in decreased or insufficient reimbursement to the industry even in an environment where costs are rising.

Changes in presidential administrations and/or congressional makeup at the federal level can increase the political focus on entitlement program changes, which can create uncertainty with respect to the level of reimbursement available or the extent of regulation of the industry.

Since our operators’ profit margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement or increases in the percentage of Medicaid patients have in the past, and may in the future, adversely affect our operators’ results of operations and financial condition, which in turn could adversely impact us.

The risk of insufficient Medicaid reimbursement rates or delays in such reimbursements, along with possible initiatives to push residents historically cared for in SNFs to alternative settings, labor shortages in certain areas and limited regulatory support for increased levels of reimbursement in certain states, may impact us more acutely in states where we have a larger presence.

While state reimbursement rates have generally improved over the last several years, reimbursement support is not consistent across states, and it is difficult to assess whether the level of reimbursement support has or will continue to adequately keep pace with increased operator costs.

We continue to monitor rate adjustment activity, particularly in states in which we have a meaningful presence.

On July 31, 2024, CMS issued a final rule regarding the government fiscal year 2025 Medicare payment rates and quality payment programs for SNFs, with aggregate Medicare Part A payments projected to increase by $1.4 billion, or 4.2%, for fiscal year 2025 compared to fiscal year 2024.

This estimated reimbursement increase is attributable to a 6.4% net market basket update to the payment rates, which is based on a 3.0% SNF market basket increase plus a 3.6% market basket forecast error adjustment and less a 2% productivity adjustment, as well as a negative 2.5%, or approximately $789 million, decrease in the fiscal year 2024 SNF Medicare payment rates as a result of the second phase of the Patient Driven Payment Model (“PDPM”) parity adjustment recalibration described below, which was being phased in over two years.

This estimated reimbursement increase is attributable to a 4.2% net market basket update to the payment rates, which is based on a 3.0% SNF market basket increase plus a 1.7% market basket forecast error adjustment and less a 0.5% productivity adjustment.

In addition to the payment rate update, CMS stated that it has rebased and revised the SNF market basket to reflect a 2022 base year.

The annual update is reduced by 2% for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program.

CMS has indicated that these impact figures did not incorporate the SNF Value-Based Program reductions that are estimated to be $196.5 million in fiscal year 2025.

While Medicare reimbursement rate setting, which takes effect annually each October, has historically included forecasted inflationary adjustments, the degree to which those forecasts accurately reflect current inflation rates remains uncertain.

Additionally, it remains uncertain whether these adjustments will ultimately be offset by non-inflationary factors, including any adjustments related to the impact of various payment models, such as those described below.

Additionally, it remains uncertain whether these adjustments will ultimately be offset by other factors, including any adjustments related to the impact of various payment models, such as those described below.

Payments to providers continue to be increasingly tied to quality and efficiency.

The PDPM, which was designed by CMS to improve the incentives to treat the needs of the whole patient, became effective October 1, 2019.

The Patient Driven Payment Model (“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the whole patient, became effective October 1, 2019.

CMS has stated that it intended PDPM to be revenue-neutral to operators, with future Medicare reimbursement reductions possible if that was not the case.

In April 2022, CMS issued a proposal for comment, which included an adjustment to obtain that revenue neutrality as early as the 2023 rate setting period.

After considering the feedback received in the rulemaking cycle, CMS finalized recalibration of the PDPM parity adjustment factor of 4.6% with a two-year phase-in period that would reduce SNF spending by 2.3%, or approximately $780 million, in each of fiscal years 2023 and 2024.

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, though many operators were restricted during the pandemic from pursuing concurrent and group therapy and unable to realize these benefits.

Additionally, our operators continue to adapt to the reimbursement changes and other payment reforms resulting from the value-based purchasing programs applicable to SNFs under the 2014 Protecting Access to Medicare Act.

These reimbursement changes have had and may, together with any further reimbursement changes to PDPM or value-based purchasing models, 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.

In August 2022, CMS issued a final rule providing that, to obtain revenue neutrality, it would utilize a PDPM parity adjustment factor of 4.6% for Medicare payment rates with a two-year phase-in period that would reduce SNF spending by 2.3%, or approximately $780 million, in each of fiscal years 2023 and 2024.

Our operators continue to adapt to the reimbursement changes and other payment reforms resulting from the value-based purchasing programs applicable to SNFs under the 2014 Protecting Access to Medicare Act.

These reimbursement changes have had and may, together with any further reimbursement changes to the PDPM or value-based purchasing models, in the future have an adverse effect on the operations and financial condition of some of our operators and could adversely impact the ability of our operators to meet their obligations to us.

The Budget Control Act of 2011 established a Medicare Sequestration of 2%, which is an automatic reduction of certain federal spending as a budget enforcement tool.

Originally, the sequester was intended to be in effect from FY 2013 to FY 2021.

However, most recently, the Infrastructure Investment and Jobs Act extended the sequester through FY 2031.

The full 2% Medicare sequestration went into effect as of July 1, 2022 and gradually increases to 4% from 2030 through 2031.

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 SNF as a part of the COVID-19 1135 waiver provisions.

The COVID-19 1135 waiver provisions also allowed 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 were provided by a physician from an alternate location, effective March 6, 2020 through May 11, 2023, the expiration of the public health emergency.

The Consolidated Appropriations Act of 2023 extended the ability of occupational therapists, physical therapists and speech-language pathologists to continue to furnish these services via telehealth and bill as distant site practitioners until the end of 2024.

On March 30, 2023, CMS issued a memorandum revising and enhancing enforcement efforts for infection control deficiencies found in nursing homes that are targeted at higher-level infection control deficiencies that result in actual harm or immediate jeopardy to residents.

Other Regulation:

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More recently, the OIG has conducted increased oversight activities and issued additional guidance regarding its findings related to identified problems with the quality of care and the reporting and investigation of potential abuse or neglect at group homes, nursing homes and SNFs.

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.

In August 2020, the OIG released its findings regarding its review of staffing levels in SNFs from 2018.

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.

The OIG indicated that while the review was initiated before the COVID-19 pandemic emerged, the 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.

It is unknown what impact, if any, enhanced scrutiny of staffing levels by OIG and CMS will have on our operators.

Department of Justice and Other Enforcement Actions .

SNFs are under intense scrutiny for ensuring the quality of care being rendered to residents and appropriate billing practices conducted by the facility.

The Department of Justice (“DOJ”) has historically used the False Claims Act to civilly pursue nursing homes that bill the federal government for services not rendered or care that is grossly substandard.

The DOJ has historically used the False Claims Act to civilly pursue nursing homes that bill the federal government for services not rendered or care that is grossly substandard.

For example, California prosecutors announced in March 2021 an investigation into a skilled nursing provider that is affiliated with one of our operators, alleging the chain manipulated the submission of staffing level data in order to improve its Five Star rating.

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and health standards, including those set by the federal Occupational Safety and Health Administration (in the U.S.).

Our operators may continue to face additional federal and state regulatory requirements related to the operation of their facilities in response to the COVID-19 pandemic.

Our operators may continue to face additional federal and state regulatory requirements related to the operation of their facilities.

These requirements may continue to evolve and develop over lengthy periods of time.

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In England, where the majority of our U.K.

operators are based, the Care Quality Commission has regulatory oversight authority over the health and social care sectors and is responsible for approving, registering and inspecting our operators and the properties where they provide services.

operators are based, the Care Quality Commission (“CQC”) has regulatory oversight authority over the health and social care sectors and is responsible for approving, registering and inspecting our operators and the properties where they provide services.

There is also a detailed legislative and regulatory framework in the U.K.

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Additionally, there has been significant legislation passed and guidance issued in the U.K.

in respect of the COVID-19 pandemic.

resulting from the COVID-19 pandemic.

Much of the legislation or guidance sets out the additional precautions, measures or restrictions which were required in the care sector, including infection control measures and vaccination requirements for care sector workers.

transitions to a post-COVID-19 pandemic position with lessened regulation across the U.K as a whole, the care sector remains subject to specific COVID-19 guidance and requirements issued by the Care Quality Commission and the U.K.

While the U.K.

has transitioned to a post-COVID-19 pandemic position with lessened regulation across the U.K as a whole, the care sector remains subject to specific COVID-19 guidance and requirements issued by the CQC and the U.K.

government’s Department for Health and Social Care, including in relation to infection control measures, the use of personal protective equipment and testing.

As a result, our U.K.

operators still face significantly increased regulatory burdens under which they must deliver services and continue to experience significant impacts on their operations and financial condition, which has been somewhat offset by the level of stimulus provided.

Environmental, Social and Governance (“ESG”)

We prioritize environmental, social and governance initiatives that matter most to our business and shareholders.

Our Nominating and Corporate Governance Committee of our Board of Directors has been charged with primary oversight of our sustainability efforts.

The Company has established an ESG Steering Committee, with senior representation from all divisions of the company, that is responsible for advancing the Company’s governance, sustainability, and social programs, including diversity and inclusion.

The Nominating and Corporate Governance Committee exercises oversight of the ESG Steering Committee.

As a result, our U.K.-based operators still face significantly increased regulatory burdens under which they must deliver services and continue to experience significant impacts on their operations and financial condition, which has been somewhat offset by the level of stimulus provided.

Corporate Sustainability Program

We prioritize corporate responsibility initiatives that matter most to our business and shareholders.

Our Nominating and Corporate Governance Committee of our Board of Directors (“Board”) has been charged with primary oversight of these efforts.

The Company has established a steering committee, with senior representation from all divisions of the company, that is responsible for advancing the Company’s corporate sustainability programs, including environmental, governance and social responsibility programs.

The Nominating and Corporate Governance Committee exercises oversight of this steering committee.

As a triple-net landlord, our third-party operators maintain operational control and responsibility for our real estate on a day-to-day basis.

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See also “Human Capital Management” immediately below.

Additional information regarding our ESG programs and initiatives is available in the ESG section of our website at www.omegahealthcare.com.

Information on our website, including our Corporate ESG Report or sections thereof, is not incorporated by reference into this Annual Report.

Additional information regarding our corporate sustainability programs and initiatives is available in the Corporate Sustainability section of our website at www.omegahealthcare.com.

Information on our website, including our Corporate Sustainability Report or sections thereof, is not incorporated by reference into this Annual Report.

Human Capital Management

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We have a long-standing commitment to being an equal opportunity employer.

Additionally, in 2021, we reinforced our diversity and inclusion commitment by signing the CEO Action for Diversity and Inclusion Pledge, one of the largest CEO-driven business commitments to act on and advance diversity, equity and inclusion in the workplace.

The Company has expanded its recruitment practices to reach more diverse candidates for employment and Board positions and has developed an internship program with a focus on increasing diversity in the pipeline of eligible employees.

The Company requires employees and Board members to certify its Code of Business Conduct & Ethics periodically, and from time to time, conducts compliance training for all employees and Directors, including diversity and inclusion training.

As of February 1, 2024, at the executive level, one of the Company’s four executive officers is a woman and brings ethnic diversity to the team, and on the senior management team, 25% are women and 25% bring ethnic diversity to the team.

The Company has expanded its recruitment practices to reach more diverse candidates for employment and Board positions and has developed an internship program that supports our local community, including underrepresented and underserved communities, and developing a talent pipeline for Omega.

The Company requires employees and Board members to certify its Code of Business Conduct & Ethics periodically, and from time to time, conducts compliance training for all employees and Directors.

As of February 1, 2025, at the executive level, one of the Company’s five executive officers is a woman and brings ethnic diversity to the team and one other of the Company’s five executive officers also brings ethnic diversity to the team.

As of February 1, 2025, on the senior management team, 29% are women and 29% bring ethnic diversity to the team.

We regularly conduct pay equity reviews as we seek for women and men, on average, at various roles and levels of the Company, to be paid equitably for their roles and contributions to our success.

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In addition, we believe that giving back to our community is an extension of our mission to improve the lives of our stockholders, our employees, and their families.

The Company has implemented a matching program for charitable contributions of employees, provides annual charitable donations to our local Baltimore community and has implemented a scholarship, mentorship and internship program with a local, historically Black university.

Information about our Executive Officers

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Pickett held various positions at PHH Corporation and KPMG Peat Marwick.

Booth (60) is our Chief Operating Officer and has served in this capacity since October 2001.

From 1993 to October 2001, Mr.

Booth served as a member of the management team of Integrated Health Services, Inc., most recently serving as Senior Vice President, Finance.

Prior to joining Integrated Health Services, Inc., Mr.

Booth served as a Vice President in the Healthcare Lending Division of Maryland National Bank (now Bank of America).

Matthew Gourmand (49) is our President and has served in this capacity since January 2025.

Gourmand previously served as Senior Vice President of Corporate Strategy & Investor Relations since October 2017.

Prior to this, Mr.

Gourmand spent ten years as an equity portfolio manager at Millenium Partners and Stevens Capital Management.

Gourmand spent three years as an equity research analyst at UBS and six years in the audit department of Deloitte where he qualified as a Chartered Accountant and a Certified Public Accountant.

Gourmand also holds the Chartered Financial Analyst designation.

Vikas Gupta (44) is our Chief Investment Officer and has served in this capacity since January 2025.

Gupta joined the Company in July 2011 and most recently served as our Senior Vice President of Acquisitions & Development since April 2015.

From 2003 to July 2011, Mr.

Gupta served in various roles at CapitalSource Finance, most recently as a Senior Loan Officer/Vice President, where he oversaw a portfolio of healthcare assets.

Stephenson (61) is our Chief Financial Officer and has served in this capacity since August 2001.

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

What changed 10-K

Item 1. Business