COVID-19 PANDEMIC

3 Months Ended

Mar. 31, 2021

Unusual or Infrequent Items, or Both [Abstract]

COVID-19 PANDEMIC

COVID-19 PANDEMICAs of March 31, 2021, the Company has received $51,607 from the PHSSEF. The Company recognized $10,534 as income, which is reflected in "other operating income" in the Company's results of operations for the three month period ended March 31, 2021. For the three months ended March 31, 2021, the Company utilized $305 of these stimulus dollars to fund capital improvements to prevent the spread of COVID-19. The remaining stimulus funds of $19,505 as of March 31, 2021 are classified as "deferred income" on the interim consolidated balance sheet, which also includes Nursing Home Infection Control Distributions. The Nursing Home Infection Control Distributions, which also include infection control quality incentive payments, are subject to terms and conditions that require recipients to use the funds for infection control expenses. HHS has not yet published reporting requirements for these distributions and has not yet stipulated a time period by which these funds must be used. The Company recognized $787 of grant funds from states, which is included in "other operating income" in the Company's results of operations for the three month period ended March 31, 2021. Additionally, the Families First Coronavirus Response Act provided states with a temporary increase in the regular federal matching rate, or federal medical assistance percentage, used to determine the federal government's share of the cost of covered services in state Medicaid programs, provided the states agreed to certain conditions such as not imposing cost-sharing requirements for COVID-19-related testing

and treatment. The Company recognized $4,056 for the three month period ended March 31, 2021 of Medicaid and Hospice dollars related to this temporary increase in the federal matching rate, which related to patient services rendered and is reflected in "patient revenues, net" in the Company's results of operations for the three month period ended March 31, 2021.

The Company initially elected to participate in the payment deferral of the employer's portion of Social Security taxes. During the third quarter of 2020, the Company ceased the deferral election and paid $3,185. As of March 31, 2021, the Company has no remaining liability related to the payment deferral and does not expect to participate in the payment deferral going forward.

The CARES Act and other stimulus legislation also include other provisions offering financial relief, for example lifting the Medicare sequestration from May 1, 2020 through December 31, 2021, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011 (but also extending sequestration through 2030). For the three month period ended March 31, 2021, the suspension of the Medicare sequestration positively impacted net patient revenues by $751. However, in addition to providing funding for healthcare providers, the ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010 ("PAYGO Act"). As a result, absent congressional action, Medicare spending will be reduced by up to 4 percentage points in FY 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011.

The Company incurred an additional $8,088 of labor expense and $3,905 for testing and the increased costs of personal protective equipment, food and infection control supplies related to the COVID-19 pandemic for the three month period ended March 31, 2021. These expenses are reflected in "operating expense" in the Company's results of operations for the three month period ended March 31, 2021.

The Company is closely monitoring and evaluating the impact of the COVID-19 pandemic on all aspects of its business. We have identified team members and patients who have tested positive for COVID-19 at all of our centers, and we have incurred an increase in the costs of caring for the team members, patients, and residents in those centers. The Company has also experienced reduced occupancy at its centers and has incurred additional expenditures preparing its centers for potential outbreaks and maintaining the healthcare delivery capacity of its centers. While we have experienced reduced occupancy and increased expenses, we received additional PHSSEF and other stimulus funds during 2020 and the first quarter of 2021, which have been used, and are expected to continue to be used to mitigate the impact of COVID-19 derived lost revenues associated with the reduced occupancy as well as increased expenses, and any cash flow or liquidity impacts therefrom. The Company has an interdisciplinary team monitoring and staying up to date on the latest information about COVID-19. The Company has implemented precautionary measures and response protocols to minimize the spread of COVID-19, following guidance from CMS and the CDC. Nevertheless, the Company expects additional COVID-19 cases will occur at its centers. The Company is continuing to evaluate and consider the potential impact that COVID-19 may have on its liquidity, financial condition and results of operations due to numerous uncertainties. However, given the uncertainty as to the duration of the COVID-19 pandemic and the timing and availability of effective medical treatment and vaccines, it could have a material adverse effect on the Company's future results of operations, financial condition and liquidity.