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<br />employers or individuals may shift their purchase of health insurance to new plans offered through the exchanges,
<br />which may or may not reimburse providers at rates at least equal to rates the providers currently receive. The exchanges
<br />could alter the health insurance markets in ways that cannot be predicted, and exchanges might, directly or indirectly,
<br />take on a rate-setting function that could negatively impact providers. Because the exchanges and plans offered are
<br />continually changing, the effect of the ACA upon the financial condition or financial performance of any third-party
<br />payor that offers health insurance, rates paid by third-party payors to providers and, thus, the Corporation’s revenues
<br />and the impact on the Corporation’s financial condition and results of operations cannot be predicted.
<br />State Regulation of Senior Living Facilities; License Required to Operate the Project
<br />Legislation may be introduced from time to time in the Minnesota Legislature relating to the operations of
<br />skilled nursing, independent living, assisted living, memory care, hospice and home care providers, including the
<br />Corporation. No precise determination can be made at this time whether the bills that may be introduced or the
<br />regulations which may be proposed for the purpose of containing costs, providing access to care, or otherwise affecting
<br />skilled nursing, independent living, assisted living, memory care, hospice and home care provider revenues, or
<br />increasing competition among skilled nursing, independent living, assisted living, memory care, hospice and home
<br />care providers, will be enacted, or, if enacted, whether and to what degree such legislation will impact the financial
<br />conditions and results of operations of the Project.
<br />Minnesota Licensing Issues. The Project consists of skilled nursing, independent living, assisted living units,
<br />memory care units, hospice units and home care units. Certain of the services provided at and advertised for the Project
<br />are subject to licensure and regulation under Minnesota law by the Minnesota Department of Health (“MDH” or the
<br />“Department”).
<br />The Corporation provides nursing and home care services that require licensure, regulation and inspection
<br />by MDH as comprehensive nursing and home care providers in accordance with Chapter 144A of the Minnesota
<br />Statutes (the “Nursing and Home Care Laws”). The Nursing and Home Care Laws establish a number of minimum
<br />requirements applicable to the business operations and services provided by nursing and home care providers. Among
<br />other things, with respect to comprehensive nursing and home care providers such as the Corporation, the Nursing
<br />and Home Care Laws establish minimum standards with respect to: quality management; abuse prevention plans and
<br />reporting; initial and recurring individualized assessment of clients; service plan development and implementation;
<br />client complaint procedures; staff qualifications and training requirements; availability of staff; medication, treatment,
<br />and therapy management; and client record requirements, including privacy and security requirements. In addition, all
<br />licensed home care providers in Minnesota must implement and comply with a statutorily prescribed health care bill
<br />of rights and provide notice of the bill of rights to their clients. Licensees are also subject to periodic inspections, both
<br />announced and unannounced, by MDH. In addition to periodic inspections, pursuant to 42 C.F.R. § 488, MDH
<br />conducts regular, expanded or extended surveys related to a licensee’s compliance for Medicare purposes. Continuing
<br />licensure to provide nursing and home care is essential to the operation of any nursing and home care facility. These
<br />licenses must also be renewed annually.
<br />In order to maintain its Minnesota home care provider licenses, the Corporation will be surveyed by MDH
<br />at least once every three years, but surveys may be conducted more frequently based on the license level, the provider’s
<br />compliance history, the number of clients served, or other factors in the Department’s discretion. If the Department
<br />finds deficiencies at the Project, MDH may issue a correction order citing specific areas of noncompliance, impose
<br />certain fines (depending on the level and scope of the violation), and in particularly egregious cases may revoke the
<br />Corporation’s home care provider license.
<br />The Project also provides services that require annual registration as housing with services establishments in
<br />accordance with Chapter 144D of the Minnesota Statutes, which the Corporation is required to comply with.
<br />Furthermore, because the Corporation uses the designation “assisted living” in the context of advertising, marketing,
<br />describing, offering or promoting themselves, they must also comply with Chapter 144G of the Minnesota Statutes,
<br />which includes disclosing and certifying certain information on their housing with services establishment registrations
<br />and annual renewals in addition to complying with additional operational requirements. Each registration requires
<br />annual renewal and compliance with additional regulatory requirements. As an example, housing with services
<br />establishments are required to enter into housing with services contracts with each of their residents providing certain
<br />statutorily prescribed information to the residents in the contracts and must provide residents with a Uniform
<br />Consumer Information Guide describing the services they provide. MDH has authority to bring actions for injunctive
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