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What changed in PACS Group, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PACS Group, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+438 added−502 removedSource: 10-K (2026-02-27) vs 10-K (2025-11-19)

Top changes in PACS Group, Inc.'s 2025 10-K

438 paragraphs added · 502 removed · 336 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

217 edited+76 added−30 removed714 unchanged
Biggest changeAny of these information systems could fail or experience a service interruption for a number of reasons, including computer viruses, programming errors, hacking or other unlawful activities, disasters or our failure to properly maintain system redundancy or protect, repair, maintain or upgrade our systems.
Biggest changeAny of these information systems could fail or experience a service interruption for a number of reasons, including computer viruses and malware (e.g., ransomware), misconfigurations, “bugs” or other vulnerabilities, malicious code,terrorism, war, telecommunication and electrical failures,programming errors, hacking or other cyberattacks, phishing attacks, and unlawful activities, natural disasters, or our failure to properly maintain system redundancy or protect, repair, maintain or upgrade our systems, employee theft or misuse, human error, fraud, denial or degradation of service attacks, and sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.
Favorable Reimbursement Environment According to CMS, approximately 72% of SNF revenue in 2022 was derived from government sources, including Medicaid and Medicare. Medicaid represents 51% of industry revenue, while Medicare represents approximately 21%. The remainder comprises managed care, private pay, and other payors. Medicare and Medicaid reimbursement has steadily increased over the past few years.
Favorable Reimbursement Environment According to CMS, approximately 72% of SNF revenue in 2022 was derived from government sources, including Medicare and Medicaid. Medicare represents 21% of industry revenue, while Medicaid represents approximately 51%. The remainder comprises managed care, private pay, and other payors. Medicare and Medicaid reimbursement has steadily increased over the past few years.
Medicaid and Medicare Reimbursement Per Patient Day Regulatory Environment The SNF industry is highly regulated with stringent regulatory compliance obligations.
Medicare and Medicaid Reimbursement Per Patient Day Regulatory Environment The SNF industry is highly regulated with stringent regulatory compliance obligations.
We have also received a subpoena from the DOJ Criminal Division per the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) relating to an investigation into possible violations of various sections of 18 U.S.C. that prohibit the making of fraudulent or false statements to any branch of the government of the United States, and a subpoena from the Respiratory Care Board of California (the “RCB”) relating to an investigation to determine if a Respiratory Care Practitioner (“RCP”) fraudulently documented providing respiratory treatments to two patients at one of our facilities.
We have also received a subpoena from the DOJ Criminal Division per the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) relating to an investigation into possible violations of various sections of 18 U.S.C. that prohibit the making of fraudulent or false statements to any branch of the government of the United States, and a subpoena from the Respiratory Care Board of California (the “RCB”) relating to an investigation to determine if a Respiratory Care Practitioner (“RCP”) fraudulently documented providing respiratory treatments to two patients at one of our facilities.
Similar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • similar state law provisions pertaining to anti-kickback, self-referral and false claims issues, some of which may apply to items or services reimbursed by any payor, including patients and commercial insurers; • state corporate practice and fee-splitting laws that prohibit general business corporations such as us, from practicing medicine or other healthcare professionals, controlling licensed healthcare professionals’ medical decisions or engaging in some practices, such as spitting fees with licensed healthcare professionals; • laws that regulate debt collection practices; • federal and state antitrust laws that prohibit or limit exclusive contracting relationships with healthcare providers, prohibit or limit the sharing of cost and pricing data, prohibit competitors from taking collective action to set commercial payer reimbursement rates, and determine when a joint venture or healthcare network is sufficiently integrated, by either sharing substantial financial risk or substantial clinical integration, to jointly contract with commercial payers; • laws that impose criminal penalties on healthcare providers who fail to disclose or refund known overpayments; • laws that require maintenance of licensure, certification and accreditation; • laws relating to adequacy and quality of healthcare services, quality and maintenance of medical equipment and facilities; • laws that impose reporting, transparency and disclosure requirements of the ownership, management. managing employees and the owners of real property lessors or sublessors, including any private equity companies or REITs; • laws relating to staffing levels and qualifications and vaccination (including boosting) of healthcare and support personnel; • confidentiality, maintenance and security issues associated with medical records and claims processing; and • constraints on protective contractual provisions with patients and third‑party payors.
Similar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • similar state law provisions pertaining to anti-kickback, self-referral and false claims issues, some of which may apply to items or services reimbursed by any payor, including patients and commercial insurers; • state corporate practice and fee-splitting laws that prohibit general business corporations such as us, from practicing medicine or other healthcare professionals, controlling licensed healthcare professionals’ medical decisions or engaging in some practices, such as spitting fees with licensed healthcare professionals; • laws that regulate debt collection practices; • federal and state antitrust laws that prohibit or limit exclusive contracting relationships with healthcare providers, prohibit or limit the sharing of cost and pricing data, prohibit competitors from taking collective action to set commercial payer reimbursement rates, and determine when a joint venture or healthcare network is sufficiently integrated, by either sharing substantial financial risk or substantial clinical integration, to jointly contract with commercial payers; • laws that impose criminal penalties on healthcare providers who fail to disclose or refund known overpayments; • laws that require maintenance of licensure, certification and accreditation; • laws relating to adequacy and quality of healthcare services, quality and maintenance of medical equipment and facilities; 50 Table of Content s • laws that impose reporting, transparency and disclosure requirements of the ownership, management. managing employees and the owners of real property lessors or sublessors, including any private equity companies or REITs; • laws relating to staffing levels and qualifications and vaccination (including boosting) of healthcare and support personnel; • confidentiality, maintenance and security issues associated with medical records and claims processing; and • constraints on protective contractual provisions with patients and third‑party payors.
The CAA 2023 provided for the wind‑down and termination of increased Federal Medicaid Assistance Percentage (FMAP) payments under the Families First Coronavirus Relief Act (FFCRA), and also provided for the disenrollment of Medicaid beneficiaries who have participated in the program since early in the COVID‑19 pandemic.
The CAA 2023 provided for the gradual wind‑down and termination of increased Federal Medicaid Assistance Percentage (FMAP) payments under the Families First Coronavirus Relief Act (FFCRA) in 2023, and also provided for the disenrollment of Medicaid beneficiaries who have participated in the program since early in the COVID‑19 pandemic.
QM Star Ratings Over Time for PACS Mature Facilities vs. Industry Average Source: CMS SNF Provider Information (Nov. 2024); PACS data for facilities with CMS certification and QM Star rating. Execution of our strategy has also increased our number of facilities with QM Star ratings of 4 or 5 Stars over time.
QM Star Ratings Over Time for PACS Mature Facilities vs. Industry Average (1) _________ (1) Source: CMS SNF Provider Information (Nov. 2024); PACS data for facilities with CMS certification and QM Star rating. Execution of our strategy has also increased our number of facilities with QM Star ratings of 4 or 5 Stars over time.
A bill in the State of California, where a significant majority of our facilities are located, was recently signed into law which increases the cap of non‑economic damages awarded to plaintiffs who are successful in medical malpractice litigation.
A bill in the State of California, where a significant majority of our facilities are located, was signed into law which increases the cap of non‑economic damages awarded to plaintiffs who are successful in medical malpractice litigation.
The market price of our common stock may be highly volatile and fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • variations between our actual operating results, or those of companies that are perceived to be similar to us, and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our Company or our failure to meet these estimates or the expectations of investors; 55 Table of Contents • additional shares of our common stock being sold into the market by us or our existing stockholders; • hedging activities by market participants; • announcements by us or our competitors of significant features, technical innovations in facilities, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our competitors; • changes in third-party payor reimbursement policies; • an inability to obtain additional funding; • general economic, political, industry and market conditions, including rising inflation, high interest rates, capital market disruptions, and price and volume fluctuations in the overall stock market; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from political conditions, election cycles, pandemics, war or incidents of terrorism, or responses to these events, many of which are outside of our control.
The market price of our common stock may be highly volatile and fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • variations between our actual operating results, or those of companies that are perceived to be similar to us, and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; 57 Table of Content s • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our Company or our failure to meet these estimates or the expectations of investors; • additional shares of our common stock being sold into the market by us or our existing stockholders; • hedging activities by market participants; • announcements by us or our competitors of significant features, technical innovations in facilities, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our competitors; • changes in third-party payor reimbursement policies; • an inability to obtain additional funding; • general economic, political, industry and market conditions, including rising inflation, high interest rates, capital market disruptions, and price and volume fluctuations in the overall stock market; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from political conditions, election cycles, pandemics, war or incidents of terrorism, or responses to these events, many of which are outside of our control.
CMS has issued guidance and direction around arbitration, to 24 Table of Contents include: the facility must not require signing of an arbitration agreement as a condition of admission or a requirement to continue to receive care at the facility, and the agreement must expressly contain language to this effect; the facility must inform the resident or the resident's representative of the right not to sign the agreement; the facility must confirm that the agreement is explained in a manner that can be understood and that the resident or their representative acknowledges their understanding of the agreement; the agreement must provide for the right to rescind the agreement within 30 calendar days of signing; and the agreement may not contain language that prohibits or discourages communications with federal, state, or local officials, including federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsperson.
CMS has issued guidance and direction around arbitration, to include: the facility must not require signing of an arbitration agreement as a condition of admission or a requirement to continue to receive care at the facility, and the agreement must expressly contain language to this effect; the facility must inform the resident or the resident's representative of the right not to sign the agreement; the facility must confirm that the agreement is explained in a manner that can be understood and that the resident or their representative acknowledges their understanding of the agreement; the agreement must provide for the right to rescind the agreement within 30 calendar days of signing; and the agreement may not contain language that prohibits or discourages communications with federal, state, or local officials, including federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsperson.
Our subsidiaries operate SNFs in Alaska, Arizona, California, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington as of December 31, 2024. Some states have established minimum staffing requirements for facilities operating in that state, and other states may do the same in the future, or existing requirements may become more stringent.
Our subsidiaries operate SNFs in Alaska, Arizona, California, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington as of December 31, 2025. Some states have established minimum staffing requirements for facilities operating in that state, and other states may do the same in the future, or existing requirements may become more stringent.
These private parties, often referred to as relators or whistleblowers, are entitled to share in any amounts recovered by the government through trial or settlement, and these qui tam cases are sealed by the court at the time of filing; • the criminal healthcare fraud provisions of HIPAA and related rules that prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing or covering up a 49 Table of Contents material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
These private parties, often referred to as relators or whistleblowers, are entitled to share in any amounts recovered by the government through trial or settlement, and these qui tam cases are sealed by the court at the time of filing; • the criminal healthcare fraud provisions of HIPAA and related rules that prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
In any of these cases, there could be an adverse affect on our business, financial condition and results of operations. The restatement of our condensed combined/consolidated financial statements has subjected us to a number of additional risks and uncertainties, including regulatory, stockholder or other actions, loss of investor confidence and negative impacts on the trading of our common stock.
In any of these cases, there could be an adverse effect on our business, financial condition and results of operations. The restatement of our condensed combined/consolidated financial statements has subjected us to a number of additional risks and uncertainties, including regulatory, stockholder or other actions, loss of investor confidence and negative impacts on the trading of our common stock.
During the course of its testing, our management may identify material weaknesses, in addition to the one described below, which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. Our internal control over financial reporting will not prevent or detect all errors and all fraud.
During the course of its testing, our management may identify material weaknesses, in addition to those described below, which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. Our internal control over financial reporting will not prevent or detect all errors and all fraud.
Additionally, under the terms of our amended and restated credit agreement with Truist Bank and a syndicate of lenders (Amended and Restated 2023 Credit Facility), we are subject to certain affirmative and negative covenants customary for credit facilities of this type as well as two financial covenants, a total leverage financial covenant and a fixed charge coverage ratio financial covenant.
Additionally, under the terms of our credit facility with Truist Bank and a syndicate of lenders (Amended and Restated Credit Facility), we are subject to certain affirmative and negative covenants customary for credit facilities of this type as well as two financial covenants, a total leverage financial covenant and a fixed charge coverage ratio financial covenant.
This concentrated control of the composition of the board of directors and voting power of our common stock will preclude your ability to influence corporate matters for the foreseeable future, including with respect to the composition of our board of directors, the election and removal of directors, the authorization and issuance of additional shares of our common stock that would be dilutive to you, the issuance of shares of preferred stock that could be dilutive to you and could have disparate voting rights, amendments to our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major 57 Table of Contents corporate transaction requiring stockholder approval.
This concentrated control of the composition of the board of directors and voting power of our common stock will preclude your ability to influence corporate matters for the foreseeable future, including with respect to the composition of our board of directors, the election and removal of directors, the authorization and issuance of additional shares of our common stock that would be dilutive to you, the issuance of shares of preferred stock that could be dilutive to you and could have disparate voting rights, amendments to our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Any adverse finding in these ongoing matters, or in any similar matter that may arise in the future, could subject us to civil or criminal penalties, sanctions, remedial measures and other detrimental consequences, including denial of 50 Table of Contents reimbursement, imposition of fines, temporary suspension of admission of new patients, suspension or decertification from the Medicaid and Medicare programs, restrictions on our ability to acquire new facilities or expand or operate existing facilities, the loss of our licenses to operate and the loss of our ability to participate in federal and state reimbursement programs.
Any adverse finding in these ongoing matters, or in any similar matter that may arise in the future, could subject us to civil or criminal penalties, sanctions, remedial measures and other detrimental consequences, including denial of reimbursement, imposition of fines, temporary suspension of admission of new patients, suspension or decertification from the Medicaid and Medicare programs, restrictions on our ability to acquire new facilities or expand or operate existing facilities, the loss of our licenses to operate and the loss of our ability to participate in federal and state reimbursement programs.
With this readily-available, real-time data, our local leaders are able to more easily assess what works well in their facilities and can appropriately manage their operations and share best practices with their colleagues within the company. 7 Table of Contents This data also facilitates greater risk management and compliance efforts, as financial and clinical information can be analyzed, which we believe helps promote accountability across the company.
With this readily-available, real-time data, our local leaders are able to more easily assess what works well in their facilities and can appropriately manage their operations and share best practices with their colleagues within the company. 7 Table of Content s This data also facilitates greater risk management and compliance efforts, as financial and clinical information can be analyzed, which we believe helps promote accountability across the company.
If there were a significant increase in the number of these claims against us or an increase in amounts owing should plaintiffs be successful in their claims, this could have a material adverse effect to our business, financial condition, results of operations and cash flows.
If there were a significant increase in the number of these claims against us or an increase in amounts owing should plaintiffs be successful in their claims, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In particular, as our strategy includes the targeted acquisition of underperforming SNFs, we from time to time acquire facilities with special focus facility status. As of December 31, 2024, we had four facilities with special focus facility status. Three such facilities were acquired with this status and one was placed on such status following our acquisition of the facility.
In particular, as our strategy includes the targeted acquisition of underperforming SNFs, we from time to time acquire facilities with special focus facility status. As of December 31, 2025, we had four facilities with special focus facility status. Three such facilities were acquired with this status and one was placed on such status following our acquisition of the facility.
Other ongoing OIG audits include an a review of nursing homes’ nurse staffing hours reported in CMS's payroll‐based journal, a review of whether and how states used Medicaid supplemental payments for use in satisfying the state’s obligations to pay nursing facilities any amounts due under the state’s nursing facility upper payment limit, a review of Medicare Advantage Organizations’ use of prior authorization for post-acute care, and a review of the implementation of the SFF program.
Other ongoing OIG audits include an a review of nursing homes’ nurse staffing hours reported in CMS's payroll‐based journal, a review of whether and how states used Medicaid supplemental payments for use in satisfying the state’s obligations to pay nursing facilities any amounts due under the state’s nursing facility upper payment limit, and a review of Medicare Advantage Organizations’ use of prior authorization for post-acute care.
Changes to the Medicare program, state Medicaid programs and other third-party payor program that could adversely affect our business include: • statutory and regulatory changes and executive actions, including policy interpretations and changes that impact state reimbursement programs, particularly Medicaid reimbursement and managed care payments; • administrative or legislative changes to base rates or the bases for payment; • the reduction or elimination of annual rate increases, or the end of the reduced payments deferment; 44 Table of Contents • limits on the services or types of providers for which Medicare will provide reimbursement; • changes in methodology for patient assessment and/or determination of payment levels; • payment or other delays by fiscal intermediaries, carriers or payors; • redefining enrollment standards and participation in government healthcare programs; • changes in staff requirements as a condition of payment or eligibility for Medicare reimbursement; • reduced reimbursement rates and changes in coverage under commercial and managed care contracts; • changes in reimbursement rates, methods, or timing under governmental reimbursement programs, including reductions in annual reimbursement updates due to budgetary or other pressures; • interruption or delays in payments due to any ongoing governmental investigations and audits or due to a partial or total federal or state government shutdown for a prolonged period of time; • an increase in co‑payments or deductibles payable by beneficiaries; • recoupment efforts and recovery of overpayments; • federal, state, and local litigation, administrative proceedings, and enforcement actions, including those relating to false claims, COVID-19 or future pandemics and the failure to satisfy the terms and conditions of financial relief; and • reputational harm of publicly disclosed enforcement actions, audits, or investigations related to quality of care, patient harm and abuse, billing and reimbursement.
Changes to the Medicare program, state Medicaid programs and other third-party payor program that could adversely affect our business include: • statutory and regulatory changes and executive actions, including policy interpretations and changes that impact state reimbursement programs, particularly Medicaid reimbursement and managed care payments; • administrative or legislative changes to base rates or the bases for payment; • the reduction or elimination of annual rate increases, or the end of the reduced payments deferment; • limits on the services or types of providers for which Medicare will provide reimbursement; • changes in methodology for patient assessment and/or determination of payment levels; • payment or other delays by fiscal intermediaries, carriers or payors; • redefining enrollment standards and participation in government healthcare programs; • changes in staff requirements as a condition of payment or eligibility for Medicare reimbursement; 45 Table of Content s • reduced reimbursement rates and changes in coverage under commercial and managed care contracts; • changes in reimbursement rates, methods, or timing under governmental reimbursement programs, including reductions in annual reimbursement updates due to budgetary or other pressures; • interruption or delays in payments due to any ongoing governmental investigations and audits or due to a partial or total federal or state government shutdown for a prolonged period of time; • an increase in co‑payments or deductibles payable by beneficiaries; • recoupment efforts and recovery of overpayments; • federal, state, and local litigation, administrative proceedings, and enforcement actions, including those relating to false claims, pandemics and the failure to satisfy the terms and conditions of financial relief; and • reputational harm of publicly disclosed enforcement actions, audits, or investigations related to quality of care, patient harm and abuse, billing and reimbursement.
If we are unable to generate sufficient 40 Table of Contents cash flow from operations in the future to service our debt or to make lease payments on our leases, we may be required, among other things, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets, reduce or delay planned capital expenditures or delay or abandon desirable acquisitions.
If we are unable to generate sufficient cash flow from operations in the future to service our debt or to make lease payments on our leases, we may be required, among other things, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets, reduce or delay planned capital expenditures or delay or abandon desirable acquisitions.
As described in Part II, Item 9A “Controls and Procedures”, these material weaknesses resulted in a restatement of our previously issued interim condensed combined/consolidated financial statements as of and for the interim periods ended March 31, 2024 and June 30, 2024.
As described in Part II, Item 9A “Controls and Procedures”, the material weaknesses identified in 2024 resulted in a restatement of our previously issued interim condensed combined/consolidated financial statements as of and for the interim periods ended March 31, 2024 and June 30, 2024.
For example, the following circumstances may adversely affect our ability to obtain insurance at favorable rates: • we experience higher‑than‑expected professional liability, property and casualty, or other types of claims or losses; • we receive survey deficiencies or citations of higher‑than‑normal scope or severity or experience higher-than-expected number of deficiencies or citations; • we acquire especially troubled operations or facilities that present unattractive risks to current or prospective insurers; • insurers tighten underwriting standards applicable to us or our industry; or • insurers or reinsurers are unable or unwilling to insure us or the industry at historical premiums and coverage levels.
For example, the following circumstances may adversely affect our ability to obtain insurance at favorable rates: • we experience higher‑than‑expected professional liability, property and casualty, or other types of claims or losses; 38 Table of Content s • we receive survey deficiencies or citations of higher‑than‑normal scope or severity or experience higher-than-expected number of deficiencies or citations; • we acquire especially troubled operations or facilities that present unattractive risks to current or prospective insurers; • insurers tighten underwriting standards applicable to us or our industry; or • insurers or reinsurers are unable or unwilling to insure us or the industry at historical premiums and coverage levels.
According to CMS Inpatient Hospital discharge data, in the first half of 2023, approximately 24% of Medicare patients over 65 years old were 14 Table of Contents discharged to SNFs, representing more than any other facility type, including inpatient rehabilitation facilities and long-term acute care hospitals (approximately 6%), and more than home health nursing care (22%) or hospice (5%).
According to CMS Inpatient Hospital discharge data, in the first half of 2023, approximately 24% of Medicare patients over 65 years old were 14 Table of Content s discharged to SNFs, representing more than any other facility type, including inpatient rehabilitation facilities and long-term acute care hospitals (approximately 6%), and more than home health nursing care (22%) or hospice (5%).
In addition, states risk losing federal Medicaid matching funds for non‑compliance with CMS’s instructions, which could result in reduced Medicaid funds available for timely reimbursement of our operating subsidiaries for their operations. 46 Table of Contents Medicare and Medicaid nursing facilities are required to disclose data about the facility’s ownership, management and the owners of real property lessors upon initial enrollment and revalidation.
In addition, states risk losing federal Medicaid matching funds for non‑compliance with CMS’s instructions, which could result in reduced Medicaid funds available for timely reimbursement of our operating subsidiaries for their operations. Medicare and Medicaid nursing facilities are required to disclose data about the facility’s ownership, management and the owners of real property lessors upon initial enrollment and revalidation.
To that end, we believe that our local leaders and employees understand the distinct needs and priorities of their patients, staff, and facilities and are best positioned to make clinical and operational decisions in order to optimize patient outcomes and experience.
To that end, we believe that our local leaders and their teams understand the distinct needs and priorities of their patients, staff, and facilities and are best positioned to make clinical and operational decisions in order to optimize patient outcomes and experience.
We believe that delays in confirming 22 Table of Contents eligibility or coverage under these provisions can create the conditions for coverage interruptions, potential delays or denied payments. Prior to the OBBBA’s passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods.
We believe that delays in confirming 22 Table of Content s eligibility or coverage under these provisions can create the conditions for coverage interruptions, potential delays or denied payments. Prior to the OBBBA’s passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods.
Because the determination of whether we are a “U.S. real property holding corporation” (USRPHC) for U.S. federal income tax purposes depends on the fair market value of our “U.S. real property interests” (USRPIs) relative to the fair 60 Table of Contents market value of our non-U.S. real property interests and our other business assets, and because we have significant interests in real property located in the U.S., we may currently be, or may become in the future, a USRPHC.
Because the determination of whether we are a “U.S. real property holding corporation” (USRPHC) for U.S. federal income tax purposes depends on the fair market value of our “U.S. real property interests” (USRPIs) relative to the fair market value of our non-U.S. real property interests and our other business assets, and because we have significant interests in real property located in the U.S., we may currently be, or may become in the future, a USRPHC.
In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are designed and operating effectively, and implement a continuous reporting and improvement process for internal control over financial reporting.
In this regard, we continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are designed and operating effectively, and implement a continuous reporting and improvement process for internal control over financial reporting.
The ability of our subsidiaries to make distributions to us will depend substantially on their respective operating results and will be subject to restrictions under, among other things, the laws of their jurisdiction of organization, 43 Table of Contents which may limit the amount of funds available for distribution to investors or stockholders, agreements of those subsidiaries, the terms of our financing arrangements and the terms of any future financing arrangements of our subsidiaries.
The ability of our subsidiaries to make distributions to us will depend substantially on their respective operating results and will be subject to restrictions under, among other things, the laws of their jurisdiction of organization, which may limit the amount of funds available for distribution to investors or stockholders, agreements of those subsidiaries, the terms of our financing arrangements and the terms of any future financing arrangements of our subsidiaries.
Restrictions under applicable federal and state laws and regulations that may affect our ability to operate include the following: • the federal Anti-Kickback Statute (AKS) that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Restrictions under applicable federal and state laws and regulations that may affect our ability to operate include the following: 49 Table of Content s • the federal Anti-Kickback Statute (AKS) that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Given the generally predetermined nature of the reimbursement rates that SNFs are paid for 29 Table of Contents caring for patients, if our operating costs increase disproportionately compared to the reimbursement rates we are paid for providing services under consolidated billing, there could be a material adverse effect on our business, financial condition, and results of operations.
Given the generally predetermined nature of the reimbursement rates that SNFs are paid for 29 Table of Content s caring for patients, if our operating costs increase disproportionately compared to the reimbursement rates we are paid for providing services under consolidated billing, there could be a material adverse effect on our business, financial condition, and results of operations.
Certain of our independently operating subsidiaries have been, and may continue to be, subject to findings of quality of care deficiencies or practices, incidents of patient abuse or neglect, and 34 Table of Contents claims regarding services rendered that do not meet the standard of care, which have resulted, and in the future may result, in civil or criminal penalties, fines and other actions.
Certain of our independently operating subsidiaries have been, and may continue to be, subject to findings of quality of care deficiencies or practices, incidents of patient abuse or neglect, and claims regarding services rendered that do not meet the standard of care, which have resulted, and in the future may result, in civil or criminal penalties, fines and other actions.
We believe this 12 Table of Contents directly aligned incentive model has played a critical role in successfully attracting, incentivizing, and retaining our industry veterans. Robust Suite of Technology-Enabled Services Our technology focus delivers real-time data access to caregivers and administrators, facilitating delivery of the right care at the right time.
We believe this 12 Table of Content s directly aligned incentive model has played a critical role in successfully attracting, incentivizing, and retaining our industry veterans. Robust Suite of Technology-Enabled Services Our technology focus delivers real-time data access to caregivers and administrators, facilitating delivery of the right care at the right time.
If global economic conditions remain volatile for a prolonged period or experience further disruptions, it could have a material adverse effect on our business, financial condition and results of operations. 63 Table of Contents We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders.
If global economic conditions remain volatile for a prolonged period or experience further disruptions, it could have a material adverse effect on our business, financial condition and results of operations. We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders.
Murray and Hancock beneficially own, in the aggregate, less than the majority of the voting power of our outstanding shares of voting stock, directors may only be removed for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of all then outstanding shares of our voting stock; • requiring the approval of holders of two-thirds of the total voting power of all then outstanding shares of our capital stock to amend certain provisions in our Amended and Restated Charter and our Amended and Restated Bylaws; 59 Table of Contents • authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibiting stockholders from calling special meetings of stockholders; • providing that, at any time when Messrs.
Murray and Hancock beneficially own, in the aggregate, less than the majority of the voting power of our outstanding shares of voting stock, directors may only be removed for cause and only by the 61 Table of Content s affirmative vote of the holders of at least two-thirds of the voting power of all then outstanding shares of our voting stock; • requiring the approval of holders of two-thirds of the total voting power of all then outstanding shares of our capital stock to amend certain provisions in our Amended and Restated Charter and our Amended and Restated Bylaws; • authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibiting stockholders from calling special meetings of stockholders; • providing that, at any time when Messrs.
We believe the success of our strategy is further exemplified by our historical ability establish and maintain a QM Star rating for our Mature facilities that is higher than the industry average, The graphic below sets forth our QM Star rating 9 Table of Contents over time for our Mature facilities, as well as the industry average QM Star rating for buildings of all maturities, for the periods indicated.
We believe the success of our strategy is further exemplified by our historical ability establish and maintain a QM Star rating for our Mature facilities that is higher than the industry average, The graphic below sets forth our QM Star rating 9 Table of Content s over time for our Mature facilities, as well as the industry average QM Star rating for buildings of all maturities, for the periods indicated.
These new obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could have an adverse effect on our business, financial condition and results of operations. 62 Table of Contents Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
These new obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could have an adverse effect on our business, financial condition and results of operations. Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We seek to recruit, train, and reward dynamic administrators for our facilities, and rely on them to work with their interdisciplinary teams to implement policies and procedures that are appropriate and effective and result in positive outcomes. We support 5 Table of Contents the delivery of excellent care by building excellent teams.
We seek to recruit, train, and reward dynamic administrators for our facilities, and rely on them to work with their interdisciplinary 5 Table of Content s teams to implement policies and procedures that are appropriate and effective and result in positive outcomes. We support the delivery of excellent care by building excellent teams.
Our Diversified Portfolio of Properties We have a diverse portfolio of facilities that are located in selected attractive markets. A majority of our facilities are leased and are accounted for as either operating leases or finance leases. Our remaining facilities are either wholly-owned 8 Table of Contents or partially-owned through joint ventures managed by third parties.
Our Diversified Portfolio of Properties We have a diverse portfolio of facilities that are located in selected attractive markets. A majority of our facilities are leased and are accounted for as either operating leases or finance leases. Our remaining facilities are either wholly-owned 8 Table of Content s or partially-owned through joint ventures managed by third parties.
Our patients have in the past and could in the future be harmed by one or more of our employees or staff members, either intentionally, by accident, or through negligence, neglect, error, poor performance, mistreatment, assault, abuse, failure to provide proper care, failure to properly document or monitor or report information, failure to address risks to patients’ health or safety, failure to maintain appropriate staffing, failure to implement appropriate interventions or other actions or inaction.
Our patients have in the past and could in the future be harmed by one or more of our employees or staff members, either intentionally, by accident, or through negligence, neglect, error, poor performance, mistreatment, assault, abuse, failure to provide proper care, failure to 34 Table of Content s properly document or monitor or report information, failure to address risks to patients’ health or safety, failure to maintain appropriate staffing, failure to implement appropriate interventions or other actions or inaction.
Budget pressures often lead the federal government to reduce or place limits on reimbursement rates under Medicare and Medicaid. We cannot predict the extent to which such proposals will be 19 Table of Contents adopted or, if adopted and implemented, what effect, if any, such proposals and legislation will have on us.
Budget pressures often lead the federal government to reduce or place 19 Table of Content s limits on reimbursement rates under Medicare and Medicaid. We cannot predict the extent to which such proposals will be adopted or, if adopted and implemented, what effect, if any, such proposals and legislation will have on us.
Subject to general market conditions and the availability of essential resources and leadership within our company, we 35 Table of Contents continue to seek both single‑and multi‑facility acquisition and property acquisition opportunities that are consistent with our strategic objectives. We face competition for the acquisition of facilities and properties and expect this competition to continue and potentially increase.
Subject to general market conditions and the availability of essential resources and leadership within our company, we continue to seek both single‑and multi‑facility acquisition and property acquisition opportunities that are consistent with our strategic objectives. We face competition for the acquisition of facilities and properties and expect this competition to continue and potentially increase.
Unanticipated delays in receiving reimbursement from state programs or commercial payors due to changes in their policies or billing or audit procedures may adversely impact our liquidity and working capital. 41 Table of Contents The continued use and growth of managed care organizations (MCOs) may contribute to delays or reductions in our reimbursement, including Managed Medicaid.
Unanticipated delays in receiving reimbursement from state programs or commercial payors due to changes in their policies or billing or audit procedures may adversely impact our liquidity and working capital. The continued use and growth of managed care organizations (MCOs) may contribute to delays or reductions in our reimbursement, including Managed Medicaid.
In addition, if any of our referral sources have a reduction in patients whom they can refer due to a decrease in their business, our occupancy rate and the quality of our patient mix could suffer. 31 Table of Contents The healthcare services industry is highly competitive.
In addition, if any of our referral sources have a reduction in patients whom they can refer due to a decrease in their business, our occupancy rate and the quality of our patient mix could suffer. 31 Table of Content s The healthcare services industry is highly competitive.
Post-acute care encompasses multiple care settings outside of acute care hospitals that are differentiated by the acuity level of patients and the services they require. While services may overlap 13 Table of Contents across each distinct post-acute offering, post-acute rehab or SNFs provide the most comprehensive array of services.
Post-acute care encompasses multiple care settings outside of acute care hospitals that are differentiated by the acuity level of patients and the services they require. While services may overlap 13 Table of Content s across each distinct post-acute offering, post-acute rehab or SNFs provide the most comprehensive array of services.
Given our operations are subject to highly complex compliance requirements, our systems and internal controls regularly highlight potential compliance issues, which we investigate as they arise. We similarly investigate concerns that 32 Table of Contents are reported to us by employees or other persons.
Given our operations are subject to highly complex compliance requirements, our systems and internal controls regularly highlight potential compliance issues, which we investigate as they arise. We similarly investigate concerns that 32 Table of Content s are reported to us by employees or other persons.
Furthermore, due to the concentration of our operations in these states, our business may be adversely affected by economic conditions, contagious disease outbreaks, including COVID-19, political unrest, and other conditions over which we have no control that disproportionately affect these states as compared to other states.
Furthermore, due to the concentration of our operations in these states, our business may be adversely affected by economic conditions, contagious disease outbreaks, political unrest, and other conditions over which we have no control that disproportionately affect these states as compared to other states.
We often upgrade facility infrastructure shortly after acquisition and perform periodic refreshes, to ensure our 10 Table of Contents facilities are comfortable and well-equipped to serve patients across a wide range of acuities with a primary focus on high acuity patients.
We often upgrade facility infrastructure shortly after acquisition and perform periodic refreshes, to ensure our 10 Table of Content s facilities are comfortable and well-equipped to serve patients across a wide range of acuities with a primary focus on high acuity patients.
If we are unable to accomplish any of these objectives at the operating subsidiaries we acquire, we will not realize the anticipated benefits and we may experience lower than anticipated profits, or even losses. During the years ended December 31, 2024, 2023, and 2022, we added 106, 58, and nine stand-alone skilled nursing, assisted living, and subacute facilities, respectively.
If we are unable to accomplish any of these objectives at the operating subsidiaries we acquire, we will not realize the anticipated benefits and we may experience lower than anticipated profits, or even losses. During the years ended December 31, 2025, 2024, and 2023, we added eight, 106, and 58 stand-alone skilled nursing, assisted living, and subacute facilities, respectively.
CMS discloses the increasing standards for four‑ and five‑star ratings in its star rating cut point table, 37 Table of Contents which discloses the points needed for each star rating within every state. CMS has indicated that it will increase these quality measure thresholds every six months.
CMS discloses the increasing standards for four‑ and five‑star ratings in its star rating cut point table, which discloses the points needed for each star rating within every state. CMS has indicated that it will increase these quality measure thresholds every six months.
Some of the policies we currently maintain include property, general liability, employment benefits liability, business automobile, workers’ compensation, and directors’ and officers’, employment practices and fiduciary liability insurance. We do not know, however, if we will 38 Table of Contents be able to maintain insurance with adequate levels of coverage.
Some of the policies we currently maintain include property, general liability, employment benefits liability, business automobile, workers’ compensation, and directors’ and officers’, employment practices and fiduciary liability insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage.
See the risk factor titled “Our self-insurance programs may expose us to significant and unexpected costs and losses.” Furthermore, class action claims related to patient care, employment practices or other matters could be brought alleging legal violations that may materially affect our business, financial condition and results of operations.
See the risk factor titled “Our self-insurance programs may expose us to significant and unexpected costs and losses.” Furthermore, class action claims related to patient care, employment practices or other matters have been and in the future could be brought alleging legal violations that may materially affect our business, financial condition and results of operations.
Because more than 50% of the voting power in the election of our directors is held by an individual, group, or another company, we are a “controlled company” within the meaning of the corporate governance 58 Table of Contents standards of the New York Stock Exchange.
Because more than 50% of the voting power in the election of our directors is held by an individual, group, or another company, we are a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange.
If we were subsequently denied licensure or certification for any reason, we might not realize the expected benefits of the acquisition and would likely incur unanticipated costs and other challenges which could cause our business to suffer. We may have difficulty completing partnerships that increase our capacity consistent with our growth strategy.
If we were subsequently denied licensure or certification for any reason, we might not realize the expected benefits of the acquisition and would likely incur unanticipated costs and other challenges which could cause our business to suffer. 37 Table of Content s We may have difficulty completing partnerships that increase our capacity consistent with our growth strategy.
Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Amended and Restated Charter (as may be amended or restated). Non-U.S.
Any person 62 Table of Content s or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Amended and Restated Charter (as may be amended or restated). Non-U.S.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or combined/consolidated financial 61 Table of Contents statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or combined/consolidated financial statements will not be prevented or detected on a timely basis.
Some of the factors are beyond our control and a change in any such factor could affect our ability to pay or maintain dividends. The Amended and Restated 2023 Credit Facility restricts our ability to pay dividends to stockholders if we are in default under the agreement.
Some of the factors are beyond our control and a change in any such factor could affect our ability to pay or maintain dividends. The Amended and Restated Credit Facility restricts our ability to pay dividends to stockholders, in certain instances, if we are in default under the agreement.
We seek to create value in our properties by purchasing these distressed facilities and making improvements under our operations and ownership. As of December 31, 2024 we owned 44 post-acute care facilities, and we have investments in joint ventures that own the underlying real estate and related improvements of 49 post-acute care facilities that are operated by PACS Group subsidiaries.
We seek to create value in our properties by purchasing these distressed facilities and making improvements under our operations and ownership. As of December 31, 2025 we owned 53 post-acute care facilities, and we have investments in joint ventures that own the underlying real estate and related improvements of 49 post-acute care facilities that are operated by PACS Group subsidiaries.
The information found on our website is not part of this or any other report that we file with, or furnish to, the SEC. 28 Table of Contents Item 1A RISK FACTORS Our business involves a high degree of risk.
The information found on our website is not part of this or any other report that we file with, or furnish to, the SEC. 28 Table of Content s Item 1A RISK FACTORS Our business involves a high degree of risk.
Financing may not be available to us or may be available to us only on terms that are not favorable, including being subject to interest rates that are higher than those incurred in the past. In addition, some of our outstanding indebtedness and long‑term leases restrict, among other things, our ability to incur additional debt.
Financing may not be available to us or may be 41 Table of Content s available to us only on terms that are not favorable, including being subject to interest rates that are higher than those incurred in the past. In addition, some of our outstanding indebtedness and long‑term leases restrict, among other things, our ability to incur additional debt.
Based on this information, SNFs in 52 Table of Contents particular are potential targets for more robust scrutiny and examination by regulators, although it is unknown whether the current presidential administration will seek further or escalating scrutiny of SNFs.
Based on this information, SNFs in particular are potential targets for more robust scrutiny and examination by regulators, although it is unknown whether the current presidential administration will seek further or escalating scrutiny of SNFs.
People are provided the opportunity to advance to become an administrator through our Administrator-in-Training program, and to join a regional leadership team. For example, in the year ended December 31, 2024, we promoted 11 of our administrators from within our organization after participating in our Administrator-in-Training program, and 18 of our RVPs were previously successful administrators with us.
People are provided the opportunity to advance to become an administrator through our Administrator-in-Training program, and to join a regional leadership team. For example, in the year ended December 31, 2025, we promoted 56 of our administrators from within our organization after participating in our Administrator-in-Training program, and 18 of our RVPs were previously successful administrators with us.
This dedicated focus by our administrators and their local teams on patient outcomes drives demand for our services and can ultimately result in higher patient census and profitability. 11 Table of Contents • Robust technology enabled operating infrastructure.
This dedicated focus by our administrators and their local teams on patient outcomes drives demand for our services and can ultimately result in higher patient census and profitability. 11 Table of Content s • Robust technology enabled operating infrastructure.
The following is a summary of our leased and owned facilities: • Leased Properties. As of December 31, 2024, we had 270 leased facilities. The majority of these leased facilities are in California, with the remainder in Alaska, Arizona, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington.
The following is a summary of our leased and owned facilities: • Leased Properties. As of December 31, 2025, we had 268 leased facilities. The majority of these leased facilities are in California, with the remainder in Alaska, Arizona, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington.
The initial and continued licensure of our facilities and certification to participate in government healthcare programs depends upon many factors including various state licensure regulations relating to quality of care, environment of care, equipment, services, minimum staffing requirements, staff training, administrators, personnel, and the existence of adequate policies, procedures, and controls.
The initial and continued licensure of our facilities and certification to participate in government healthcare programs depends upon many factors including various state licensure regulations relating to quality of care, environment of care, equipment, services, minimum staffing requirements, staff training, administrators, personnel, and the existence of adequate policies, procedures, and 25 Table of Content s controls.
Overall, these state laws regulating costs, access to care and 54 Table of Contents quality, in effect and those that may go into effect in the future, may delay or burden our transactions, including future add-on acquisitions, increase costs associated with expansion, require intrusive disclosures, and impose onerous, ongoing reporting obligations.
Overall, these state laws regulating costs, access to care and quality, in effect and those that may go into effect in the future, may delay or burden our transactions, including future add-on acquisitions, increase costs associated with expansion, require intrusive disclosures, and impose onerous, ongoing reporting obligations.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. We have identified material weaknesses in our internal control over financial reporting.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. 63 Table of Content s We have identified material weaknesses in our internal control over financial reporting.
Examples include requirements related to resident rights, admission, transfer and discharge, resident assessments, care planning, availability of certain services, administration and governance, emergency preparedness, quality assurance and performance improvement programs, infection control, compliance and ethics programs, physical environment, and training requirements. Compliance with these requirements can be burdensome and costly.
Examples include requirements related to resident rights, admission, transfer and discharge, resident assessments, care planning, availability of certain services, administration and governance, emergency preparedness, quality assurance and 24 Table of Content s performance improvement programs, infection control, compliance and ethics programs, physical environment, and training requirements. Compliance with these requirements can be burdensome and costly.
In addition, hardware, software or 42 Table of Contents applications we (or third‑party vendors) develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise the security of information systems.
In addition, hardware, software or applications we (or third‑party vendors) develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise the security of information systems.
Moreover, the OBBBA imposes significant reductions in the funding of the Medicaid program, such reductions are expected to decrease the number of persons enrolled in Medicaid and reduce the services covered by Medicaid. To generate funds to pay for the increasing costs of the Medicaid program, many states utilize financial arrangements commonly referred to as provider taxes.
Moreover, the OBBBA imposes significant reductions in the funding of the Medicaid program, such reductions are expected to decrease the number of persons enrolled in Medicaid and reduce the services covered by Medicaid. 46 Table of Content s To generate funds to pay for the increasing costs of the Medicaid program, many states utilize financial arrangements commonly referred to as provider taxes.
Furthermore, the steps to remediate any such material weaknesses, including the ones described in Part II, Item 9A “Controls and Procedures”, could require additional remedial measures, including hiring additional personnel, which could be costly and time-consuming.
Furthermore, the steps to remediate any material weakness, including the ones described in Part II, Item 9A “Controls and Procedures”, could require additional remedial measures, including hiring additional personnel, which could be costly and time-consuming.
In connection with improvements to its data infrastructure, CMS temporarily paused monthly updates to the Nursing Home Care Compare 23 Table of Contents Five Star Rating System as of July 30, 2025.
In connection with improvements to its data infrastructure, CMS temporarily paused monthly updates to the Nursing Home Care Compare 23 Table of Content s Five Star Rating System as of July 30, 2025.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Skilled Services Metrics and Non-GAAP Financial Measures.” We believe our strategy drives these results and is central to our ability to develop acquired facilities into higher performing facilities over time.
See the section titled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Skilled Services Metrics and Non-GAAP Financial Measures.” We believe our strategy drives these results and is central to our ability to develop acquired facilities into higher performing facilities over time.
As of December 31, 2024, 2023, and 2022, our average QM Star rating across our Mature facilities, which we define as facilities purchased more than 36 months prior to the measurement date, was 4.3, 4.2 and 4.4 Stars, respectively, compared to the industry average of 3.4, 3.6 and 3.7 Stars, respectively.
As of December 31, 2025, 2024, and 2023, our average QM Star rating across our Mature facilities, which we define as facilities purchased more than 36 months prior to the measurement date, was 4.4, 4.3 and 4.2 Stars, respectively, compared to the industry average of 3.5, 3.4 and 3.6 Stars, respectively.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to any appreciation in the value of their stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not 66 Table of Content s anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to any appreciation in the value of their stock.
A service interruption or shutdown could have a materially adverse impact on our operating activities and could result in reputational, competitive, and business harm. Furthermore, remediation and repair of any failure, problem or breach of our key information systems could require significant capital investments.
A service interruption or shutdown could have a materially adverse impact on our operating activities and could result in 35 Table of Content s reputational, competitive, and business harm. Furthermore, remediation and repair of any failure, problem or breach of our key information systems could require significant capital investments.
Further, we may incur post‑acquisition compliance risk due 36 Table of Contents to the difficulty or impossibility of immediately or quickly bringing non‑compliant facilities into substantial compliance with applicable healthcare regulations.
Further, we may incur post‑acquisition compliance risk due to the difficulty or impossibility of immediately or quickly bringing non‑compliant facilities into substantial compliance with applicable healthcare regulations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe full Board also regularly receives briefings from management on our cyber risk management program, as well as presentations on cybersecurity topics from our Vice President of Technology Support, internal security staff, or external experts as part of the Board’s continuing education on topics that impact public companies.
Biggest changeThe full board of directors also receives briefings from management on our cyber risk management program. Our management team, including the Vice President of Technology, is primarily responsible for assessing and managing our material risks from cybersecurity threats.
Key elements of our cybersecurity risk management program and strategy include but are not limited to the following: • Adhering to principles of Security by Design and Security by Default • Conducting third-party vulnerability scans, and penetration testing • Access controls enforcing principles of Least Privilege, Zero Trust, and Role-Based Access Controls with MFA requirements for critical systems and accounts • Cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents • A third-party risk management evaluation process for key service providers based on our assessment of their criticality to our operations and respective risk profile, suppliers, and vendors with access to our information systems or data • An employee cybersecurity awareness training program including awareness training and simulated attacks • A dedicated team responsible for incident identification, management, and remediation • Implementation of cybersecurity controls with ongoing monitoring and improvement internally, with assistance from external auditors • Third-party security vendors and auditors, where appropriate, to assess, test otherwise assist with aspects of our security processes.
Key elements of our cybersecurity risk management program and strategy include but are not limited to the following: • Adhering to principles of Security by Design and Security by Default • Conducting third-party vulnerability scans, and penetration testing • Access controls enforcing principles of Least Privilege, Zero Trust, and Role-Based Access Controls with MFA requirements for critical systems and accounts • Cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents • A third-party risk management evaluation process for key service providers based on our assessment of their criticality to our operations and respective risk profile, suppliers, and vendors with access to our information systems or data • An employee cybersecurity awareness training program including awareness training and simulated attacks • A dedicated team responsible for incident identification, management, and remediation • Implementation of cybersecurity controls with ongoing monitoring and improvement internally, with assistance from external auditors • Third-party security vendors and auditors, where appropriate, to assess, test and otherwise assist with aspects of our security processes.
The Committee receives quarterly reports from management on our cybersecurity risks. In addition, management updates the Committee, where it deems appropriate, regarding cybersecurity incidents it considers to be significant or potentially significant. The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
The Committee receives quarterly reports from management on our cybersecurity risks. In addition, management updates the Committee, where it deems appropriate, regarding cybersecurity incidents it considers to be significant or potentially significant. The Committee reports to the full board of directors regarding its activities, including those related to cybersecurity.
Item 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. 64 Table of Contents We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework, or NIST CSF.
Item 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework, or NIST CSF.
See “Risk Factors – Security breaches, cybersecurity incidents, or our inability to effectively integrate, manage and keep our information systems secure and operatio nal could violate security laws, disrupt our operations, and subject us to significant liability .” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the Committee) oversight of cybersecurity risks, including oversight of management’s implementation of our cybersecurity risk management program.
Risk Factors – Security breaches, 67 Table of Content s cybersecurity incidents, or our inability to effectively integrate, manage and keep our information systems secure and operational could violate security laws, disrupt our operations, and subject us to significant liability .” Cybersecurity Governance Our board of directors considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the Committee) oversight of cybersecurity risks, including oversight of management’s implementation of our cybersecurity risk management program.
Our internal information technology management team has 65 Table of Contents over 15 years of tenure with the Company and over 45 years of experience in the information technology space. We also leverage a third party cybersecurity team from FIT Solutions to assist with cybersecurity governance and operations.
Our Vice President of Technology has over 25 years of experience in the information technology space and over 20 years of management experience over IT operations, which includes management experience in a complex, multi-site, healthcare setting. We also leverage a third party cybersecurity team from FIT Solutions to assist with cybersecurity governance and operations.
Our management team, including the Vice President of Technology Support and Director of IT Service Management, is primarily responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
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Item 2. PROPERTIES PACS Services. Our PACS Services’ main office is located in Farmington, Utah. The property consists of approximately 35,000 square feet of usable office space. Operating Facilities.
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As of December 31, 2024, we operated 314 post-acute care facilities in Alaska, Arizona, California, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington, with the operational capacity to serve approximately 34,260 patients with 32,016 skilled nursing beds and 2,244 assisted living beds.
Removed
Of these post-acute care facilities, we leased 221 facilities, directly owned the real estate at 44 facilities and had joint ventures for 49 facilities which we also leased.
Removed
In addition, subsequent to December 31, 2024, we acquired seven facilities (one leased facility representing 96 assisted living beds in California, three leased facilities representing 376 skilled nursing beds in Nevada, two owned facilities representing 175 assisted living beds in South Carolina, and one leased facility representing 119 skilled nursing beds in Tennessee) and acquired the real estate for five facilities at the option of the lessor (all of which were in California) resulting in five additional owned properties.
Removed
Additionally, subsequent to December 31, 2024 we divested of one leased facility in Kansas which included 120 skilled nursing beds. A majority of our facilities are operated under long-term, triple-net lease arrangements pursuant to which we are responsible for property taxes, insurance, maintenance, and repairs.
Removed
As of December 31, 2024, the average remaining lease term across our portfolio was approximately 14 years for operating leases and 6 years for finance leases, and certain leases include purchase options, purchase obligations, and rights of first refusal. Our owned facilities are subject to mortgages and other customary encumbrances for similar properties.
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See Note 13 “Leases” to our audited combined/consolidated financial statements for additional information. 66 Table of Contents We believe our facilities are suitable and adequate for their current needs.
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The following table provides summary information regarding the location of our post-acute care facilities and operational beds by property type as of December 31, 2024: Leased Owned Total Facilities Beds/Units Facilities Beds/Units Facilities Beds/Units Alaska 1 102 — — 1 102 Arizona 10 1,352 — — 10 1,352 California 113 13,071 26 2,814 139 15,885 Colorado 19 2,207 1 242 20 2,449 Idaho 6 407 — — 6 407 Kansas 3 378 — — 3 378 Kentucky 5 596 2 340 7 936 Missouri 2 190 3 424 5 614 Montana 1 64 — — 1 64 Nevada 6 411 2 165 8 576 Ohio 24 2,733 — — 24 2,733 Oregon 21 1,489 — — 21 1,489 Pennsylvania 4 597 4 602 8 1,199 South Carolina 21 2,352 4 488 25 2,840 Tennessee 11 1,180 — — 11 1,180 Texas 3 290 2 246 5 536 Washington 20 1,520 — — 20 1,520 270 28,939 44 5,321 314 34,260

Item 2. Properties

Properties — owned and leased real estate

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Item 2. P roperties 66 I tem 3. L egal Proceedings 67 I tem 4. M ine Safety Disclosures 69 PART II I tem 5. M arket for R egistrant ’ s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities 70 I tem 6. [ R eserved] 71 I tem 7.
Added
Item 2. PROPERTIES PACS Services. Our PACS Services’ main office is located in Salt Lake City, Utah. The property consists of approximately 165,000 square feet of usable office space. A portion of the office building is subleased to third-party tenants. We also have PACS Services offices in Rocklin, California and Riverside, California. Operating Facilities.
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M anagement ’ s Discussion and Analysis of Financial Condi tion and Results of Operations 71 I tem 7A. Q uantitative and Qualitative Disclosures Abo ut Market Risk 94 I tem 8. F inancial Statements and Supplementary Data 95 I tem 9. C hanges in and Disagreements W ith Accountants on Accounting and Financial Disclosure 143 I tem 9A.
Added
As of December 31, 2025, we operated 321 post-acute care facilities in Alaska, Arizona, California, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and Washington, with the operational capacity to serve 35,379 patients with 32,854 skilled nursing beds and 2,525 assisted living beds.
Removed
C ontrols and Procedures 143 I tem 9B. O ther Information 144 I tem 9C. D isclosure Regarding Foreign Jurisdictions t h at Prevent Inspections 144 PART III I tem 10. D irectors, Executive Officers and Corporate Governance 145 I tem 11. E xecutive Compensation 150 I tem 12.
Added
Of these post-acute care facilities, we leased 219 facilities, directly owned the real estate at 53 facilities and had joint ventures for 49 facilities which we also leased.
Removed
S ecurity Ownership of Certain Beneficial Owner s and Management and Related Stockholder Matters 168 I tem 13. C ertain Relationships and Related Transactions, and Director Independence 170 I tem 14.
Added
In addition, subsequent to December 31, 2025, we acquired three facilities (two owned facilities representing 144 assisted living beds in Alaska and one leased facility representing 86 assisted living beds in Idaho) and acquired the real estate for one facility in Arizona which we previously operated.
Removed
P rinci pal Account ant Fees and Services 173 PART IV I tem 15 E xhibits and Financial Statement Schedules 174 I tem 16 F orm 10-K Summary 176 S ignatures 177 Table of Contents Special Note Regarding Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements about us and our industry that involve substantial risks and uncertainties.
Added
Additionally, subsequent to December 31, 2025 we divested of one leased facility in Colorado which included 110 skilled nursing beds. A majority of our facilities are operated under long-term, triple-net lease arrangements pursuant to which we are responsible for property taxes, insurance, maintenance, and repairs.
Removed
We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Added
As of December 31, 2025, the average remaining lease term across our portfolio was 13 years for operating leases and 22 years for finance leases, and certain leases include purchase options, purchase obligations, and rights of first refusal. Our owned facilities are subject to mortgages and other customary encumbrances for similar properties.
Removed
All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, and expected market growth, are forward-looking statements.
Added
See Note 13, “Leases”, to our audited combined/consolidated financial statements for additional information. 68 Table of Content s We believe our facilities are suitable and adequate for their current needs.
Removed
In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions.
Added
The following table provides summary information regarding the location of our post-acute care facilities and operational beds by property type as of December 31, 2025: Leased Owned Total Facilities Beds/Units Facilities Beds/Units Facilities Beds/Units Alaska 1 102 — — 1 102 Arizona 10 1,364 — — 10 1,364 California 108 12,651 32 3,481 140 16,132 Colorado 19 2,236 1 242 20 2,478 Idaho 6 409 — — 6 409 Kansas 2 258 — — 2 258 Kentucky 5 596 2 340 7 936 Missouri 2 190 3 424 5 614 Montana 1 64 — — 1 64 Nevada 9 787 3 325 12 1,112 Ohio 24 2,733 — — 24 2,733 Oregon 21 1,572 — — 21 1,572 Pennsylvania 4 593 4 602 8 1,195 South Carolina 21 2,355 6 663 27 3,018 Tennessee 12 1,287 — — 12 1,287 Texas 3 300 2 282 5 582 Washington 20 1,523 — — 20 1,523 268 29,020 53 6,359 321 35,379
Removed
Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about: • our future financial performance, including our expectations regarding our revenue, operating expenses, and our ability to achieve and maintain future profitability; • the demand for our services in general; • our ability and the ability of local leaders and others to transform SNFs and other acquired facilities into higher acuity, high value-add short-term transitional care SNFs, including through the implementation of PACS Services; • our expectations regarding improvement in clinical quality, patient experience, and operating metrics over time as facilities mature over a transition period, and our ability to maintain standards in our Mature facilities; • our ability to successfully execute upon our strategy to deploy our decentralized, local operating model in acquired SNFs and in existing and new markets; • our ability to successfully execute upon our acquisition strategy, including with respect to SNFs, and our ability to successfully identify, acquire and integrate facilities, businesses and operations; • the scalability of PACS Services and our operating model; • our ability to successfully compete with existing and new competitors generally and in specific existing and new geographical markets; • the size of our market and market trends, including with respect to SNFs, expected growth rates of the market and our ability to grow within and further penetrate our market; • our ability to attract, train, and retain motivated, entrepreneurial individuals, including local leaders. administrators, clinicians, and other important employees and personnel; • our expectations regarding the ongoing civil and criminal government investigative demands; • our expectations regarding the effects of existing and developing laws and regulations; • our ability to comply with regulations applicable to our business; • our ability to develop and protect our brand; • our expectations regarding, and management of, future growth; • our ability to maintain, protect and enhance our technology and intellectual property; • our ability to implement, maintain and improve effective internal controls and remediate the material weakness; and 1 Table of Contents • the sufficiency of our cash to meet our liquidity needs and our ability to reach an agreement by the end of the forbearance period (as described herein) with the lenders under our Amended and Restated 2023 Credit Facility.
Removed
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Annual Report on Form 10-K. You should not rely upon forward-looking statements as predictions of future events.
Removed
We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations, estimates, forecasts, and projections about future events and trends that we believe may affect our business, results of operations, financial condition, and prospects.
Removed
Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report on Form 10-K, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all.
Removed
The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment.
Removed
New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K.
Removed
The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made.
Removed
We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law.
Removed
We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
Removed
You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K, completely and with the understanding that our actual future results may be materially different from what we expect.
Removed
We qualify all of the forward-looking statements in this Annual Report on Form 10-K by these cautionary statements. 2 Table of Contents RISK FACTORS SUMMARY The following is a summary of certain of the principal risks that may materially adversely affect our business, financial condition, results of operations or liquidity.
Removed
The following should be read in conjunction with the more complete discussion of the risk factors we face, which are described in Part I, Item 1A.
Removed
“Risk Factors” in this Annual Report on Form 10-K. • We depend upon reimbursement from third‑party payors, and our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our facilities as well as changes in payor mix and payment methodologies and new cost containment initiatives by third-party payors; • We may not be fully reimbursed for all services for which each facility bills through consolidated billing or bundled payments, which could have an adverse effect on our revenue, financial condition and results of operations. • Increased competition for, or a shortage of, nurses, nurse assistants and other skilled personnel could increase our staffing and labor costs and subject us to monetary fines. • State efforts to regulate or deregulate the healthcare services industry or the construction, expansion, or acquisition of healthcare facilities could impair our ability to expand our operations, or could result in increased competition. • If we fail to attract patients and residents and to compete effectively with other healthcare providers, our revenue and profitability may decline and we may incur losses. • We review and audit the care delivery, recordkeeping and billing processes of our operating subsidiaries.
Removed
These reviews from time to time detect instances of noncompliance that we attempt to correct, which in some instances requires reduced or repayment of billed amounts or other costs. • We are subject to litigation, which is commonplace in our industry, which could result in significant legal costs and large settlement amounts or damage awards, and our self-insurance programs may expose us to significant and unexpected costs and losses. • We have identified material weaknesses in our internal control over financial reporting.
Removed
If our remediation of such material weakness is not effective, or if we experience additional material weaknesses or otherwise fail to design and maintain effective internal control over financial reporting, our ability to accurately report our financial condition and results of operations in a timely manner or comply with applicable laws and regulations could be impaired, which may adversely affect investor confidence in us, subject us to litigation or significant financial or other penalties, and, as a result, affect the value of our common stock and our financial condition. • If we are unable to provide consistently high quality of care, or if our employees or staff members engage in conduct (or fail to take action) that impacts our patients’ health, safety, welfare or clinical treatment, our business will be adversely impacted and we may be subject to civil or criminal penalties, fines or other actions. • We rely significantly on information technology, and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business. • We calculate certain operational metrics using internal systems and tools and do not independently verify such metrics.
Removed
Certain metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business. • We may be unable to complete future facility or business acquisitions at attractive prices or at all, which may adversely affect our revenue; we may also elect to dispose of underperforming or non-strategic operating subsidiaries, which would decrease our revenue. • We may not be able to successfully integrate acquired facilities and properties into our operations, and we may not achieve the benefits we expect from any of our facility acquisitions. 3 Table of Contents • In undertaking acquisitions, we may be adversely impacted by costs, liabilities and regulatory issues that may adversely affect our operations, and we may not be able to successfully integrate acquired facilities and properties into our operations, or achieve the benefits we expect from any of our facility acquisitions. • We may have difficulty completing partnerships that increase our capacity consistent with our growth strategy. • If we do not achieve or maintain competitive quality of care ratings from CMS or private organizations engaged in similar rating activities, our business may be negatively affected. • If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected. • Our self-insurance programs may expose us to significant and unexpected costs and losses. • The geographic concentration of our facilities could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas. • The actions of national labor unions may adversely affect our revenue and profitability. • Because we lease the majority of our facilities, we are subject to risks associated with leased real property, including risks relating to lease termination, lease extensions and special charges, any of which could have an adverse effect on our business, financial condition and results of operations. • Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term leases could result in defaults under those agreements and cross-defaults under other debt, mortgage or lease arrangements, which could harm our operating subsidiaries and cause us to lose facilities or experience foreclosures. • We may need additional capital to fund our operating subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow. • We are subject to extensive and complex laws and government regulations.
Removed
If we are not operating in compliance with these laws and regulations or if these laws and regulations change, we could be required to make significant expenditures or change our operations in order to bring our facilities and operations into compliance. • Our founders, Jason Murray and Mark Hancock, have substantial control over us and hold a substantial portion of our outstanding common stock, and their interests may conflict, or appear to conflict, with our interests and the interests of other stockholders • We are a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange.
Removed
As a result, we may elect to rely on exemptions from certain corporate governance standards and you may not have the same protections afforded to stockholders of companies that are subject to such requirements. 4 Table of Contents PART I

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

8 edited+2 added−4 removed23 unchanged
Biggest changeThe results of legal proceedings are inherently uncertain, and material adverse outcomes are possible. For example, we have been subjected to, and are currently involved in, litigation alleging violations of state and federal wage and hour laws resulting from the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and related causes of action.
Biggest changeFor example, we have been subjected to, and are currently involved in, litigation alleging violations of state and federal wage and hour laws resulting from the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and related causes of action. 70 Table of Content s In addition to the litigation described above, we are also subject to the following litigation: Litigation – Securities Class Action and Shareholder Derivative Actions On November 13, 2024, a putative securities class action captioned Manchin v.
We are cooperating with the investigation, which is ongoing. 67 Table of Contents On February 26, 2025, we received a subpoena from the DOJ per the HIPAA relating to an investigation into possible violations of various sections of 18 U.S.C. that prohibit the making of fraudulent or false statements to any branch of the government of the United States.
We are cooperating with the investigation, which is ongoing. On February 26, 2025, we received a subpoena from the DOJ per the HIPAA relating to an investigation into possible violations of various sections of 18 U.S.C. that prohibit the making of fraudulent or false statements to any branch of the government of the United States.
PACS Group, Inc., et al. , Case No. 1:24-cv-08636-LJL (S.D.N.Y.) (“ Manchin Action”) was filed against us, individual defendants Jason Murray, Derick Apt, Mark Hancock, Jacqueline Millard, and Taylor Leavitt; and underwriter defendants Citigroup Global Markets Inc., J.P. 68 Table of Contents Morgan Securities LLC, Truist Securities, Inc., RBC Capital Markets, LLC, Goldman Sachs & Co.
PACS Group, Inc., et al. , Case No. 1:24-cv-08636-LJL (S.D.N.Y.) (“ Manchin Action”) was filed against us, individual defendants Jason Murray, Derick Apt, Mark Hancock, Jacqueline Millard, and Taylor Leavitt; and underwriter defendants Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Truist Securities, Inc., RBC Capital Markets, LLC, Goldman Sachs & Co.
(“Providence Group”) received a CID from the DOJ requesting information and documents relating to an investigation of its skilled nursing facilities, specifically including Bishop Care Center (“Bishop”) to determine whether Providence Group violated the False Claims Act by submitting false claims to Medicare for reimbursement under the COVID-19 related Hospital Stay Waiver (otherwise known as the 1135 waiver).
(“Providence Group”) received a CID from the DOJ requesting information and documents relating to an investigation of its skilled nursing facilities, specifically including Bishop Care Center (“Bishop”) to determine whether Providence Group violated the False Claims Act by submitting false claims to Medicare for reimbursement under the COVID-19 related Hospital Stay Waiver (otherwise known as the 1135 waiver). 69 Table of Content s The CID includes requests for information relating to 1135 COVID Waiver practices at Bishop.
Regardless of final outcomes, however, any such proceedings, claims, and investigations may nonetheless impose a significant burden on management and employees and be costly to defend, with unfavorable preliminary, interim or final rulings.
Regardless of final outcomes, however, any such proceedings, claims, and investigations may nonetheless impose a significant burden on management and employees and be costly to defend, with unfavorable preliminary, interim or final rulings. Item 4. MINE SAFETY DISCLOSURES Not applicable. 71 Table of Content s PART II
The CID includes requests for information relating to referral source relationships, including relationships with medical directors and other individuals. We are cooperating with the investigation, which is ongoing.
The CID includes requests for information relating to referral source relationships, including relationships with medical directors and other individuals. Since the receipt of the CID, the DOJ has made additional requests for information from Providence, including marketing materials and certain expense data across all Providence facilities. We are cooperating with the investigation, which is ongoing.
Pursuant to the parties’ stipulation and as ordered by the court on May 29, 2025, the Lead Plaintiff’s consolidated complaint is not due until 14 days after we file our Quarterly Report on Form 10-Q for the period ended September 30, 2024 and our Annual Report on Form 10-K for the year ended December 31, 2024.
On December 19, 2025, after we filed our Quarterly Report on Form 10-Q for the period ended September 30, 2024 and our Annual Report on Form 10-K for the year ended December 31, 2024, the lead plaintiff filed a consolidated complaint. The new complaint added Joshua Jergensen and P.J.
Utah) was filed against the same defendants and alleging substantially the same claims and theories as IN RE PACS GROUP, INC. DERIVATIVE LITIGATION . The defendants have not yet been served in this action. The parties have tentatively agreed to stay the Utah Derivative Action pending resolution of the anticipated motion to dismiss the securities class action.
Utah) was filed against the same defendants and alleging substantially the same claims and theories as IN RE PACS GROUP, INC. DERIVATIVE LITIGATION . The plaintiff voluntarily dismissed this case on December 8, 2025, without prejudice to her ability to refile.
Removed
The CID includes requests for information relating to 1135 COVID Waiver practices at Bishop.
Added
The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible.
Removed
In addition to the litigation described above, we are also subject to the following litigation: Litigation -- Shareholder Derivative Actions On November 13, 2024, a putative securities class action captioned Manchin v.
Added
Sanford as named defendants, and also brought additional claims pursuant to Section 12(a)(2) of the Securities Act and Section 20A of the Exchange Act. Defendants moved to dismiss the consolidated complaint on February 17, 2026. According to the current operative schedule, Plaintiffs’ opposition is due April 20, 2026, and Defendants’ reply will be due June 4, 2026.
Removed
Defendants’ motion to dismiss the consolidated complaint is due 60 days after the complaint is filed, Plaintiffs’ opposition is due 60 days after the filing of the motion to dismiss, and Defendants’ reply is due 45 days after the filing of the opposition.
Removed
No dispositive rulings have issued, discovery is not proceeding, and there are no settlement ranges or agreements in principle. Future developments may include motions to dismiss and other dispositive motions, and potential coordination with the securities class action if the stays are lifted.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed1 unchanged
Biggest changeApril 11, 2024 Q2 Q3 Q4 PACS Group, Inc. $ 100.00 $ 128.26 $ 173.78 $ 57.00 Peer Group (1) 100.00 110.62 120.48 116.06 S&P 500 Index 100.00 105.03 110.84 113.13 (1) “Peer Group” includes the following companies: The Ensign Group, Inc., Encompass Healthcare Corp., and Select Medical Holdings Corp.
Biggest changeApril 11, 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Q4 2025 PACS Group, Inc. $ 100.00 $ 128.26 $ 173.78 $ 57.00 $ 48.87 $ 56.17 $ 59.70 $ 167.00 Peer Group (2) 100.00 110.62 120.48 116.06 114.46 127.00 129.00 125.49 S&P 500 Index 100.00 105.03 110.84 113.13 107.94 119.35 128.65 131.67 __________ (2) “Peer Group” includes the following companies: The Ensign Group, Inc., Encompass Healthcare Corp., and Select Medical Holdings Corp.
Comparison of Life-to-Date Cumulative Total Return* Among PACS Group Inc., the S&P 500 Index, and our Peer Group *Assumes $100 invested on April 11, 2024 in stock in index, including reinvestment of dividends.
Comparison of Life-to-Date Cumulative Total Return (1) Among PACS Group Inc., the S&P 500 Index, and our Peer Group __________ (1) Assumes $100 invested on April 11, 2024 in stock in index, including reinvestment of dividends.
Issuer Purchases of Equity Securities None. 70 Table of Contents Stock Performance Graph The graph below shows a cumulative total stockholder return of investment of $100 (and reinvestment of any dividend thereafter) on the date of our IPO, April 11, 2024 in (i) PACS Group, Inc. common stock, (ii) our Peer Group (1) , and (iii) the S&P 500 Index.
Issuer Purchases of Equity Securities None. 72 Table of Content s Stock Performance Graph The graph below shows a cumulative total stockholder return of investment of $100 (and reinvestment of any dividend thereafter) on the date of our IPO, April 11, 2024 in (i) PACS Group, Inc. common stock, (ii) our Peer Group (2) , and (iii) the S&P 500 Index.
Dividend Policy For the years ended December 31, 2024, 2023 and 2022, we paid $33.7 million, $80.4 million and $60.3 million, respectively, in cash dividends to holders of our common stock. We have no current plans to pay dividends or other distributions on our common stock in the foreseeable future.
For the years ended December 31, 2024 and 2023, we paid $33.7 million and $80.4 million, respectively, in cash dividends to holders of our common stock. We have no current plans to pay dividends or other distributions on our common stock in the foreseeable future.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is listed under the ticker symbol “PACS” on The New York Stock Exchange. Holders of Record As of October 31, 2025, there were 128 holders of record of our common stock.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is listed under the ticker symbol “PACS” on The New York Stock Exchange. Holders of Record As of January 30, 2026, there were 129 holders of record of our common stock.
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. Dividend Policy We paid no dividends during the year ended December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables present the above key skilled services metrics by category for all skilled nursing facilities, and for the skilled nursing facilities in each of the three facility cohorts, as of and for the years ended December 31, 2024, 2023 and 2022: Total Facility Results Year ended December 31, Change for the year ended December 31, 2024 2023 2022 2024 2023 (Dollars in thousands) Skilled nursing services revenue $ 4,014,412 $ 3,092,577 $ 2,391,309 29.8 % 29.3 % Skilled mix by revenue 50.3 % 55.1 % 64.1 % (4.8) % (9.0) % Skilled mix by nursing patient days 29.2 % 32.4 % 40.7 % (3.2) % (8.3) % Occupancy for skilled nursing services: Available patient days 9,493,639 7,457,345 5,719,689 27.3 % 30.4 % Actual patient days 8,585,654 6,775,063 5,139,736 26.7 % 31.8 % Occupancy rate (operational beds) 90.4 % 90.9 % 89.9 % (0.5) % 1.0 % Number of facilities at period end 287 203 150 41.4 % 35.3 % Number of operational beds at period end 32,016 22,950 16,345 39.5 % 40.4 % Mature Facility Results Year ended December 31, Change for the year ended December 31, 2024 2023 2022 2024 2023 (Dollars in thousands) Skilled nursing services revenue $ 1,443,958 $ 1,095,106 $ 951,936 31.9 % 15.0 % Skilled mix by revenue 54.4 % 58.8 % 66.1 % (4.4) % (7.3) % Skilled mix by nursing patient days 32.1 % 35.6 % 43.1 % (3.5) % (7.5) % Occupancy for skilled nursing services: Available patient days 3,139,441 2,497,872 2,175,718 25.7 % 14.8 % Actual patient days 2,964,909 2,333,584 1,995,321 27.1 % 17.0 % Occupancy rate (operational beds) 94.4 % 93.4 % 91.7 % 1.0 % 1.7 % Number of facilities at period end 137 65 62 110.8 % 4.8 % Number of operational beds at period end 14,893 6,959 6,525 114.0 % 6.7 % 74 Table of Contents Ramping Facility Results Year ended December 31, Change for the year ended December 31, 2024 2023 2022 2024 2023 (Dollars in thousands) Skilled nursing services revenue $ 1,521,162 $ 924,697 $ 141,542 64.5 % 553.3 % Skilled mix by revenue 54.2 % 55.3 % 64.3 % (1.1) % (9.0) % Skilled mix by nursing patient days 31.6 % 32.5 % 38.4 % (0.9) % (5.9) % Occupancy for skilled nursing services: Available patient days 3,254,715 2,135,644 365,702 52.4 % 484.0 % Actual patient days 3,054,690 1,994,742 330,306 53.1 % 503.9 % Occupancy rate (operational beds) 93.9 % 93.4 % 90.3 % 0.5 % 3.1 % Number of facilities at period end 48 76 4 (36.8) % 1800.0 % Number of operational beds at period end 5,737 8,330 453 (31.1) % 1738.9 % New Facility Results Year ended December 31, Change for the year ended December 31, 2024 2023 2022 2024 2023 (Dollars in thousands) Skilled nursing services revenue $ 1,049,292 $ 1,072,774 $ 1,297,831 (2.2) % (17.3) % Skilled mix by revenue 39.2 % 51.1 % 62.5 % (11.9) % (11.4) % Skilled mix by nursing patient days 22.8 % 29.2 % 39.4 % (6.4) % (10.2) % Occupancy for skilled nursing services: Available patient days 3,099,483 2,823,829 3,178,269 9.8 % (11.2) % Actual patient days 2,566,055 2,446,737 2,814,109 4.9 % (13.1) % Occupancy rate (operational beds) 82.8 % 86.6 % 88.5 % (3.8) % (1.9) % Number of facilities at period end 102 62 84 64.5 % (26.2) % Number of operational beds at period end 11,386 7,661 9,367 48.6 % (18.2) % The following tables present additional detail regarding our skilled mix, including our percentage of nursing patient days and revenue by payor source for all facilities, and for each of the three facility cohorts, for the years ended December 31, 2024, 2023 and 2022: Year ended December 31, Skilled mix by revenue Mature Ramping New Total 2024 2023 2022 2024 2023 2022 2024 2023 2022 2024 2023 2022 Medicare 37.3 % 41.5 % 51.5 % 36.9 % 35.7 % 49.8 % 22.5 % 36.1 % 44.9 % 33.2 % 37.9 % 47.8 % Managed care 17.1 17.3 14.6 17.3 19.6 14.5 16.7 15.0 17.6 17.1 17.2 16.3 Skilled mix 54.4 58.8 66.1 54.2 55.3 64.3 39.2 51.1 62.5 50.3 55.1 64.1 Medicaid 38.1 35.2 29.0 37.8 37.7 30.8 51.6 41.9 31.8 41.6 38.3 30.6 Private and other 7.5 6.0 4.9 8.0 7.0 4.9 9.2 7.0 5.7 8.1 6.6 5.3 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Year ended December 31, Skilled mix by nursing patient days Mature Ramping New Total 2024 2023 2022 2024 2023 2022 2024 2023 2022 2024 2023 2022 Medicare 18.8 % 21.7 % 30.3 % 18.8 % 18.3 % 27.8 % 10.6 % 18.2 % 25.5 % 16.4 % 19.4 % 27.5 % Managed care 13.3 13.9 12.8 12.8 14.2 10.6 12.2 11.0 13.9 12.8 13.0 13.2 Skilled mix 32.1 35.6 43.1 31.6 32.5 38.4 22.8 29.2 39.4 29.2 32.4 40.7 Medicaid 59.3 55.8 49.4 59.3 58.0 53.6 66.6 62.0 52.1 61.4 58.7 51.2 Private and other 8.6 8.6 7.5 9.1 9.5 8.0 10.6 8.8 8.5 9.4 8.9 8.1 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % • Average daily rates — The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period.
Biggest changeExcludes 30 and 27 assisted living and independent living facilities for the years ended December 31, 2025 and 2024, respectively. • Number of operational beds — The total number of operational beds associated with the skilled nursing facilities that we own. 75 Table of Content s The following tables present the above key skilled services metrics by category for all skilled nursing facilities, and for the skilled nursing facilities in each of the three facility cohorts, as of and for the years ended December 31, 2025 and 2024: Year ended December 31, 2025 2024 Change % Change Total Facility Results (Dollars in thousands) Skilled nursing services revenue $ 5,178,456 $ 4,014,412 $ 1,164,044 29.0 % Skilled mix by revenue 48.8 % 50.3 % (1.5) % (3.0) % Skilled mix by nursing patient days 28.7 % 29.2 % (0.5) % (1.7) % Occupancy for skilled nursing services: Available patient days 11,836,845 9,493,639 2,343,206 24.7 % Actual patient days 10,541,457 8,585,654 1,955,803 22.8 % Occupancy rate (operational beds) 89.1 % 90.4 % (1.3) % (1.4) % Number of facilities at period end 291 287 4 1.4 % Number of operational beds at period end 32,854 32,016 838 2.6 % Year ended December 31, 2025 2024 Change % Change Mature Facility Results (Dollars in thousands) Skilled nursing services revenue $ 2,914,727 $ 1,443,958 $ 1,470,769 101.9 % Skilled mix by revenue 56.0 % 54.4 % 1.6 % 2.9 % Skilled mix by nursing patient days 33.4 % 32.1 % 1.3 % 4.0 % Occupancy for skilled nursing services: Available patient days 5,748,879 3,139,441 2,609,438 83.1 % Actual patient days 5,457,745 2,964,909 2,492,836 84.1 % Occupancy rate (operational beds) 94.9 % 94.4 % 0.5 % 0.5 % Number of facilities at period end 149 137 12 8.8 % Number of operational beds at period end 16,415 14,893 1,522 10.2 % Year ended December 31, 2025 2024 Change % Change Ramping Facility Results (Dollars in thousands) Skilled nursing services revenue $ 1,108,849 $ 1,521,162 $ (412,313) (27.1) % Skilled mix by revenue 41.8 % 54.2 % (12.4) % (22.9) % Skilled mix by nursing patient days 22.8 % 31.6 % (8.8) % (27.8) % Occupancy for skilled nursing services: Available patient days 2,806,713 3,254,715 (448,002) (13.8) % Actual patient days 2,422,237 3,054,690 (632,453) (20.7) % Occupancy rate (operational beds) 86.3 % 93.9 % (7.6) % (8.1) % Number of facilities at period end 64 48 16 33.3 % Number of operational beds at period end 8,286 5,737 2,549 44.4 % Year ended December 31, 2025 2024 Change % Change New Facility Results (Dollars in thousands) Skilled nursing services revenue $ 1,154,880 $ 1,049,292 $ 105,588 10.1 % Skilled mix by revenue 37.7 % 39.2 % (1.5) % (3.8) % Skilled mix by nursing patient days 24.6 % 22.8 % 1.8 % 7.9 % Occupancy for skilled nursing services: Available patient days 3,281,253 3,099,483 181,770 5.9 % Actual patient days 2,661,475 2,566,055 95,420 3.7 % Occupancy rate (operational beds) 81.1 % 82.8 % (1.7) % (2.1) % Number of facilities at period end 78 102 (24) (23.5) % Number of operational beds at period end 8,153 11,386 (3,233) (28.4) % 76 Table of Content s The following tables present additional detail regarding our skilled mix, including our percentage of nursing patient days and revenue by payor source for all facilities, and for each of the three facility cohorts, for the years ended December 31, 2025 and 2024: Year ended December 31, Skilled mix by revenue Mature Ramping New Total 2025 2024 2025 2024 2025 2024 2025 2024 Medicare 40.4 % 37.3 % 29.6 % 36.9 % 20.2 % 22.5 % 33.5 % 33.2 % Managed care 15.6 17.1 12.2 17.3 17.5 16.7 15.3 17.1 Skilled mix 56.0 54.4 41.8 54.2 37.7 39.2 48.8 50.3 Medicaid 35.2 38.1 48.5 37.8 52.1 51.6 41.9 41.6 Private and other 8.8 7.5 9.7 8.0 10.2 9.2 9.3 8.1 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Year ended December 31, Skilled mix by nursing patient days Mature Ramping New Total 2025 2024 2025 2024 2025 2024 2025 2024 Medicare 21.5 % 18.8 % 13.7 % 18.8 % 11.5 % 10.6 % 17.2 % 16.4 % Managed care 11.9 13.3 9.1 12.8 13.1 12.2 11.5 12.8 Skilled mix 33.4 32.1 22.8 31.6 24.6 22.8 28.7 29.2 Medicaid 57.4 59.3 66.9 59.3 63.8 66.6 61.2 61.4 Private and other 9.2 8.6 10.3 9.1 11.6 10.6 10.1 9.4 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % • Average daily rates — The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period.
EBITDA – We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before: interest expense, net; provision for income taxes; and depreciation and amortization.
EBITDA – We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before: interest expense; provision for income taxes; and depreciation and amortization.
On July 24, 2025 and August 13, 2025 we entered into two separate forbearance agreements with the Administrative Agent and the lenders, pursuant to which the lenders agreed to temporarily forbear from exercising remedies under the Amended and Restated 2023 Credit Facility with respect to certain technical events of default, including without limitation matters relating to inaccuracies in certain representations and warranties made, which inaccuracies also triggered an event of default under the Third Consolidated Master Lease, dated June 30, 2023 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Omega Master Lease”), which in turn triggered an additional event of default under the Amended and Restated 2023 Credit Facility.
On July 24, 2025 and August 13, 2025 we entered into two separate forbearance agreements with the Administrative Agent and the lenders, pursuant to which the lenders agreed to temporarily forbear from exercising remedies under the Amended and Restated Credit Facility with respect to certain technical events of default, including without limitation matters relating to inaccuracies in certain representations and warranties made, which inaccuracies also triggered an event of default under the Third Consolidated Master Lease, dated June 30, 2023 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Omega Master Lease”), which in turn triggered an additional event of default under the Amended and Restated Credit Facility.
Adjusted EBITDA – We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, lease termination fees, losses incurred from debt restructuring, gains on lease termination, stock-based compensation expense, loss from equity method investment, forfeiture of a seller’s note, recognition of a bargain purchase gain, legal and other costs, recognition of Employee Retention Tax Credit (ERTC), disaster relief payment, and certain one-time expenses that are not representative of our underlying operating performance.
Adjusted EBITDA – We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, losses incurred from debt restructuring, gains on lease termination, stock-based compensation expense, loss from equity method investment, forfeiture of a seller’s note, recognition of a bargain purchase gain, legal and other costs, recognition of Employee Retention Tax Credit (ERTC), disaster relief payment, and certain one-time expenses that are not representative of our underlying operating performance.
The Amended and Restated 2023 Credit Facility includes customary affirmative and negative covenants and two financial covenants: a requirement that our Total Leverage Ratio not exceed 3.00:1.00 as of the end of each fiscal quarter, and a requirement that our Fixed Charge Coverage Ratio (as defined in the Amended and Restated Credit Agreement) not fall below 1.10:1.00, in each case, tested quarterly for the trailing four fiscal quarters.
The Amended and Restated Credit Facility includes customary affirmative and negative covenants and two financial covenants: a requirement that our Total Leverage Ratio not exceed 3.00:1.00 as of the end of each fiscal quarter, and a requirement that our Fixed Charge Coverage Ratio (as defined in the Amended and Restated Credit Agreement) not fall below 1.10:1.00, in each case, tested quarterly for the trailing four fiscal quarters.
On May 16, 2024, we entered into an amendment to the Amended and Restated 2023 Credit Facility that, among other things, waived an event of default that had occurred and was then continuing under the Amended and Restated 2023 Credit Facility and modified the affirmative covenants thereunder requiring the joinder of certain subsidiaries of PACS Group, Inc. to the Amended and Restated 2023 Credit Facility, as further set forth therein.
On May 16, 2024, we entered into an amendment to the Amended and Restated Credit Facility that, among other things, waived an event of default that had occurred and was then continuing under the Amended and Restated Credit Facility and modified the affirmative covenants thereunder requiring the joinder of certain subsidiaries of PACS Group, Inc. to the Amended and Restated Credit Facility, as further set forth therein.
Accordingly, management believes that the combined/consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP.
Accordingly, management believes that the combined/consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S.
On March 27, 2025, and May 29, 2025, we entered into further amendments to the Amended and Restated 2023 Credit Facility that, among other things, extended the deadline for delivery of audited annual financial statements for the fiscal year ended December 31, 2024.
On March 27, 2025, and May 29, 2025, we entered into further amendments to the Amended and Restated Credit Facility that, among other things, extended the deadline for delivery of audited annual financial statements for the fiscal year ended December 31, 2024.
On November 14, 2024, we entered into another amendment to the Amended and Restated 2023 Credit Facility that, among other things, extended the deadline for our delivery of unaudited quarterly financial statements for the fiscal quarter ended September 30, 2024.
On November 14, 2024, we entered into another amendment to the Amended and Restated Credit Facility that, among other things, extended the deadline for our delivery of unaudited quarterly financial statements for the fiscal quarter ended September 30, 2024.
We used $370.0 million of the net proceeds from the IPO to repay amounts outstanding under our Amended and Restated 2023 Credit Facility (as defined below) and used the remaining amount for general corporate purposes to support the growth of the business.
We used $370.0 million of the net proceeds from the IPO to repay amounts outstanding under our Amended and Restated Credit Facility (as defined below) and used the remaining amount for general corporate purposes to support the growth of the business.
On September 9, 2024, we completed an underwritten follow-on offering receiving initial net proceeds of $96.4 million, of which we used $95.3 million to repay amounts outstanding under our Amended and Restated 2023 Credit Facility.
On September 9, 2024, we completed an underwritten follow-on offering receiving initial net proceeds of $96.4 million, of which we used $95.3 million to repay amounts outstanding under our Amended and Restated Credit Facility.
In addition, a separate representation and warranty event of default occurred under the Omega Master Lease, which triggered an event of default under the Amended and Restated Credit Agreement (all such technical events of default under the Amended and Restated 2023 Credit Facility, the “Initial Technical Events of Default”).
In addition, a separate representation and warranty event of default occurred under the Omega Master Lease, which triggered an event of default under the Amended and Restated Credit Agreement (all such technical events of default under the Amended and Restated Credit Facility, the “Initial Technical Events of Default”).
Borrowings under the Amended and Restated 2023 Credit Facility bear interest, at our option, at either (a) SOFR (subject to a 0.10% credit spread adjustment), plus a margin ranging from 2.25% to 3.25% per annum; or (b) the Base Rate (as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 2.25% per annum, with such margins, in each case, determined by reference to our Total Leverage Ratio (as defined in the Amended and Restated Credit Agreement).
Outstanding borrowings under the Amended and Restated Credit Facility bear interest, at our option, at either (a) SOFR (subject to a 0.10% credit spread adjustment), plus a margin ranging from 2.25% to 3.25% per annum; or (b) the Base Rate (as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 2.25% per annum, with such margins, in each case, determined by reference to our Total Leverage Ratio (as defined in the Amended and Restated Credit Agreement).
In addition, our Chief Executive Officer and our Interim Chief Financial Officer have concluded that, due to the material weaknesses, our disclosure controls and procedures were not effective, as such term is defined under Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act, as of December 31, 2024. Management is committed to maintaining a strong internal control environment.
In addition, our Chief Executive Officer and our Interim Chief Financial Officer have concluded that, due to the material weaknesses, our disclosure controls and procedures were not effective, as such term is defined under Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act, as of December 31, 2025. Management is committed to maintaining a strong internal control environment.
As of December 31, 2024, our HUD-insured mortgage loans bear fixed interest rates ranging from 2.4% to 6.3% per annum and have various maturity dates through October 1, 2061. In addition to the interest rate, we incur other fees for HUD placement, including but not limited to audit fees.
As of December 31, 2025, our HUD-insured mortgage loans bear fixed interest rates ranging from 2.4% to 6.3% per annum and have various maturity dates through October 1, 2061. In addition to the interest rate, we incur other fees for HUD placement, including but not limited to audit fees.
We have determined that we are reasonably certain to exercise the purchase option at the end of each purchase option window. Therefore, we have calculated the lease term through the end of the purchase option window for each such lease.
We have determined that we are reasonably certain to exercise the purchase option at the end of the purchase option window. Therefore, we have calculated the lease term through the end of the purchase option window for such lease.
Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees based on the principal balance on the date of prepayment. The original terms for all the HUD-insured mortgage loans are 24 to 37 years. In addition to the HUD-insured mortgage loans above, our subsidiaries have eight other mortgage loans or promissory notes.
Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees based on the principal balance on the date of prepayment. The original terms for all the HUD-insured mortgage loans are 24 to 37 years. In addition to the HUD-insured mortgage loans above, our subsidiaries have four other mortgage loans or promissory notes.
Under the October Forbearance Agreement, the lenders again agreed to temporarily forbear from exercising rights and remedies under the Amended and Restated Credit Agreement with respect to the Initial Technical Events of Default, as well as 91 Table of Contents certain additional technical events of default including without limitation matters relating to the designation of certain immaterial conflicted subsidiaries; failure to join certain subsidiaries to the loan documents; noncompliance with cash management requirements; and inaccuracies in certain representations and warranties made as a result of the foregoing (collectively, with the Initial Technical Events of Default, the “Technical Events of Default”).
Under the October Forbearance Agreement, the lenders again agreed to temporarily forbear from exercising rights and remedies under the Amended and Restated Credit Agreement with respect to the Initial Technical Events of Default, as well as certain additional technical events of default including without limitation matters relating to the designation of certain immaterial conflicted subsidiaries; failure to join certain subsidiaries to the loan documents; noncompliance with cash management requirements; and inaccuracies in certain representations and warranties made as a result of the foregoing (collectively, with the Initial Technical Events of Default, the “Technical Events of Default”).
For 35 of the facility operating leases, we hold an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of these purchase options was not reasonably assured.
For 36 of the facility operating leases, we hold an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of these purchase options was not reasonably assured.
All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements. We also lease certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of two of the facility finance leases allow for a purchase option during a specified window.
All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements. We also lease certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of one of the facility finance leases allow for a purchase option during a specified window.
Our operating subsidiaries lease and operate, but do not own the underlying real estate of, 270 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements.
Our operating subsidiaries lease and operate, but do not own the underlying real estate of, 268 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements.
Revenue associated with calculating average daily rates is based on contractually agreed-upon amounts or rates, excluding the estimates of variable 75 Table of Contents consideration under ASC 606. These rates also exclude additional state relief funding, which includes payments we recognized as part of The Families First Coronavirus Response Act (FFCRA).
Revenue associated with calculating average daily rates is based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under ASC 606. These rates also exclude additional state relief funding, which includes payments we recognized as part of The Families First Coronavirus Response Act (FFCRA).
The May 29, 2025 amendment also supplemented the Amended and Restated Credit Agreement’s financial covenants requiring us to maintain unrestricted cash and certain permitted investments of at least $100 million until we deliver audited financial statements for the fiscal year ended December 31, 2024 (the “Liquidity Requirement”).
The May 29, 2025 amendment also supplemented the Amended and Restated Credit Agreement’s financial covenants requiring us to maintain unrestricted cash and certain permitted investments of at least $100 million until delivery of audited financial statements for the fiscal year ended December 31, 2024 (the “Liquidity Requirement”).
Accrued risk reserves include the accrual for risks associated with professional liability claims and include a liability for unpaid reported claims and estimates for incurred but unreported claims. 93 Table of Contents We utilize a wholly-owned captive insurance subsidiary to provide coverage to our various consolidated operating subsidiaries related to professional and general liability insurance.
Accrued risk reserves include the accrual for risks associated with professional liability claims and include a liability for unpaid reported claims and estimates for incurred but unreported claims. We utilize a wholly-owned captive insurance subsidiary to provide coverage to our various consolidated operating subsidiaries related to professional and general liability insurance.
Recent Accounting Pronouncements See Note 2 “Summary of Significant Accounting Policies” to our combined/consolidated financial statements for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies”, to our combined/consolidated financial statements for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K. 87 Table of Content s
If actual amounts of consideration ultimately received differ from the estimates, we adjust these estimates, which would affect net service revenue in the period such variances become known. Accrued Risk Reserves - We are principally self-insured for risks related to professional and general liability.
If actual amounts of consideration ultimately received differ from the estimates, we adjust these estimates, which would affect net service revenue in the period such variances become known. Professional Liability and General Liability Self-Insurance Liabilities - We are principally self-insured for risks related to professional and general liability.
Operating and finance leases We lease most of our skilled nursing and assisted living facilities, as well as office space and certain vehicles and equipment, under various non-cancelable operating lease agreements. These operating leases expire at various dates throughout 2049.
Operating and finance leases We lease most of our skilled nursing and assisted living facilities, as well as office space and certain vehicles and equipment, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2050.
Additionally, other companies may define these or similar Non-GAAP Financial Measures with the same or similar names differently, and because these Non-GAAP Financial Measures are not standardized, it may not be possible to compare these financial measures to those of other companies.
Additionally, other companies may define these or similar Non-GAAP Financial Measures with the same or similar names differently, and because these Non-GAAP 77 Table of Content s Financial Measures are not standardized, it may not be possible to compare these financial measures to those of other companies.
As of December 31, 2024, we had $13.9 million of borrowing capacity under the Amended and Restated 2023 Credit Facility pledged as collateral to secure outstanding letters of credit. We may enter into further contractual arrangements in the future in order to support our business plans.
As of December 31, 2025, we had $7.9 million of borrowing capacity under the Amended and Restated Credit Facility pledged as collateral to secure outstanding letters of credit. We may enter into further contractual arrangements in the future in order to support our business plans.
We believe our success is driven in significant part by our decentralized, local operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients.
We believe our success is driven in significant part by our locally led, centrally supported operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients.
Options on three of the leases have become subject to disagreement with the landlord regarding whether the option exercise window has closed, and the Company will be working with the landlord to resolve the disagreement. 92 Table of Contents At our option, the facility leases are generally renewable for additional terms ranging from 3 to 20 years.
Options on three leases have become subject to disagreement with the landlord regarding whether the option exercise window has closed, and the Company will be working with the landlord to resolve the disagreement. At our option, the facility leases are generally renewable for additional terms ranging from 5 to 20 years.
The inclusion of therapy and other ancillary treatments in the 73 Table of Contents contracted daily rate varies by payor source and by contract.
The inclusion of therapy and other ancillary treatments in the contracted daily rate varies by payor source and by contract.
Key Skilled Services Metrics and Non-GAAP Financial Measures We use the following key skilled services metrics and non-GAAP financial measures to help us evaluate our business, identify trends that affect our financial performance, and make strategic decisions.
GAAP. 74 Table of Content s Key Skilled Services Metrics and Non-GAAP Financial Measures We use the following key skilled services metrics and non-GAAP financial measures to help us evaluate our business, identify trends that affect our financial performance, and make strategic decisions.
As of December 31, 2024 and 2023, we had $17.0 million and $48.8 million, respectively, of debt outstanding under the non-HUD mortgage loans and promissory notes, of which $10.8 million is classified as current and the remaining $6.2 million is classified as non-current as of December 31, 2024, and $14.5 million is classified as current and the remaining $34.3 million is classified as non-current as of December 31, 2023.
As of December 31, 2025 and 2024, we had $4.3 million and $17.0 million, respectively, of debt outstanding under the non-HUD mortgage loans and promissory notes, of which $0.3 million is classified as current and the remaining $4.0 million is classified as non-current as of December 31, 2025, and $10.8 million is classified as current and the remaining $6.2 million is classified as non-current as of December 31, 2024.
The following is a summary of the estimated useful lives of our depreciable assets: • Buildings and improvements - minimum of 5 years to a maximum of 40 years, but generally 30 years • Leasehold improvements - shorter of the lease term or the estimated useful life, generally 5 years to 15 years • Furniture and equipment - minimum of 3 years to a maximum of 15 years Other Expense, net Other expense, net consists primarily of interest expense related to our debt, as well as income from gains and losses from investments in partnerships, including joint ventures. 80 Table of Contents Provision for Income Taxes Provision for income taxes consists primarily of income taxes in certain jurisdictions in which we conduct business.
The following is a summary of the estimated useful lives of our depreciable assets: • Buildings and improvements - minimum of 5 years to a maximum of 40 years, but generally 30 years • Leasehold improvements - shorter of the lease term or the estimated useful life, generally 5 years to 15 years • Furniture and equipment - minimum of 3 years to a maximum of 15 years Other Expense, net Other expense, net consists primarily of interest expense related to our debt, as well as income from gains and losses from investments in partnerships, including joint ventures.
EBITDA and Adjusted EBITDA are performance measures. Adjusted EBITDAR is a valuation measure. These Non-GAAP Financial Measures have no standardized meaning defined by GAAP, and therefore have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP.
These Non-GAAP Financial Measures have no standardized meaning defined by GAAP, and therefore have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP.
We expect patient and resident service revenue to continue to represent the vast majority of our total revenue and that such revenue will continue to increase to the extent we successfully execute on our acquisition strategy. Additional Funding We received funding from the U.S.
We expect patient and resident service revenue to continue to represent the vast majority of our total revenue and that such revenue will continue to increase to the extent we successfully execute on our acquisition strategy.
We believe the results of our acquisition strategy are demonstrated by our high average QM Star rating and occupancy rate for Mature facilities of 4.3 and 94%, respectively, as of December 31, 2024. As of December 31, 2024, the average QM Star rating and occupancy rate for New facilities was 3.3 and 83%, respectively.
We believe the results of our acquisition strategy are demonstrated by our high average QM Star rating and occupancy rate for Mature facilities of 4.4 and 95%, respectively, as of December 31, 2025. As of December 31, 2025, the average QM Star rating and occupancy rate for New facilities was 3.5 and 81%, respectively.
In addition, for six of the facility finance leases, the lessor holds an option which could require us to purchase the associated real estate. The total obligation to purchase such real estate is approximately $86,751 and can be exercised by the lessor through June 14, 2026.
In addition, for one of the facility finance leases, the lessor holds an option which could require us to purchase the associated real estate. The total obligation to purchase such real estate is approximately $32,000 and can be exercised by the lessor through June 30, 2026.
We expect to continue to use the Amended and Restated 2023 Credit Facility, subject to entrance into the agreement described above, as our single line of credit and to fund the potential acquisition of additional property and operations, as well as for working capital and for general corporate purposes.
We expect to continue to use the Amended and Restated Credit Facility as our single line of credit and to fund the potential acquisition of additional property and operations, as well as for working capital and for general corporate purposes.
Additionally we experienced a higher occupancy rate across Mature and Ramping facility cohorts of 94.4% and 93.9%, respectively, for the year ended December 31, 2024, compared to 93.4% occupancy for both Mature and Ramping facilities for the year ended December 31, 2023, due to increased demand as a result of continued execution on our business model.
Additionally we experienced a higher occupancy rate within the Mature facility cohorts of 94.9% for the year ended December 31, 2025, compared to 94.4% occupancy for Mature facilities for the year ended December 31, 2024, due to increased demand as a result of continued execution on our business model.
See Note 16 “Operation Expansions”, to our audited combined/consolidated financial statements for more information related to the acquisition. Cost of services Cost of services increased by $849.4 million, or 34.7% to $3.3 billion, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
See Note 16, “Operation Expansions”, to our audited combined/consolidated financial statements for more information related to the 2024 acquisition. Cost of services Cost of services increased by $832.6 million, or 25.3% to $4.1 billion, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
This increase was driven by the recognition of a $17.2 million bargain purchase gain following our acquisition from the former operator Prestige during the year ended December 31, 2024 offset by a $2.7 million loss allocated to us from a discrete disposal recognized by one of our equity method investments and a $0.5 million forfeiture of a seller’s note during the same period.
This decrease was driven by the recognition of a $17.2 82 Table of Content s million bargain purchase gain following our acquisition from the former operator Prestige during the year ended December 31, 2024 offset by a $2.7 million loss allocated to us from a discrete disposal recognized by one of our equity method investments and a $0.5 million forfeiture of a seller’s note during the same period compared to the activity during the year ended December 31, 2025 which primarily consisted of gains from our investments.
This increase was further driven by an increase in cash flows from the change in operating assets and liabilities of $252.9 million due to the timing of payables and other accrued liabilities. Investing activities Investing cash flows consist primarily of capital expenditures, investment activities, proceeds from sale of property and equipment and cash used for acquisitions.
This increase was offset by a decrease in cash flows from the change in operating assets and liabilities of $85.5 million due to the timing of payables and other accrued liabilities. Investing activities Investing cash flows consist primarily of capital expenditures, investment activities, proceeds from sale of property and equipment and cash used for acquisitions.
Labor, supply expenses and capital expenditures make up a substantial portion of our cost of services. Those expenses can be subject to increase in periods of rising inflation and when labor shortages occur in the marketplace. To date, we have generally been able to implement cost control measures or obtain increases in reimbursement sufficient to offset increases in these expenses.
Those expenses can be subject to increase in periods of rising inflation and when labor shortages occur in the marketplace. To date, we have generally been able to implement cost control measures or obtain increases in reimbursement sufficient to offset increases in these expenses.
Cash paid to fund acquisitions was $283.3 million and $127.0 million for the years ended December 31, 2024 and 2023, respectively. Total capital expenditures for property and equipment were $66.5 million and $45.8 million for the years ended December 31, 2024 and 2023, respectively.
Cash paid to fund acquisitions was $143.8 million and $283.3 million for the years ended December 31, 2025 and 2024, respectively. Total capital expenditures for property and equipment were $105.4 million and $66.5 million for the years ended December 31, 2025 and 2024, respectively.
The August 13, 2025 Forbearance Agreement and Fifth Amendment Credit Agreement required that the Liquidity Requirement remain in place for the entirety of the forbearance period and further extended the delivery period with respect to the fiscal year 2024 financial statements.
The August 13, 2025 Forbearance Agreement and Fifth Amendment Credit Agreement required that the Liquidity Requirement remain in place for the entirety of the forbearance period and further extended the delivery period with respect to the fiscal year 2024 financial statements. On October 21, 2025, we entered into a third forbearance agreement (the “October Forbearance Agreement”).
The increase was primarily attributable to the addition of new facilities with operating leases throughout the year, as well as to annual escalators on existing facilities’ rent. General and administrative expense General and administrative expense increased by $130.1 million, or 60.9% to $343.8 million, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
The increase was primarily attributable to the addition of new facilities with operating leases throughout the year, as well as to annual escalators on existing facilities’ rent. General and administrative expense General and administrative expense increased by $71.3 million, or 20.7% to $415.1 million, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Total facility occupancy decreased slightly year-over-year from 90.9% for the year ended December 31, 2023 compared to 90.4% for the year ended December 31, 2024 due to a decrease in the New facility cohort occupancy as a result of the significant number of acquisitions during 2024.
Total facility occupancy decreased slightly year-over-year from 90.4% for the year ended December 31, 2024 compared to 89.1% for the year ended December 31, 2025 due to a decrease in the New and Ramping facility cohort occupancy as a result of the significant number of acquisitions during the last quarter of the year ended December 31, 2024 and into the year ended December 31, 2025.
Other expense, net primarily consists of interest expense which decreased by $5.6 million, to $44.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to a decrease in amounts drawn on lines of credit and long-term debt of $324.7 million during the year.
Other expense, net primarily consists of interest expense which decreased by $16.0 million, to $28.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, due to a decrease in amounts drawn on lines of credit and long-term debt of $58.6 million during the year.
As of December 31, 2023, our subsidiaries had HUD-insured mortgage loans in the aggregate amount of $166.2 million of which $2.4 million was classified as current and the remaining $163.8 million was classified as non-current. These subsidiaries are subject to HUD-mortgage oversight and periodic inspections.
As of December 31, 2024, 13 of our subsidiaries had HUD-insured mortgage loans in the aggregate amount of $252.9 million of which $4.0 million was classified as current and the remaining $248.9 million was classified as non-current. These subsidiaries are subject to HUD-mortgage oversight and periodic inspections.
For each of the years ended December 31, 2024 and 2023, skilled nursing services revenue represented more than 98.0% of patient and resident service revenue. Skilled nursing services revenue increased by $921.8 million, or 29.8%, to $4.0 billion for the year ended December 31, 2024, compared to the year ended December 31, 2023.
For each of the years ended December 31, 2025 and 2024, skilled nursing services revenue represented more than 97.0% of patient and resident service revenue. Skilled nursing services revenue increased by $1,164.0 million, or 29.0%, to $5.2 billion for the year ended December 31, 2025, compared to the year ended December 31, 2024.
During the year ended December 31, 2024, other expense, net also included a gain of $8.0 million recognized upon the termination of a lease. Additionally, during the year ended December 31, 2024, other expense, net included other income of $14.8 million, an increase of $15.3 million from the year ended December 31, 2023.
During the year ended December 31, 2024, other expense, net also included a gain of $8.0 million recognized upon the termination of a lease. Additionally, during the year ended December 31, 2025, other expense, net included other income of $3.2 million, a decrease of $11.6 million from the year ended December 31, 2024.
Provision for income taxes Provision for income taxes totaled $46.2 million for the year ended December 31, 2024, representing an effective tax rate of 45.5%, compared to a provision for income taxes of $44.4 million and an effective tax rate of 28.1% for the year ended December 31, 2023.
Provision for income taxes Provision for income taxes totaled $93.0 million for the year ended December 31, 2025, representing an effective tax rate of 32.6%, compared to a provision for income taxes of $46.2 million and an effective tax rate of 45.5% for the year ended December 31, 2024.
The Technical Events of Default also triggered an event of default under the Omega Master Lease, which in turn triggered an additional event of default under the Amended and Restated Credit Agreement. The October Forbearance Agreement provides for the same forbearance period as the prior forbearance agreements.
The Technical Events of Default also triggered an event of default under the Omega Master Lease, which in turn triggered an additional event of default under the Amended and Restated Credit Agreement.
Material Weakness In connection with the preparation of our combined/consolidated financial statements for the year ended December 31, 2024, together with facts learned during the course of the Audit Committee’s independent investigation, our management identified control deficiencies that, individually or in the aggregate, constitute material weaknesses in our internal control over financial reporting.
In addition, in connection with the preparation of our combined/consolidated financial statements for the year ended December 31, 2025, our management identified control deficiencies that, individually or in the aggregate, constitute material weaknesses in our internal control over financial reporting.
Net cash used in investing activities for the year ended December 31, 2024 of $442.7 million increased by $269.9 million as compared with the same period in 2023.
Net cash used in investing activities for the year ended December 31, 2025 of $264.0 million decreased by $178.7 million as compared with the same period in 2024.
Our average Medicaid rates increased 5.3% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states. Medicaid rates exclude the amount of state relief revenue we recorded.
Our average Medicaid rates increased 5.2% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states.
As a result, thirteen of our subsidiaries had mortgage loans insured with HUD in the aggregate amount of $252.9 million as of December 31, 2024, of which $4.0 million is classified as current and the remaining $248.9 million is classified as non-current.
As of December 31, 2025, 13 of our subsidiaries had mortgage loans insured with HUD in the aggregate amount of $248.9 million as of December 31, 2025, of which $4.2 million was classified as current and the remaining $244.7 million was classified as non-current.
Cost of Services (exclusive of rent and depreciation and amortization shown separately) Our cost of services represents the costs of operating our operating subsidiaries, which primarily consist of payroll and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients.
Other revenue typically represents an immaterial portion of our total revenue and we expect this to continue for the foreseeable future. 79 Table of Content s Cost of Services (exclusive of rent and depreciation and amortization shown separately) Our cost of services represents the costs of operating our operating subsidiaries, which primarily consist of payroll and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients.
The increase in cash used was primarily attributable to an increase of $156.3 million in cash used to acquire real estate facilities and an increase of $20.7 million in cash used to purchase property and equipment, in excess of cash used for these purposes in 2023.
The decrease in cash used was primarily attributable to a decrease of $139.6 million in cash used to acquire real estate facilities offset by an increase of $38.9 million in cash used to purchase property and equipment, in excess of cash used for these purposes in 2024.
Long-term debt During the years ended December 31, 2024 and 2023, some of our subsidiaries entered into Department of Housing and Urban Development (HUD)-insured mortgage loans in the aggregate amount of $68.3 million and $88.8 million, respectively. Additionally, we converted a $22.5 million construction loan to a HUD-insured mortgage loan during the year ended December 31, 2024.
Long-term debt During the year ended December 31, 2025, none of our subsidiaries entered into Department of Housing and Urban Development (HUD)-insured mortgage loans, whereas in the year ended December 31, 2024, certain of our subsidiaries entered into HUD-insured mortgage loans in the aggregate amount of $68.3 million.
Adjusted EBITDAR – We calculate Adjusted EBITDAR as Adjusted EBITDA less rent-cost of services. 77 Table of Contents The table below presents a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDAR to net income, the most directly comparable financial measure calculated in accordance with GAAP, on a combined/consolidated basis for the periods presented: Year ended December 31, 2024 2023 2022 (in thousands) Net income $ 55,344 $ 112,882 $ 150,496 Less: Net (loss) income attributable to noncontrolling interest (416) 8 — Add: Interest expense 44,341 49,919 25,538 Provision for income taxes 46,210 44,435 56,549 Depreciation and amortization 40,809 25,632 22,311 EBITDA $ 187,120 $ 232,860 $ 254,894 Adjustments to EBITDA: Acquisition related costs 2,506 998 201 Lease termination fees — — 421 Loss resulting from debt restructuring — 3,628 — Gain on lease termination (8,046) — — Stock-based compensation 115,544 — — Loss from equity method investment 2,736 — — Forfeiture of seller's note 500 — — Bargain purchase gain (17,185) — — Legal and other costs 9,727 — — Employee Retention Tax Credit (14,599) — — Disaster relief payment 1,154 — — Adjusted EBITDA $ 279,457 $ 237,486 $ 255,516 Rent - cost of services 284,953 216,711 160,003 Adjusted EBITDAR $ 564,410 78 Table of Contents The additional table below presents a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP, on a condensed combined/consolidated basis for the periods presented: Three months ended March 31, 2024 Three months ended June 30, 2024 Three months ended September 30, 2024 Three months ended December 31, 2024 (in thousands) Net income (loss) $ 34,819 $ (31,876) $ 16,210 $ 36,191 Less: Net income (loss) attributable to noncontrolling interest 2 2 590 (1,010) Add: Interest expense 16,096 9,915 9,029 9,301 Provision (benefit) for income taxes 22,880 (19,123) 17,446 25,007 Depreciation and amortization 8,116 9,254 10,523 12,916 EBITDA $ 81,909 $ (31,832) $ 52,618 $ 84,425 Adjustments to EBITDA: Acquisition related costs 207 486 845 968 Gain on lease termination (8,046) — — — Stock-based compensation — 90,936 12,304 12,304 Loss from equity method investment — 2,736 — — Forfeiture of seller's note — — 500 — Bargain purchase gain — — (17,185) — Legal and other costs — — — 9,727 Employee Retention Tax Credit — — — (14,599) Disaster relief payment — — — 1,154 Adjusted EBITDA $ 74,070 $ 62,326 $ 49,082 $ 93,979 Components of Results of Operations Revenue Patient and Resident Service Revenue Patient and resident service revenue typically represents over 99% of our total revenue.
Adjusted EBITDAR – We calculate Adjusted EBITDAR as Adjusted EBITDA plus rent-cost of services. 78 Table of Content s The table below presents a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDAR to net income, the most directly comparable financial measure calculated in accordance with GAAP, on a combined/consolidated basis for the periods presented: Year ended December 31, 2025 2024 2023 (in thousands) Net income $ 191,461 $ 55,344 $ 112,882 Less: Net (loss) income attributable to noncontrolling interest (82) (416) 8 Add: Interest expense 28,363 44,341 49,919 Provision for income taxes 92,989 46,210 44,435 Depreciation and amortization 55,663 40,809 25,632 EBITDA $ 368,558 $ 187,120 $ 232,860 Adjustments to EBITDA: Acquisition related costs 310 2,506 998 Loss resulting from debt restructuring — — 3,628 Gain on lease termination — (8,046) — Stock-based compensation 54,069 115,544 — Loss from equity method investment — 2,736 — Forfeiture of seller's note — 500 — Bargain purchase gain — (17,185) — Legal and other costs 97,032 9,727 — Employee Retention Tax Credit (14,946) (14,599) — Disaster relief payment — 1,154 — Adjusted EBITDA $ 505,023 $ 279,457 $ 237,486 Rent - cost of services 378,908 284,953 216,711 Adjusted EBITDAR $ 883,931 Components of Results of Operations Revenue Patient and Resident Service Revenue Patient and resident service revenue typically represents over 99% of our total revenue.
We also provide senior care, assisted living, and independent living options in some of our communities. As of December 31, 2024, our portfolio consisted of 314 post-acute care, assisted living, and independent living facilities across 17 states serving over 30,100 patients daily.
As of December 31, 2025, our portfolio consisted of 321 post-acute care, assisted living, and independent living facilities across 17 states serving over 31,700 patients daily.
This increase is directly attributable to new real estate obtained through acquisitions as well as growth of our finance lease portfolio. 82 Table of Contents Other expense, net Other expense, net decreased by $28.9 million, or 57.4% to $21.5 million, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Depreciation and amortization Depreciation and amortization increased by $14.9 million, or 36.4% to $55.7 million, for the year ended December 31, 2025, compared to $40.8 million for the year ended December 31, 2024. This increase is directly attributable to new real estate obtained through acquisitions as well as growth of our finance lease portfolio.
Aside from labor costs, the increase in cost of services was primarily due to increases of $257.1 million in administrative and ancillary expenses for facility increases, driven by a $93.5 million increase in contracted services, a $80.3 million increase in liability insurance, a $35.2 million increase in quality assurance fees, an $8.6 million increase in professional fees, an $8.2 million increase in licenses with the remaining $31.3 million of the administrative and ancillary expense increase spread out across various expense types.
Aside from labor costs, the increase in cost of services was primarily due to increases of $167.6 million in administrative and ancillary expenses for facility increases, driven by a $111.0 million increase in contracted services, a $56.3 million increase in quality assurance fees, a $5.2 million increase in software support and upgrades, and a $4.8 million increase in professional fees, offset by a decrease in liability insurance of $38.4 million.
The terms of our Amended and Restated 2023 Credit Facility permit optional prepayments from time to time without premium or penalty.
In addition, we had outstanding letters of credit of $7.9 million as of December 31, 2025. The terms of our Amended and Restated Credit Facility permit optional prepayments from time to time without premium or penalty.
As of December 31, 2024 and September 30, 2025, we had cash and cash equivalents (which include short-term investments with original maturities of three months or less at the time of purchase) of $157.7 million, and $355.7 million, respectively.
As of December 31, 2025, we had cash and cash equivalents (which include short-term investments with original maturities of three months or less at the time of purchase) of $197.0 million. The total principal amount outstanding under our Amended and Restated Credit Facility as of December 31, 2025 was $100.0 million.
Payments under these programs generally provide for reimbursement levels that are adjusted for inflation annually based upon the state’s fiscal year for the Medicaid programs and in each October for the Medicare program. These adjustments may not continue in the future, and even if received, such adjustments may not reflect the actual increase in our costs for providing healthcare services.
Payments under these programs generally provide for 86 Table of Content s reimbursement levels that are adjusted for inflation annually based upon the state’s fiscal year for the Medicaid programs and in each October for the Medicare program.
Other revenue - Other revenue increased to $3.1 million for the year ended December 31, 2024, compared to $1.0 million for the year ended December 31, 2023 due to an increase in lease income during the extended execution of our acquisition from the former operator Prestige.
Medicaid rates exclude the amount of state relief revenue we recorded. 81 Table of Content s Other revenue - Other revenue decreased to $1.0 million for the year ended December 31, 2025, compared to $3.1 million for the year ended December 31, 2024 due to a decrease in lease income compared to the prior year in which we had the extended execution of our acquisition from the former operator Prestige.
In 2023, this program ended and we do not expect to recognize any revenue based on funding through the PRF in the future. 79 Table of Contents Other Revenue Other revenue relates to ancillary revenue generating activities and primarily consists of revenue associated with arrangements in which we are a lessor of certain facilities.
Other Revenue Other revenue relates to ancillary revenue generating activities and primarily consists of revenue associated with arrangements in which we are a lessor of certain facilities.
The change was also impacted by an increase in salaries and wages of $39.3 million, or 33.3%, attributable to an increase in personnel to help integrate and facilitate the operational growth from acquisitions in the current year, and an increase in legal and professional fees incurred associated with the Audit Committee’s independent investigation and with ongoing government investigations of $9.7 million.
The change was also impacted by an increase in salaries and wages of $28.7 million, or 18.3%, attributable to an increase in personnel to help integrate and facilitate the operational growth.
The following table presents selected data from our combined/consolidated statement of cash flows for the periods presented: Year ended December 31, 2024 2023 (in thousands) Net cash provided by/(used in) Operating activities $ 367,341 $ 63,697 Investing activities (442,679) (172,791) Financing activities 117,476 129,592 Net change in cash $ 42,138 $ 20,498 Cash, cash equivalents, and restricted cash - beginning of period 118,704 98,206 Cash, cash equivalents, and restricted cash - end of period $ 160,842 $ 118,704 Operating activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities .
We may, in the future, seek to raise additional capital to fund growth, capital renovations, operations and other business activities, but such additional capital may not be available on acceptable terms, on a timely basis, or at all. 83 Table of Content s The following table presents selected data from our combined/consolidated statement of cash flows for the periods presented: Year ended December 31, 2025 2024 (in thousands) Net cash provided by/(used in) Operating activities $ 404,224 $ 367,341 Investing activities (264,025) (442,679) Financing activities (68,990) 117,476 Net change in cash $ 71,209 $ 42,138 Cash, cash equivalents, and restricted cash - beginning of period 160,842 118,704 Cash, cash equivalents, and restricted cash - end of period $ 232,051 $ 160,842 Operating activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities .
The difference in the effective tax rate from the statutory rate is mainly due to state taxes, permanent book-tax differences, and other adjustments. The change in effective tax rate for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to an increase in non-deductible expenses, including non-deductible compensation in 2024.
The difference in the effective tax rate from the statutory rate is mainly due to state taxes, permanent book-tax differences, and other adjustments.
Our historical results are not necessarily indicative of the results to be expected in the future.
Our historical results are not necessarily indicative of the results to be expected in the future. For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2024, refer to “Item 7.
We also made an additional $30.3 million investment in partnerships compared to $2.6 million used for this purpose in 2023. Financing activities Financing cash flows consist primarily of payments and draws on lines of credit, distributions and repayment of short-term and long-term debt, borrowings on lines of credit, contributions from noncontrolling interest, and proceeds from equity offerings.
These changes were offset by a decrease in sales of investments of $25.9 million as compared to 2024. Financing activities Financing cash flows consist primarily of payments and draws on lines of credit, distributions and repayment of short-term and long-term debt, borrowings on lines of credit, contributions from noncontrolling interest, and proceeds from equity offerings.
The increase was primarily driven by an increase of $504.4 million in salaries and wages. Of the salaries and wages increase, facilities acquired within the past year accounted for $241.7 million or 47.9% of the increase.
The increase was primarily driven by an increase of $536.0 million in salaries and wages. Of the salaries and wages increase, facilities classified within the New facilities cohort accounted for $204.8 million or 38.2% of the increase.
Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased from 208 as of December 31, 2023 to 314 as of December 31, 2024, an increase of 51.0%. This increase in operations and employees led to the increase in labor cost for new facilities as they were acquired throughout the year.
This increase in operations and employees led to the increase in labor cost for new facilities as they were acquired throughout the year ended December 31, 2024 and into the year ended December 31, 2025.
The remaining $34.5 million increase is spread over various expense categories. Rent - cost of services Rent - cost of services increased by $68.2 million, or 31.5% to $285.0 million, for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Rent - cost of services Rent - cost of services increased by $94.0 million, or 33.0% to $378.9 million, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Our skilled nursing services revenue was impacted by developments in our average daily rates and fluctuations in our payor sources.
Our skilled nursing services revenue was impacted by developments in our average daily rates and fluctuations in our payor sources. Our Medicare daily rates at Mature and Ramping facilities increased by 3.6% and 0.4%, respectively, for the year ended December 31, 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeRisks due to changing interest rates impact the return we realize related to our cash and short-term investment balances. As of December 31, 2024, we had outstanding indebtedness under mortgage loans insured with HUD and two promissory notes to third parties of $262.6 million, all of which are at fixed interest rates.
Biggest changeRisks due to changing interest rates impact the return we realize related to our cash and short-term investment balances. As of December 31, 2025, we had outstanding indebtedness under mortgage loans insured with HUD of $248.9 million, all of which were at fixed interest rates.
These prepayment rights may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity. Our cash and cash equivalents as of December 31, 2024 consisted of cash and short-term investments with original maturities of three months or less at the time of purchase.
These prepayment rights may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity. Our cash and cash equivalents as of December 31, 2025 consisted of cash and short-term investments with original maturities of three months or less at the time of purchase.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to risks associated with market changes in interest rates through our borrowing arrangements. As of December 31, 2024, we had approximately $142.0 million of variable rate debt, none of which was subject to an interest rate hedge.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to risks associated with market changes in interest rates through our borrowing arrangements. As of December 31, 2025, we had approximately $100.0 million of variable rate debt, none of which was subject to an interest rate hedge.
Accordingly, as of December 31, 2024, based on the amount of variable rate debt outstanding and the then-current SOFR rate, a hypothetical 10% increase in interest rates would have increased annual interest expense by approximately $1.0 million and a hypothetical 10% decrease in interest rates would have decreased annual interest expense by approximately $1.0 million.
Accordingly, as of December 31, 2025, based on the amount of variable rate debt outstanding and the then-current SOFR rate, a hypothetical 10% increase in interest rates would have increased annual interest expense by approximately $0.7 million and a hypothetical 10% decrease in interest rates would have decreased annual interest expense by approximately $0.7 million.
The above only incorporates those exposures that exist as of December 31, 2024 and does not consider those exposures or positions which could arise after that date. 94 Table of Contents
The above only incorporates those exposures that exist as of December 31, 2025 and does not consider those exposures or positions which could arise after that date. 88 Table of Content s