1.  DRAFT Update to Lean Handbook is expected to posted end of May.  Short Review Period – 21 days  MBA Group will be reviewing

2. Home & Community Based Services Outcome of the Affordable Care Act State compliance required by 2019 Risk Factors (9/23/2015 e-blast) State Risk Summary Grid Address in Lender Narrative – Other Risk Factors

3. State Risk CategoryFacility Characteristics Medicaid Waivers – Home & Community-Based Service Rule (H&CBSR) High Medicaid Census Non-SNFs 1.Concentrated MI/DD population (≥25%) 2.Medicaid Census ≥ 80% Combo DSCR falls below 1.0 w/ minimal reduction in Medicaid Census Questions to Consider Does the subject facility’s State Transition Plan* address the state’s compliance and/or the state’s efforts to comply with the Final H&CBSR? Is it anticipated that the subject facility and/or the subject facility type will be compliant with the state’s plan? Is the long term viability of the Medicaid Waiver Program at risk for such facilities? Does the subject facility exhibit the ability to operate without Medicaid Waiver residents? * https://www.medicaid.gov/medicaid-chip-program-information/by-topics/long-term-services-and- supports/home-and-community-based-services/statewide-transition-plans.htmlhttps://www.medicaid.gov/medicaid-chip-program-information/by-topics/long-term-services-and- supports/home-and-community-based-services/statewide-transition-plans.html

4. State Risk CategoryFacility Characteristics Medicaid Reimbursement DelaysSNF Beds in states with a pattern of extensive reimbursement delays Without A/R Financing Questions to Consider Does the project demonstrate the ability to handle delayed payments without AR Financing? State Risk CategoryFacility Characteristics Olmstead Plans, Cases & SettlementsConcentrated MI/DD population ≥25% Questions to Consider Are there any pending Olmstead cases, Settlement Agreements or Olmstead Plans or initiatives that could impact the facility? Is facility at risk of being unable to serve this population? What constraints would limit the facility’s ability to serve other types of residents? What approaches would the facility employ to serve new residents if no longer able to serve MI/DD population*? *ORCF determines concentration of MI/DD residents using data from CMS Form 672

5. State Risk CategoryFacility Characteristics State Budgetary ConstraintsSNF Beds w/ Medicaid Census ≥ 80% Whose DSCR falls below 1.0 w/ 5% reduction in Medicaid Census or Rate Questions to Consider Does the owner/operator have a plan for working through rate reductions, rate freezes or changes in eligibility? Does the facility demonstrate an ability to remain viable, as evidenced by a Sensitivity Analysis showing how income, expenses and NOI would be impacted by the above changes?

6. State Risk CategoryFacility Characteristics Money Follows the Person (MFP) - MI/DD populations Concentrated MI/DD population ≥25% in B&C; SNF/ALF combos; Combo including B&C bed; or any ICF beds Money Follows the Person (MFP) - Non- Elderly, Physically Disabled & Elderly populations SNF Beds Whose DSCR falls below 1.0 w/ minimal decline in Medicaid Census or Rate Questions to Consider If residents are predominantly non-elderly, how is the facility impacted by MFP, Balancing Incentives Program and other state “rebalancing” efforts? Are there any constraints on facility’s ability to serve other types of residents? Is State Medicaid funding for MI/DD residents stable?

7.  The above are merely suggestions of potential risks and approaches to consider.  In some instances, such an approach/mitigant would be insufficient,  It is possible alternative, preferable mitigants exist.  What is vital is that the Lender appropriately addresses risks in the Lender Narrative.  If Lender Narrative discussion is not thorough, then extensive subsequent communication with HUD may be necessary, thus slowing the review process.

8.  Comprehensive Care for Joint Replacement (“CJR”)  Effective April 1, 2016 for 5 years  67 Selected MSAs  Projected savings of $343MM  Three notable financial incentives for Hospitals  Ensure procedure is completed competently & efficiently  Discharge patient to lower cost setting (SNF) quickly & safely  Ensure effective post-acute rehabilitation  Three-Day-Stay rule waiver beginning in 2017  Discharge to SNF with a 3-Star CMS Rating or better  Implications on Market Value

9.  Connecticut SNFs are at risk (4/27/2016 e-blast)  State “right-sizing” SNFs and rebalance long-term care toward home & community based settings  State of Connecticut Medicaid Long Term Care Demand Projections Databook http://www.ct.gov/dss/lib/dss/pdfs/ct_ltc_appendices_2014_08_12_final.pdf http://www.ct.gov/dss/lib/dss/pdfs/ct_ltc_appendices_2014_08_12_final.pdf

10.  Phase I ESA Providers not knowing required repair scope (6/24/2015 e-blast)  Notice CPD 16-02 provides clarity for Maintenance vs Rehab  Floodways – not eligible unless “incidental” rule applies (8/9/2012 e-blast)  Floodplains/Wetlands on site (8-step process)  Check Advisory and Preliminary Maps (4/29/2013 e-blast)  Verify offsite work is not in floodplain or wetland

11.  SHPO, Tribal, & Farmland Protection Consultations  Endangered Species (http://ecos.fws.gov/ipac/)http://ecos.fws.gov/ipac/  Above Ground Storage Tanks (safety letter/distance calc/remediation)  Asbestos (O&M plans/removal)

12.  Use Lean Thinking to resolve issues prior to submission (3/30/2012 e-blast)  Environmental Checklist/Matrix (6/26/2014 e-blast)  (http://portal.hud.gov/hudportal/documents/huddoc?id=223f_EnvChecklist.xlsx)http://portal.hud.gov/hudportal/documents/huddoc?id=223f_EnvChecklist.xlsx  Phase I Consultant Resources:  Field Environmental Officers (https://www.hudexchange.info/environmental-review/hud-environmental-staff- contacts/)https://www.hudexchange.info/environmental-review/hud-environmental-staff- contacts/  Fall Zones (Nelson Rivera; nelson.rivera@hud.gov; 202-402-4455 ) nelson.rivera@hud.gov

13.  Complete the Decision Circuit  Saves HUD time  Helps identify HUD’s focus  Reconciling Operating Statements to Historical NOI  Thoroughly explain expense adjustments / atypical  Show how NOI presented ties to statement

14.  “Risk…Risk is our business” - Captain James T. Kirk  Identify  Mitigate  Don’t hide it  Review 3 rd Party Reports  Help them, help you  Avoid delays