THE TERRACE AT HOBE SOUND

CODE OF CONDUCT AND

COMPLIANCE PLAN

Table of Contents

I. Code of Conduct and Compliance Plan ..................................................... 1

Mission and Values Statement ............................................................................ 3 Purpose of Our Code of Conduct ......................................................................... 5 Our Fundamental Commitments .......................................................................... 8 Integrity of Business Practices ........................................................................... 10 Care and Treatment of Residents....................................................................... 14 Agreements with Referral Sources ..................................................................... 22 Submission of Accurate Claims ....................................................................... 29 Conflicts of Interest ....................................................................................... 35 Marketing ......................................................................................................... 43 Personnel and Work Environment ...................................................................... 45 Government Investigations ................................................................................ 51 Compliance with Environmental Laws ................................................................ 53 Compliance with Copyright Laws ....................................................................... 56 Business Information Systems ........................................................................... 60 The Compliance Program .................................................................................. 64 Compliance Hotline ........................................................................................... 68

II. Code of Conduct and Compliance Plan Policies ...................................... 69

Personnel Policy Reporting Compliance Problems................................................ 70 Compliance Training and Education Policy .......................................................... 71 Coding and Billing Policy .................................................................................. 73 Medical and Business Records Accuracy and Storage Policy ................................. 75 Confidentiality and Privacy Policy ...................................................................... 77 Response to Government Investigations Policy ................................................... 80

III. Code of Conduct and Compliance Plan Questionnaires .......................... 82

Compliance Questionnaire for Clinical Personnel ................................................. 83 Compliance Questionnaire for Coding/Billing Staff ............................................... 85

IV. Acknowledgment and Certification .......................................................... 86

Acknowledgement and Certification ................................................................... 87

V. Resolution and Approval........................................................................... 88

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MISSION AND VALUES STATEMENT

The Terrace at Hobe Sound, LLC, which is otherwise referred to and known in

the community as The Terrace at Hobe Sound (hereinafter also referred to as the

“Facility”), strives to provide professional skilled nursing services with a high degree of

professionalism and ethics. Above all else, we are committed to the care and

improvement of human life. In recognition of this commitment, we will strive to attain

or maintain each resident’s highest practicable physical, mental and psychosocial well-

being.

At The Terrace at Hobe Sound, all services will be performed with honesty and

integrity. All personnel, regardless of position, will treat all patients and their families

with respect and shall be uncompromising in their honesty, telling the truth accurately

without omission or misrepresentation. The Facility prides itself on its commitment to

maintaining the highest levels of professionalism and integrity in all of its professional

relationships. In pursuit of our mission, we believe the following value statements are

essential and timeless:

• We recognize and affirm the unique and intrinsic worth of each

individual.

• We treat all those we serve with compassion and kindness.

• We strive to deliver high quality, cost-effective health care in the

community we serve.

• We act with absolute honesty, integrity and fairness in the way we

conduct our business and the way we live our lives.

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• We trust our colleagues as valuable members of our health care

team and pledge to treat one another with loyalty, respect and

dignity.

PURPOSE OF OUR CODE OF CONDUCT

Our Code of Conduct provides guidance to all Facility employees and assists us in

carrying out our daily activities within appropriate ethical and legal standards. These

obligations apply to our relationship with residents, their families, colleagues, referring

physicians, third-party payers, subcontractors, independent contractors, vendors,

consultants, and one another. It is a critical component of our Compliance Program

and was developed to ensure that we meet our ethical standards and comply with all

applicable laws and regulations.

The Facility has and is committed to maintaining its well-earned reputation for

conducting itself in accord with the highest standards of integrity and business ethics

and in compliance with applicable laws. Our reputation, which has been achieved and

maintained through the integrity and ethical standards of its directors, managers,

officers, department heads and employees, is something the Facility takes very

seriously and is a valuable asset of the Facility. As a consequence, we will not tolerate

any behavior which jeopardizes our reputation for integrity and ethics.

This Compliance Plan (the "Plan") has been approved by the Compliance

Committee and is intended as a guide for each employee’s conduct so that the Facility

may fulfill its obligation to observe the laws, regulations and the Facility's policies

affecting its business and to deal fairly with the Facility's physicians, employees,

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vendors, third-party payers, and the Facility's residents and their families. This Plan is

intended to define the standards of conduct expected of all Facility personnel. That

said, no set of standards or written rules can substitute for the personal integrity, good

judgment, and common sense required to meet the challenges of the daily work of the

Facility’s employees.

The standards of conduct described in this Plan cannot, nor were they intended

to, cover every situation which a Facility employee may encounter. When the best

course of action is unclear or if a Facility employee observes a violation of these

standards, he or she is expected to seek the guidance of and report the violations to

their supervisor, their department head or to the Facility’s Compliance Officer, who is

responsible for the Facility’s Compliance Hotline (888-202-8477). Calls to the Hotline

will be treated as confidential, and may, at the caller’s request, be anonymous, as

discussed in the Hotline Section of this Plan.

Failure to observe the provisions of the Plan can result in serious consequences

to the employee, such as termination and possible civil or criminal charges; to the

Facility, such as criminal prosecution, substantial monetary fines, exclusion from

federally funded health care programs including Medicare, Medicaid and TRICARE; and,

of primary importance, the loss of the Facility's reputation for integrity and ethics. This

Plan will be updated or otherwise amended periodically to keep the Facility’s employees

abreast of the most current information available on these topics. If any Facility

personnel has suggestions for improvements in this Plan, please call the Facility’s

Compliance Officer at (772) 546-5800, or write to the Compliance Officer at The

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Terrace at Hobe Sound, 9555 SE Federal Highway, Hobe Sound, FL 33455. In addition

to this Plan, please be aware that the Facility may periodically distribute memoranda

and policy statements describing matters of interest to the Facility, or prohibiting

specified activities by all or some of the Facility’s employees. To the extent that they

prohibit or require certain conduct, these memoranda and policy statements should be

considered a part of this Plan. To the extent there is a direct conflict between the

terms, duties and responsibilities set forth in this Code of Conduct and Compliance Plan

and the Facility Employee Handbook or any other Facility manual, the provisions of this

Plan shall control.

OUR FUNDAMENTAL COMMITMENTS

The Terrace at Hobe Sound recognizes that it has commitments to various

groups and individuals by virtue of its position in the community and the services it

provides. Consequently it affirms the following commitments:

To our residents: We are committed to providing quality care that is sensitive,

compassionate, up to date, promptly delivered, and cost effective. We will strive to

attain or maintain each resident’s highest practicable physical, mental and psychosocial

well-being.

To our colleagues: We are committed to a work setting which treats all colleagues

with fairness, dignity, and respect, and affords them an opportunity to grow, to develop

professionally, and to work in a team environment.

To our third-party payers: We are committed to dealing with our third party payers

in a way that demonstrates our commitment to contractual obligations and reflects our

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shared concern for quality health care and bringing efficiency and cost effectiveness to

health care. We encourage our private third-party payers to adopt their own set of

comparable ethical principles to explicitly recognize their obligations to patients as well

as the need for fairness in dealing with providers.

To our regulators: We are committed to an environment in which compliance with

rules, regulations and sound business practices is woven into the Facility’s culture. We

accept the responsibility to aggressively self-govern and monitor adherence to the

requirements of law and to our Code of Conduct.

To our community: We are committed to understanding the health care needs of the

professional and greater community we serve and providing them with quality, cost-

effective health care.

To our suppliers and vendors: We are committed to fair competition among

prospective suppliers and the sense of responsibility required of a good customer. We

encourage our suppliers to adopt their own set of comparable ethical principles.

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INTEGRITY OF BUSINESS PRACTICES

Improper Payments.

No director, manager, officer, department head or other employee shall engage,

either directly or indirectly, in any illegal business practice, including, but not limited to,

prohibited fee splitting, bribery, kickbacks or payoffs, intended to induce, influence, or

reward favorable decisions of any government personnel or representative, any

customer, contractor or vendor in a commercial transaction, or any person in a position

to benefit the Facility or the employee in any way. No director, manager, officer,

department head or other employee shall make or offer to make any payment or

provide any other thing of value to another person with the understanding or intention

that such payment is to be used for an unlawful or improper purpose. THE FACILITY

DOES NOT RECOGNIZE ANY EXCEPTIONS TO THIS PROHIBITION AND WILL

IMPOSE DISCIPLINARY SANCTIONS FOR ANY VIOLATION OF THESE

PROVISIONS.

Business Entertainment and Gifts.

Within the guidelines adopted by the Facility, The Terrace at Hobe Sound

personnel may provide ordinary and reasonable business entertainment and gifts of

nominal value which is defined to mean of an aggregate value of less than $25 (e.g.

tickets to sporting events or concerts, meals and similar gift items), provided that such

entertainment and gifts do not otherwise violate state or federal laws or the laws of the

locale in which the business is transacted, are not given for the purpose of influencing

the business behavior of the recipient, are not given as a "thank you" for a referral or

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pattern of referrals, or otherwise intended to increase utilization, to unfairly affect

competition, or to affect one’s professional judgment. In any event, such ordinary and

reasonable entertainment and gifts may be given only with the prior approval of the

Facility’s Administrator. The Facility’s Administrator must exercise discretion and control

in authorizing such entertainment or gifts and consult the Compliance Officer/Legal

Counsel as needed. Cash gifts, regardless of the amount, to physicians or other referral

sources are prohibited. Non-cash gifts to physicians or other potential referral sources

that exceed nominal value as defined in this policy on an annual basis (individually or

combined) are prohibited. If circumstances seem to dictate a gift exceeding nominal

value, prior approval must be obtained from the Facility’s Administrator or Compliance

Officer. Such prior approval, along with the reason for the gift, must be documented in

writing and maintained as part of the Facility’s records.

Transactions Involving Government Employees.

The Terrace at Hobe Sound’s directors, managers, officers, employees and

agents must take no action that would cause any government employee to violate, to

appear to violate, or take action that would be otherwise inconsistent with, the standard

of conduct expected of government employees. Specifically, except as described in the

following sentence, no Facility director, manager, officer, employee or agent may offer

or give anything of monetary value, including gifts, gratuities, favors, entertainment or

loans, to an employee or representative of a government agency with which the Facility

has or is seeking to obtain contractual or other business or financial relations or that

regulates any of the Facility’s activities or operations. Any and all lobbying efforts by or

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on behalf of The Terrace at Hobe Sound with a federal, state, local or foreign

government or governmental employee of any kind shall be undertaken in compliance

with all federal, state, local and international laws, regulations and rules, and only with

the knowledge and prior written approval of the Facility’s Administrator, Compliance

Officer and Director of Legal Affairs.

Specific rules and regulations govern the conditions of employment of former

Federal and State government employees, which may affect the duties they can

perform as employees of the Facility. All Facility employees to whom such rules or

regulations apply shall comply with both the letter and spirit of those rules and

regulations to avoid any appearance of impropriety.

Integrity of Financial Reporting.

It is management’s responsibility to ensure that assets and liabilities are

accounted for properly in compliance with all tax and financial reporting requirements,

generally accepted accounting principles, and established Facility accounting and

financial policies, that no false or artificial Facility records are made, and that there are

no unrecorded Facility assets. All items of income and expense and all assets and

liabilities shall be entered on the financial records of the Facility; all reports submitted to

governmental authorities shall be accurately made; all transactions shall be executed in

accordance with management’s authorizations; and access to assets shall be permitted

only in accordance with such authorization.

The Facility’s Business Office has guidelines and policies regarding internal

controls in general, as well as guidelines and policies applicable to the reporting of and

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accounting for specific financial transactions. The Facility’s Business Office’s personnel

and other Facility employees whose responsibilities fall within the administrative and

financial areas must also review and comply with these accounting guidelines and policy

statements.

Control of Funds.

Each owner, director, manager, officer, department head and/or the

Administrator must monitor the commitment and expenditure of Facility funds by

persons under his or her authority. Each must ensure that any expenditure or transfer

of the Facility’s funds is made for a valid business purpose, is appropriately

documented, is made pursuant to authority in published guidelines and policy

statements and is actually received by the recipient indicated in the Facility records.

If a Facility employee has concerns about unethical practices, improper

conduct, the integrity of the Facility’s financial reporting, or other improper

practices as described above, the employee is expected to contact either his

or her supervisor, the Facility’s Administrator, the Facility’s Compliance

Officer or the Compliance Hotline (888-202-8477). Calls to the Hotline will be

treated as confidential and may, at the caller's request, be anonymous to the

extent practical as disclosed in the Hotline Section of this Plan.

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CARE AND TREATMENT OF RESIDENTS

The Terrace at Hobe Sound makes providing quality care for all residents a top

priority. The Facility believes that it attracts residents because of the quality of its

services, the facilities it provides and the competence of its staff and employees. Our

mission is to provide high quality, cost-effective health care to all of our residents. We

endeavor to treat all residents with warmth, respect and dignity and provide care that is

both necessary and appropriate. We make no distinction in the care we provide based

on age, gender, disability, race, color, religion, or national origin. Clinical care is based

on identified resident health care needs, not on resident or Facility financial

considerations.

Quality of Care and Treatment.

The primary goal of The Terrace at Hobe Sound’s medical and nursing staff is to

strive to attain or maintain each resident’s highest practicable physical, mental and

psychosocial well-being. The Facility is committed to providing high quality, cost

effective services to its residents and to the delivery of professional medical and nursing

services in a responsible, reliable and appropriate manner. The Facility is also

committed to the goal of excellence in quality care and is sensitive to resident needs. At

all times, the Facility’s residents and their families must be treated with dignity and

respect.

We seek to involve residents and their families in all aspects of their care and

obtain informed consent for treatment. As applicable and consistent with state and

federal laws governing protected health information, each resident or authorized

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representative, is provided with a clear explanation of care including, but not limited to,

diagnosis, treatment plan, right to refuse or accept care, care decision dilemmas, and

an explanation of the risks and benefits associated with available treatment options.

Residents are informed as applicable of their right to make advance directives.

Resident advance directives will be honored within the limits of the law and the

Facility’s policies and capabilities. In the promotion of each resident’s rights, each

resident and his or her authorized representatives will be accorded appropriate

confidentiality, privacy and the opportunity to resolve any complaints as required under

federal and state law and consistent with The Terrace at Hobe Sound’s policies and

procedures.

Since residents depend upon the Facility’s staff for their health and well being, it

is the duty and affirmative responsibility of all Facility officers and employees never to

ignore any deficiency or error in resident care. It is essential and expected that all

employees promptly bring such deficiencies or errors to the attention of those who can

properly assess and redress the problem.

Staffing.

The Facility is committed to providing staff in sufficient numbers and with the

appropriate clinical expertise to serve its residents. The Facility will routinely assess its

staffing patterns to ensure it has adequate, competently trained staff to care for the

acuity levels of its residents. In such assessment, the Facility will evaluate, among

other things, the current staff skill levels, staff-to-resident ratios, staff turnover, staffing

schedules, disciplinary records, payroll records, timesheets, and adverse incident

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reports. Facility management will also interview staff, residents, and resident’s family

or legal guardians to ensure that its staffing levels are appropriate.

Resident Care Plans.

The Facility recognizes and acknowledges that the development of

comprehensive resident care plans is essential to reducing risk. The Facility commits to

ensuring that within 14 days of admission, a comprehensive assessment of the resident

is conducted. Within seven (7) days thereafter, a comprehensive care plan shall be

developed for that resident that addresses his or her medical, nursing, mental and

psychosocial needs, and includes reasonable objectives and timetables. Each care plan

shall include all disciplines involved in the resident’s care. The Facility will ensure an

interdisciplinary and comprehensive approach to developing care plans, including

ensuring that the attending physician is involved in that process and appropriately

supervises each resident’s care. The resident, where appropriate, and the resident’s

family or the resident’s legal representative shall be provided reasonable notice of the

meeting to develop the comprehensive resident care plan.

Psychotropic Medications.

Where the Facility provides or arranges for physician services, it has an

affirmative obligation to ensure appropriate use of psychotropic medications. The

Facility shall ensure that such medications are not used as a means of chemical

restraint for purposes of discipline or convenience, but rather only as required to treat

the resident’s medical symptoms. For those residents who specifically require and are

prescribed antipsychotic medications by their healthcare provider, residents shall

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receive gradual dose reductions and behavioral interventions aimed at reducing the

level of medication as ordered by the healthcare provider, unless contraindicated. No

less than monthly, the Facility shall ensure there is an adequate indication for the use of

the medication and should carefully monitor, document, and review the drug use of

each resident’s psychotropic drugs, and adopt such measures as part of its compliance

program through staff education and training regarding appropriate monitoring and

documentation practices, as well as auditing drug regimen reviews and resident care

plans to determine if they incorporate an assessment of the resident’s medical, nursing,

mental and psychosocial needs.

Medication Management.

Each resident has the right to freedom of choice in obtaining pharmaceutical

supplies and services from a pharmacy of his or her own choosing, at the resident’s

own expense or through Title XIX of the Social Security Act, if applicable. The Facility

will also make available pharmaceutical services to meet the needs of each resident.

The Facility is committed to appropriate staff training for those involved in all aspects of

the pharmaceutical care of its residents. The Facility will employ or obtain the services

of a duly licensed pharmacist to provide consultation on all aspects of the provision of

pharmacy services within the Facility. Consultant pharmacists shall be required to: 1)

establish a system of records of receipt and disposition of all controlled drugs; 2)

determine that the drug records are in order and that an accounting of all controlled

drugs is maintained and periodically reconciled; and 3) review the drug regimen of each

resident at least monthly. The Facility is committed to training and monitoring all staff

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who are involved in prescribing, administering, and managing pharmaceuticals,

including all consultant pharmacists. Such training shall be for the purpose of

familiarizing staff with the proper medication management techniques, as well as with

the legal prohibition against accepting anything of value from a pharmacy or

pharmaceutical manufacturer to influence the choice of drug for a resident or to switch

a resident from one drug to another.

The Facility shall also periodically review the total compensation paid to

consultant pharmacists to ensure that compensation is not tied in any manner to the

volume or value of particular drugs prescribed for or administered to, the residents and

complies with all federal, state and local laws, regulations and rules. All prescribing

(except for generic substitutions where permitted by state law) shall be based

principally on clinical efficacy and appropriateness and drug switches should not be

made by the pharmacist without proper authorization from the attending physician, the

medical director, or other licensed prescriber.

Resident Safety.

The Facility is committed to ensuring that its residents are provided a safe

environment, one free from abuse and neglect. To this end, the Facility will promote

resident safety through its policies to prevent, investigate and respond to instances of

potential resident abuse, neglect, or mistreatment. Such potential abuse can result

from staff-on-resident abuse or neglect, resident-on-resident abuse, or abuse from

unknown causes. The Facility staff should properly screen and assess a resident’s risk

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for aggressive behavior through initial resident assessments, comprehensive care plans,

periodic reassessments, and proper staffing assignments.

The Facility shall not employ persons found guilty of abusing, neglecting or

mistreating residents, nor individuals with a finding entered in a state nurse aide

registry concerning abuse, neglect, mistreatment of residents or misappropriation of

their property. The Facility shall make a diligent effort to verify the education,

licensing, certification and training for all care providers in an effort to ensure such

persons are qualified and skilled caregivers.

If a Facility employee has reason to believe a resident has been the

victim or potential victim of abuse or neglect, the employee is expected to

immediately contact his or her supervisor, the Facility’s Administrator, the

Facility’s Compliance Officer, or the Facility’s Hotline (888-202-8477). All

calls to the Hotline will be treated as confidential and may, at the caller’s

request, be anonymous to the extent practical as discussed in the Hotline

Section of this Plan.

Resident Information.

The Facility collects information about the resident’s medical condition, history,

medications, and family illnesses to provide quality care. We are aware of the sensitive

nature of this information and are committed to maintaining its confidentiality. We do

not release or discuss resident-specific information with others unless it is necessary to

serve the resident or as required by law. The Facility’s employees must never disclose

confidential information that violates the privacy rights of our residents as promulgated

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under Florida law, the Health Insurance Portability and Accountability Act of 1996

(HIPAA) or other applicable laws, regulations or rules pertaining to the confidentiality

and privacy of individually identifiable health information. No Facility employee has a

right to any resident information other than that which is necessary to perform his or

her job. Subject only to emergency exceptions, residents can expect their privacy will

be protected and resident-specific information will be released only to persons

authorized by law or pursuant to the written consent of the resident or their legal

guardian.

The Facility maintains resident records as strictly confidential, as required by law.

Confidential resident information should never become a topic of gossip or casual

conversation. Confidential resident records and the information therein is not to be

disclosed, shared or discussed with anyone who is not properly authorized to receive

that information, including directors, managers, officers and other Facility employees,

as well as Facility suppliers or vendors. It is imperative that all staff be aware of their

surroundings in order to utilize appropriate care not to discuss any resident’s

confidential medical information in front of another resident or any other individual

without a specific reason to know that information for reasons related solely to the care

of the resident. Any questions regarding the access to or disclosure of confidential

resident records and information should be directed to the Facility’s Chief Privacy

Officer, Administrator or Compliance Officer. THE FACILITY DOES NOT

RECOGNIZE ANY EXCEPTIONS TO THIS PROHIBITION AND WILL IMPOSE

DISCIPLINARY SANCTIONS FOR ANY VIOLATION OF THESE PROVISIONS.

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The Facility shall ensure that the requirements of the HIPAA Privacy and Security

Rules are appropriately implemented to establish a series of administrative, technical,

and physical security safeguards to ensure the confidentiality of electronic protected

health information.

Treatment Based on Medical Necessity.

The Facility’s resident criteria are based strictly upon the medical needs of the

resident. The medical treatment of residents must be based solely on clinical needs.

The Facility does not pay bonuses or offer other incentives of any type to employees or

other individuals working with the Facility based on the referral of any resident. The

Facility is committed to creating a safe, compassionate treatment environment where

residents and their families will be able to understand their individual illnesses and the

treatment process. All employees are required to observe the Facility’s policy regarding

obtaining informed consent from residents or their legal guardians. Residents shall be

treated based upon their medical needs without regard to their insurance coverage.

If a Facility employee has concerns about unethical or unlawful

treatment practices, the employee is expected to contact either his or her

supervisor, the Facility’s Administrator, the Facility’s Compliance Officer, or

the Facility’s Compliance Hotline (888-202-8477). Calls to the Hotline will be

treated as confidential and may, at the caller's request, be anonymous to the

extent practical as discussed in the Hotline Section of this Plan.

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AGREEMENTS WITH REFERRAL SOURCES

Perquisites to Referral Sources.

Every agreement entered into by The Terrace at Hobe Sound and/or any Facility

director, manager, officer or other employee with a referral source or a potential

referral source for the Facility must be in writing and reviewed in advance by and is

subject to the approval of an attorney for the Facility. No director, manager, officer or

other employee is allowed to offer or grant any benefit to a potential or actual referral

source on the condition that such referral source agrees to refer any residents to the

Facility. Referral sources include, but are not limited to, physician practices, therapists,

hospitals, ALFs, home health agencies, clinical laboratories, medical equipment

companies and diagnostic imaging facilities. Facility directors, managers, officers and

other employees are urged to use caution when engaging in transactions that involve

physicians or other potential or actual referral sources.

Services or assets purchased from referral sources must reasonably be needed at

the Facility and amounts paid by the Facility must not exceed fair market value. In this

context, "fair market value" may be defined as what the Facility would pay in an arm’s

length transaction for the service or asset from another person who does not refer

residents to the Facility. Thus, for example, large payments to referral sources for

purchasing items and services which are not needed, high hourly payment rates, or

multiple agreements with the same referral sources, will give the appearance of

impropriety or may be perceived as inherently suspect.

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Joint Ventures with Referral Sources.

No director, manager, officer, or other employee or agent acting on behalf of

Lanier Terrace is authorized to incur any obligation to any proposed joint venture or

partner or enter into or commit to enter into any joint venture, partnership or other

risk-sharing arrangement with any entity that is a potential or actual referral source

until such time as an attorney for the Facility has reviewed the terms and provisions of

such joint venture or partnership to ensure compliance with applicable laws,

regulations, agreements with lenders, and Facility policies.

The Terrace at Hobe Sound Does Not Pay For Referrals.

The Facility does not pay or otherwise reward anyone including but not limited to

employees, physicians, health care professionals, residents, vendors, agents or anyone

else for the referral of residents. The Facility does not make payments or provide non-

cash benefits (e.g., office space, gifts, services) to any physician or health care

professional providing services to the Facility or its residents without a written contract,

which has been approved through the proper approval process. The Facility requires all

non-employee physicians and non-employee health care professionals providing

professional services to the Facility to submit invoices outlining specific dates, hours,

and types of services performed prior to any payment being made.

The Facility’s physicians and health care professionals are free to refer residents

to any person or entity they deem appropriate for the care of the resident. When the

Facility’s physicians and health care professionals make such referrals to physicians,

health care professionals or other health care facilities, they must make such referrals

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based solely on what is best for the individual seeking treatment and without regard to

the value or volume of referrals any such physician, health care professional or other

health care facility has made to The Terrace at Hobe Sound. The Facility does not and

will not accept any payment of any kind for the referrals made by its employees to

other health care providers.

No Payments to Residents.

The Facility does not waive insurance co-payments or deductibles or otherwise

provide financial benefits to residents unless permitted by law. Under certain limited

circumstances, the Facility may provide appropriate financial accommodation (such as

allowing monthly payments over time) to residents based purely on the financial need

of the individual resident. The provision of professional courtesy discounts or

uncompensated care to residents requires the prior approval of the Facility’s

Administrator, the Facility’s Compliance Officer or Director of Legal Services to assure

that such conduct does not violate any third-party payer contract or applicable law.

Medicare/Medicaid Fraud and Abuse.

The Facility recognizes the public trust placed upon it by the taxpayers of the

United States and the State of Florida to properly administer taxpayer funded care and

treatment to residents, and to do so with integrity and free from fraud or abusive

activities. The Medicare/Medicaid Fraud and Abuse provisions of the Social Security Act

prohibit, among other things, any person from offering or paying remuneration to a

referral source of Medicare or Medicaid residents, for making or recommending referral

of residents, and from making false claims for Medicare or Medicaid reimbursement. In

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addition, Florida law contains similar limitations on such conduct regardless of the

source of payment.

The Terrace at Hobe Sound will not tolerate any behavior which might be

considered as violating the Medicare/Medicaid Fraud and Abuse provisions. To that end,

no officer or employee may receive any compensation from or offer any compensation

to, whether in cash or otherwise, anyone for the referral of a resident to any Facility

physician or to another health care provider. All resident charts must accurately reflect

services rendered to residents and such services must be billed using the proper billing

codes for the services rendered. Services performed for residents must be medically

necessary, as must all tests, procedures and medications provided residents.

Federal and state laws prohibit certain physician self-referrals, unless otherwise

exempt. The OIG has advised that nursing facilities should pay particular attention to

their relationships with attending physicians who treat residents and with physicians

who are nursing facility owners, investors, medical directors or consultants. The Facility

shall ensure that all such agreements are in writing, signed by both parties; for a period

of at least one (1) year; are at fair market value compensation for the items or services

provided; that said items or services are actually needed and rendered; and that such

arrangements otherwise meet all requirements under federal, state and local laws,

regulations and rules.

THE FACILITY DOES NOT RECOGNIZE ANY EXCEPTIONS TO THIS

PROHIBITION AND WILL IMPOSE DISCIPLINARY SANCTIONS FOR ANY

VIOLATION OF THESE PROVISIONS.

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If any Facility employee has concerns about any possible unethical or

unlawful referral practices or a question about whether a practice would be

permissible, the employee is expected to contact either his or her supervisor,

the Facility’s Administrator, the Facility’s Compliance Officer, or the

Compliance Hotline (888-202-8477). Calls to the Hotline will be treated as

confidential and may, at the caller's request, be anonymous to the extent

practical as discussed in the Hotline Section of this Plan.

Medical Directorships and Physician Service Agreements.

Medical directorships and other physician service agreements can create

significant risk for the Facility. All directorships held by the Facility’s physicians must be

for services reasonably needed by the facility to fill a bona fide need (other than

increased utilization), which would not ordinarily be provided by a physician without

charge as part of the physician's normal treatment of patients. Such services may

include the need for administrative services or to increase efficiency in delivery of

patient services or quality of care. Directorship agreements must define clearly the

duties for which the particular physicians are under contract. Numerous directorships at

a facility (or multiple directorships with the same physician) and/or those with unusual

titles or non-specific duties will give the appearance of impropriety or may be perceived

as inherently suspect. Also, there should not be two or more medical directors with

overlapping or similar functions unless (1) the administrative functions have been

divided among the physicians, (2) the amounts paid in the aggregate are not more than

what would be paid to a single medical director, and (3) the Facility’s Administrator

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corresponds with the Director of Legal Affairs to verify the division (and not duplication)

of the administrative functions. Compensation under each agreement must be based

upon a reasonable, fixed, fair market rate for time spent in the performance of the

duties without regard to the value or volume of any referrals or admissions; and hours

"purchased" should be reasonable in number in light of the physician's private practice

responsibilities and other duties. Compensation may be paid only if (1) the duties are

actually performed, (2) written documentation is provided to the Facility’s

Administrator, completed by the physician, describing in reasonable detail the nature of

the duties performed, (3) the compensation is set out in advance and is at fair market

value in an arm’s length transaction, and (4) payment is not being made for what the

physician is already obligated to do by law or contract. The agreement should be in

writing and for a period of at least one (1) year. This is intended as a guideline for the

Facility’s employees, and it is not intended to be a complete description of any and all

legal or regulatory requirements for medical directorships and other physician service

agreements. Accordingly, it is expected that all medical directorships and other

physician service agreements will be disclosed in full to, reviewed by, and approved by

the Facility’s Administrator and the Director of Legal Affairs prior to the entry by a

physician or other health care provider into such agreements. Once approved and

executed, a copy of each Physician Service Agreement shall be provided to the Director

of Legal Affairs.

If a Facility employee has concerns about possible improper

agreements with physicians or other referral sources or possible improper

25

perquisites given to physicians, the employee is expected to contact either

his or her supervisor, the Facility’s Administrator, the Facility’s Compliance

Officer, or the Compliance Hotline (888-202-8477). Calls to the Hotline will

be treated as confidential and may, at the caller's request, be anonymous to

the extent practical as discussed in the Hotline Section of this Plan.

Space and Equipment Leases.

Space or equipment rental agreements between the Facility and a health care

provider or referral source must be in writing and meet the following criteria: (1) be for

a term of not less than one year; (2) provide for "fair market value" consideration not

related to volume or value of business generated (i.e., fixed compensation set in

advance and not a percentage of gross or net income); (3) specify the precise premises

or equipment to be leased; and (4) if the lease is for less than a full-time basis, identify

the precise period when the premises or equipment is to be used. In this context, "fair

market value" may be defined as the value of the property for general commercial

purposes, but does not permit rental charges to reflect the value attributed by either

party to the proximity or convenience of the property to physicians or other providers

who are in a position to make referrals to the facility. This is intended as a guideline for

the Facility’s employees, and it is not intended to be a complete description of any and

all legal or regulatory requirements for space and equipment leases. Accordingly, it is

expected that all space and equipment lease agreements between the Facility and a

health care provider or referral source will be disclosed in full to, reviewed by, and

26

approved by the Facility’s Administrator and Director of Legal Affairs prior to entry into

any such agreement.

If a Facility employee has concerns about possible improper

agreements with physicians or other referral sources or possible improper

perquisites given to physicians, the employee is expected to contact either

his or her supervisor, the Facility’s Administrator, the Facility’s Compliance

Officer, or the Compliance Hotline (888-202-8477). Calls to the Hotline will

be treated as confidential and may, at the caller's request, be anonymous to

the extent practical as discussed in the Hotline Section of this Plan.

SUBMISSION OF ACCURATE CLAIMS

Billing.

The Terrace at Hobe Sound bills only for services rendered, nothing less and

nothing more. The Facility must comply with the specific billing requirements adopted

by various government-sponsored programs and other payers. All Facility officers and

employees must exercise care in any written or oral statement made to any

government agency or other payer. The Facility will not tolerate false statements by

any of the Facility’s officers or employees to a government agency or other payer.

Deliberate misstatements to government agencies or other payers may expose the

individual involved to termination and civil or criminal penalties. THE FACILITY DOES

NOT RECOGNIZE ANY EXCEPTIONS TO THIS PROHIBITION AND WILL

27

IMPOSE DISCIPLINARY SANCTIONS FOR ANY VIOLATION OF THESE

PROVISIONS.

Accurate Claims and Proper Reporting of Resident Case-Mix.

The Terrace at Hobe Sound is committed to submitting accurate and truthful

claims to all residents, Federal health care programs and all other third-party payers, in

compliance with all applicable federal, state and local laws and regulations and will not

misrepresent charges or other billing information submitted to a resident, a Federal

health care program or other third-party payer on behalf of a resident. We will take

great care to assure that all billings to government payers, commercial insurance payers

and residents are true and accurate and conform to all pertinent federal and state laws,

regulations and rules. We strictly prohibit any Facility officer, employee or agent from

knowingly presenting or causing to be presented claims for payment or approval which

are false, fictitious or fraudulent.

We will operate oversight designed to verify that claims are submitted only for

services actually provided and services are billed as provided. This oversight will

emphasize the critical nature of complete and accurate documentation of services

provided. As part of our documentation effort, we will maintain current, accurate and

complete medical records. The Facility is committed to accurate assessment, reporting

and evaluation of resident case-mix data. Staff will be properly trained to ensure that

persons collecting the data and those charged with analyzing and responding to the

data are knowledgeable about the purpose and utility of the data, and that it is

accurate. The Facility will review such data regularly to ensure its accuracy and to

28

identify and address any potential quality of care issues. Any contractor vendor

engaged by the Facility to perform billing or coding services must have the necessary

skills, quality control processes, systems, and appropriate procedures to ensure that all

billings to government and commercial insurance programs and to residents are

accurate and complete. The Facility prefers to contract with such entities that have

adopted their own ethics and compliance programs. Third party billing entities,

contractors and vendors who are under contract consideration must be approved

consistent with the Facility’s policies on this subject.

Waiver of Co-Payments and Deductibles.

The Facility will not routinely waive co-payments and deductible payments, or

otherwise provide price reductions except in strict conformity with the Facility’s policies

and applicable law. Any such waiver is generally considered to be illegal if it relates to

Medicare services and may be viewed by commercial insurers as inappropriate and

possibly illegal as it relates to private commercial insurance. However, if there is a

negotiated discount rate for professional medical services with a managed care

organization, prepaid health plan, etc., and there is full disclosure of the waiver of the

coinsurance and deductible obligation, the waiver may be acceptable. The Facility’s

Administrator and legal counsel should be consulted when discounts, waivers or price

reductions are considered, except when those waivers or discounts are in strict

conformity with the Facility’s written policies. To qualify for an exception under Federal

law, a discount must be properly disclosed and accurately reported. Such discount

must be in the form of a reduction in price of the goods or services based on an arm’s-

29

length transaction. In evaluating the appropriateness of a discount or price reduction,

it is not the size of the discount that is determinative of anti-kickback statute violation,

but whether it is tied or linked, directly or indirectly, to referrals of other Federal health

care program business. This is intended as a guideline for the Facility’s employees, and

it is not intended to be a complete description of any and all legal or regulatory

requirements for waiver of co-payments and deductibles. Accordingly, it is expected

that all discounts, waivers or price reductions will be disclosed in full to, reviewed by,

and approved by the Facility’s Administrator and Director of Legal Affairs.

Billing Inquiries.

The Facility and its employees will be forthright in dealing with any billing

inquiries irrespective of the source. All requests for information will be answered with

complete, factual and accurate information. The Facility will cooperate with and be

courteous to all auditors and surveyors and provide them with the information to which

they are entitled during an audit. Facility officers or employees must never conceal,

destroy or alter any documents; lie or make any misleading statements to any

government or third party payer auditor or surveyor. No Facility officer or employee

should attempt to cause another colleague to fail to provide accurate information or

obstruct, mislead, or delay the communication of information or records relating to a

possible violation of law. Furthermore, in order to insure that the Facility fully meets all

of its regulatory obligations, the Facility must be informed whenever any employee has

any concerns about our compliance with any such regulations. The Facility will be

diligent in reviewing the elements of its compliance system to ensure its correctness

30

and effectiveness. Additionally, the Facility will provide its employees with the

information and education they need to comply fully with all applicable laws, regulations

and rules applicable to the Facility.

Therapy Services.

The OIG had identified the provision of physical, occupational and speech

therapy services as a potential risk area for nursing facilities. The potential risk areas

identified by OIG include: 1) improper utilization of therapy services to inflate severity

of RUG classifications; 2) over-utilization of therapy services billed on fee-for-service

basis; and 3) stinting on therapy services provided to patients covered by Part A PPS

payment.

The Facility shall endeavor to ensure that residents are receiving medically

appropriate therapy services by requiring that therapy contractors provide complete and

contemporaneous documentation of services provided to each resident; regular and

periodic reconciliation of the physician’s orders and the services actually provided;

interviews with the residents and their families to make sure services are actually

delivered; and assessments of the continued medical necessity for services during

resident care meetings attended by the attending physician.

No Federal health care program payment may be made for items or services

furnished by an excluded individual or entity. The Facility will screen to avoid hiring or

contracting with an excluded person or entity. Appropriate screening practices will

apply to all prospective owners, directors, managers, officers, employees, contractors,

and agents prior to engaging their services. Thereafter, periodic screening shall be

31

undertaken at all levels of the organization. Any director, manager, officer, employee,

contractor or agent of the Facility shall be promptly removed from his/her position

within the Facility upon the provider’s receipt of actual notice such person is excluded.

The OIG will not reimburse a nursing facility where the restorative and personal

care services are wholly deficient. To avoid this risk, the Facility is committed to

maintaining comprehensive procedures to ensure that services of an appropriate quality

and level are in fact delivered to the residents. Such procedures include resident and

staff interviews, medical record reviews, and personal observations of the care

delivered. In addition, contemporaneous documentation of services is required.

If any Facility employee has a concern about the Facility’s billing

practices, the employee is expected to contact either his or her supervisor,

the Facility’s Administrator, the Facility’s Compliance Officer, or the

Compliance Hotline (888-202-8477). Calls to the Hotline will be treated as

confidential and may, at the caller's request, be anonymous to the extent

practical as discussed in the Hotline Section of this Plan.

32

CONFLICTS OF INTEREST

A conflict of interest may occur if a director, manager, officer or employee’s

outside activities or personal interests influence or appear to influence their ability to

make objective decisions in the course of his or her responsibilities. A conflict of

interest may also exist if the demands of any outside activities hinder or distract from

the performance of one’s job or cause one to use the Facility’s resources for anything

other than the Facility’s purposes. It is the obligation of each director, manager, officer

and employee to ensure that they remain free of conflicts of interest in the performance

of their Facility responsibilities. In the event that a director, manager, officer or

employee has any questions about whether an outside activity may constitute a conflict

of interest, they must obtain approval from the Compliance Officer or Director of Legal

Affairs before pursuing the activity.

Conflicts of interest exist where an individual's actions or activities, on behalf of

the Facility or otherwise, involve the obtaining of an improper personal gain or

advantage, or an adverse effect upon the best interests of the Facility. In other words,

directors, managers, officers and employees must avoid engaging in any business,

activity, practice or act which conflicts with the interests of the Facility, its operations,

or its residents. The Facility’s directors, managers, officers and employees must also

avoid situations that would create an actual or even an appearance of a conflict of

interest, unless approved in advance and in writing by the Facility’s Administrator,

Compliance Officer or Director of Legal Affairs. Each Facility director, manager, officer

and employee also has a duty of loyalty to the Facility. While it is not possible to

33

describe all of the situations and conditions that involve a conflict of interest or violate

the duty of loyalty, the following paragraphs indicate areas where conflicts of interest or

violations of the duty of loyalty may arise to provide guidance. In the event that a

director, manager, officer or employee has any questions about whether an outside

activity may constitute a conflict of interest, they should consult the Director of Legal

Affairs.

Personal Benefit.

Each director, manager, officer or employee, for so long as he or she remains in

such position with the Facility, is expected to conduct the business of the Facility to the

best of his or her ability for the benefit of and in the best interests of the Facility. No

director, manager, officer or employee may become involved in any manner with

competitors, contractors, customers or suppliers of the Facility if such involvement

would result in improper personal gain, or the appearance of improper personal gain.

Such involvement may include but is not limited to the purchase, sale or lease of any

goods or services from or to any customer or supplier of the Facility, or serving as a

director, manager, officer, employee or in any other management or consulting capacity

with a competitor, contractor, customer or supplier of the Facility. A director, manager,

officer or employee is not prohibited from purchasing goods or services from a

customer or supplier to the Facility if those goods or services are purchased on terms

generally available to persons not affiliated with the Facility.

Placing business with any facility or entity in which there is a family or close

personal relationship or hiring or having a reporting relationship to relatives could

34

constitute a conflict of interest or create the appearance of a conflict of interest and

must first be disclosed to the Facility’s Compliance Officer.

The foregoing shall not preclude holding less than five percent of any class of

securities in a publicly held corporation listed on a nationally recognized stock exchange

or regularly traded on an over-the-counter market. However, even if the holdings are

less than five percent, where an employee is in a position to control or influence the

Facility’s decisions or actions with respect to a transaction with such a corporation, a

conflict of interest might still exist and such holdings must be disclosed in writing to the

Facility’s Compliance Officer or Director of Legal Affairs.

Acceptance of Gifts and Entertainment.

No employee, nor any member of any employee’s family, may accept any

personal gift or favor (including, but not limited to, cash, stock, or complimentary

business or personal trips) from any of the Facility’s competitors, contractors, residents

or suppliers, or anyone with whom that employee does business on behalf of the

Facility. Acceptance of perishable gifts, other gifts of a nominal value or reasonable

personal entertainment may be ethically accepted if the gift would not influence, or

reasonably appear to others to be capable of influencing, the employee's business

judgment in conducting the Facility’s affairs with the donor. If the value of the gift/s are

over $25.00 (individually or combined) or there is any question regarding whether the

gift meets this standard of reasonableness, the employee must either disclose the

details of the gift and seek prior approval to accept the gift, refuse the gift, or promptly

35

return the gift to the donor. Such disclosure (or approval) should be directed to the

Facility’s Administrator or Compliance Officer.

Outside Business Activities.

Facility employees who have been hired on a full-time, permanent basis are

expected to devote their entire working time to the performance of their duties for the

Facility. Outside business or consulting activities that would divert time, interest or

talents from the Facility’s business should be avoided. Facility employees are

encouraged to engage in charitable activities; however, if such activities require that an

employee spend a substantial amount of Facility time, interfere with the performance of

his or her duties, or create any suggestion that the Facility endorses or otherwise

supports that charity, he or she must seek the prior consent of the Facility’s

Administrator.

If a Facility employee is approached by a resident or a resident’s family member

and asked to provide services on behalf of the resident outside that employee’s regular

work schedule, the employee must obtain prior approval from the Director of Nursing.

If approved by the Director of Nursing, the employee shall not provide preferential

treatment to the resident on his/her shift. In addition, the resident or the resident’s

family, where appropriate, must sign a release acknowledging that they understand and

agree that the employee is working for them after his/her regular hours an during that

period, the employee is not working in the capacity of an employee or agent of the

Facility.

36

Business Information.

Facility employees may not use for their personal benefit any information about

the Facility or proprietary or non-public information acquired as a result of the

employee’s relationship with the Facility. Employees should disclose such business

information only as required in the performance of their job or as expressly authorized

by the Facility. Employees should not under any circumstances use or share "inside

information" which is not otherwise available to the general public for any manner of

direct or indirect personal gain or other improper use. Furthermore, employees

possessing patient or provider information must ensure that such information, in

whatever form it exists, is handled in a manner so as to protect against any

unauthorized or otherwise improper disclosure, access or use by individuals not entitled

to it. Violation of this policy may result in personal financial and/or criminal liability to

the employee for any benefit gained from improper use of such information, or any

damages sustained by the Facility as a result of improper disclosure of such

information, in addition to termination of such employee’s employment with the Facility.

Personal Use of Facility Resources.

It is the responsibility of each employee to preserve the Facility’s assets including

time, materials, supplies, equipment, and information. The Facility’s assets are to be

maintained for business related purposes. As a general rule, the personal use of any

Facility asset without prior approval of a supervisor is prohibited. The occasional use of

items, such as copying facilities or telephones for local calling, where the cost to the

Facility is insignificant, is permissible. Any use of Facility resources for community or

37

charitable organizations must be approved in advance by the Administrator. Any use of

the Facility’s resources for personal gain unrelated to the Facility’s business is strictly

prohibited.

Participation by an employee of the Facility in any activity that assists, promotes,

deters, or discourages union organizing shall not be allowed during any time the

employee is counted in staffing calculations for minimum staffing standards. Salaries

paid by the Facility to an employee for any activity that assists, promotes, deters, or

discourages union organizing shall not be an allowable cost for Medicare or Medicaid

cost reporting purposes. No expense incurred for activities directly related to

influencing employees with respect to unionization shall be an allowable cost for

Medicare or Medicaid cost reporting purposes.

Anti-Kickback Laws.

Federal and state laws place constraints on business arrangements related

directly or indirectly to items or services reimbursable by Federal health care programs,

and in the case of Florida law, reimbursable by any payer. Please refer to the

Medicare/Medicaid Fraud and Abuse Section beginning on page 26.

Violation of the federal and state anti-kickback statute is a criminal offense, and

can result in further civil liability including but not limited to the federal False Claims

Act. Every arrangement that involves a potential referral source should be carefully

evaluated by the Facility’s Director of Legal Affairs to determine if it fits within a

designated safe harbor or is otherwise subject to regulation.

38

The anti-kickback statute also precludes a nursing facility from engaging in

swapping arrangements, whereby a nursing facility accepts a low price from a provider

or supplier for an item or service covered by the nursing facility’s Part A per diem

payment in exchange for the nursing facility referring to the provider or supplier other

Federal health care program business, such as Part B business that is excluded from the

consolidated billing, and which the provider or supplier bills directly to a Federal health

care program.

Hospice services provided in a nursing facility must avoid any inducement of

referrals between the parties. When entered into, such arrangements must be in

writing, at fair-market value, and not be tied to volume or value of referrals. Whenever

possible, the Facility will structure its relationship with hospice programs to fit within a

safe harbor, such as personal services and/or management contract safe harbors.

Nursing facilities also run a risk of potential violation of the anti-kickback statute

if they accept remuneration from hospitals to keep certain beds open and available for

that particular hospital’s patients upon discharge, if one purpose of the arrangement is

to induce referrals to the hospital. Any such arrangement shall be reviewed by the

Facility’s Administrator and Director of Legal Affairs to ensure that the payment is not

made to induce or reward referrals from the Facility to the hospital.

This is intended as a guideline for the Facility’s employees, and it is not intended

to be a complete description of any and all legal or regulatory requirements related to

business dealings with referral sources. Accordingly, it is expected that all business

arrangements or other relationships with referral sources or potential referral sources

39

will be disclosed in full to, reviewed by, and approved by the Facility’s Administrator and

the Director of Legal Affairs.

Disclosure of Possible Conflicts of Interest.

Directors, managers, officers and other employees must disclose potential

conflicts of interest involving themselves or their immediate families (spouse, parents,

brothers, sisters, and children) to the Facility’s Compliance Officer. The Compliance

Officer will evaluate potential conflicts of interest and determine whether significant

conflicts of interest have occurred or might occur and take the necessary steps to

protect the Facility. If a Facility director, manager, officer or employee believes a

conflict of interest exists, he or she must treat the situation as if a conflict definitely

exists until other appropriate Facility officials have resolved the potential conflict.

If a Facility employee has concerns about possible conflicts of interest,

the employee is expected to contact either his or her supervisor, the Facility’s

Administrator, the Facility’s Compliance Officer, or the Compliance Hotline

(888-202-8477). Calls to the Hotline will be treated as confidential and may,

at the caller's request, be anonymous to the extent practical as discussed in

the Hotline Section of this Plan.

40

MARKETING

The Terrace at Hobe Sound will not accept and will otherwise forego any

business that can only be obtained by improper and/or illegal means. The Facility will

not make any unethical or illegal payments to anyone to induce the use of our services.

A Facility employee should never make a payment that if publicly disclosed, would

embarrass them or the Facility. The Facility also will not accept or approve of any of its

employees accepting any unethical or illegal payments from anyone to induce the use

of his/her/its items or services. THE FACILITY DOES NOT RECOGNIZE ANY

EXCEPTIONS TO THIS PROHIBITION AND WILL IMPOSE DISCIPLINARY

SANCTIONS FOR ANY VIOLATION OF THESE PROVISIONS.

To avoid the appearance of impropriety, the Facility will not provide any payment

or reimbursement for expenses incurred by any governmental or public representative

or employee. The Facility also will not provide gifts or payment of any kind to or on

behalf of any governmental or public representative or employee. The Facility will not

tolerate the making of such payments, and will comply with all laws regarding political

contributions and the participation of Facility employees in campaigns. Facility

employees will be expected to contact the Facility’s Compliance Officer immediately if

unethical or illegal payments are requested, offered or made.

The Facility will comply with all state and federal advertising requirements.

Facility employees must submit all advertising and marketing materials to the Facility’s

Administrator for approval before use. Such materials should be prepared in conformity

with all state and federal requirements regarding advertising. To the extent applicable,

41

the Facility will comply with the Health Insurance Portability and Accountability Act of

1996 (HIPAA) or other applicable laws, regulations or rules pertaining to the

confidentiality and privacy of individually identifiable health information in its marketing

and advertising activity. Because HIPAA and other state laws governing protected

health information may limit certain marketing activities, advertising activities or the

sale of protected health information by covered entities, care must be taken when

engaging in marketing or advertising activities to make sure that the requirements of

HIPAA and other state laws governing protect health information are understood and

observed. Accordingly, the Chief Privacy Officer should be consulted regularly

regarding any marketing or advertizing efforts by the Facility.

All Facility advertising must be truthful and not misleading. Specific claims about

the quality of the Facility’s services must be supported by evidence to substantiate the

claims made. All price advertising must accurately reflect the true charge for services

provided to our residents. The Facility does not use advertisements or marketing

programs that might cause confusion between our services and those of our

competitors. The Facility does not disparage the service or business of a competitor

through the use of false or misleading representations.

If a Facility employee has concerns about the propriety of the Facility’s

marketing or advertising practices, the employee is expected to contact

either his or her supervisor, the Facility’s Administrator, the Facility’s

Compliance Officer, or the Compliance Hotline (888-202-8477). Calls to the

Hotline will be treated as confidential and may, at the caller's request, be

42

anonymous to the extent practical as discussed in the Hotline Section of this

Plan.

PERSONNEL AND WORK ENVIRONMENT

The Terrace at Hobe Sound is committed to protecting, supporting and

developing its employees to the fullest extent of their potential in a fair and respectful

manner consistent with The Terrace at Hobe Sound’s reasonable capabilities. The

Facility realizes the importance of providing quality resident care through the use of

qualified, competent employees. The Facility will provide reasonable training to its

employees to assure that those who provide health care services at its facilities carry

out their duties in a professional and competent manner. Facility employees should take

advantage of opportunities to develop their skills, talents, knowledge and understanding

of their jobs. The Facility’s commitment to providing high quality services to its

residents requires that each of its employees strives to constantly improve their ability

to perform his or her job responsibilities.

Maintaining a Safe Workplace Environment.

The Facility is committed to providing a workplace environment that is as healthy

and safe for its employees as reasonably possible. The Facility will comply with all

government regulations and rules and its own required policies and practices that

promote the protection of workplace health and safety. The Facility’s policies have

been developed to protect its staff from potential workplace hazards. Employees shall

become familiar with and understand how these policies apply to their specific job

responsibilities and seek advice from their supervisors whenever they have a question

43

or concern. It is vitally important that each employee immediately advise his/her

supervisor of any serious workplace injury or any situation presenting a danger of injury

so timely corrective action may be taken to resolve the issue.

Ethical Concerns.

Every Facility supervisor or department head has a responsibility to create a work

environment in which ethical concerns can be raised and openly discussed. If a

supervisor or department head does not know how to answer such a question or

address a concern, the Facility’s Compliance Officer will assist.

Employees Should Report Improper Conduct.

No one employed by, or associated with the Facility, should be required to

subordinate their reasonable and lawful professional standards, judgment or objectivity

to those of any other individual. When differences of opinion arise, they should be

referred to appropriate management levels within the Facility for resolution.

If a Facility employee has reason to believe a situation involving fraud

or abuse has occurred at the Facility, the employee should contact either his

or her supervisor, the Facility’s Administrator, the Facility’s Compliance

Officer, or the Compliance Hotline (888-202-8477). Calls to the Hotline will

be treated as confidential and may, at the caller’s request, be anonymous to

the extent practical as discussed in the Hotline Section of this Plan.

44

Controlled Substances.

Some employees may routinely have access to prescription drugs, controlled

substances and other medical supplies. Many of these substances are governed and

monitored by specific regulatory organizations and may only be administered pursuant

to a physician order. It is extremely important that these items be handled properly

and only by authorized individuals to minimize risks to the Facility and its residents. If

an employee becomes aware of the diversion of any drug from the Facility, he or she

shall report the incident immediately to the Facility’s Administrator or Compliance

Officer.

Substance Abuse.

To protect the interests of our employees and residents, the Facility is committed

to an alcohol and drug-free work environment. All employees must report for work free

of the influence of alcohol and illegal drugs. Reporting to work under the influence of

any illegal drug or alcohol; having an illegal drug in your system; or using, possessing,

or selling illegal drugs while on Facility work time or property may result in immediate

termination. The Facility reserves the right to employ drug testing as a means of

enforcing this policy.

It is also recognized that individuals may be taking prescription or over-the-

counter medication, which could impair judgment or other skills required in job

performance. If an employee has questions about the effect of such medication on

his/her performance, or an employee observes an individual who appears to be

45

impaired in the performance of his or her job, they shall promptly consult their

supervisor, the Facility’s Administrator or the Facility’s Compliance Officer.

Equal Employment Opportunity.

Our employees provide the Facility with a wide complement of talents which

contribute greatly to our success. We are committed to providing an equal opportunity

work environment where everyone is treated with fairness, dignity and respect. We will

comply with all applicable laws, regulations and policies related to non-discrimination in

all of our personnel actions. Such actions include hiring, staff reductions, termination,

evaluations, recruiting, compensation, corrective action, discipline, and promotions. No

employee shall discriminate against any individual with a disability with respect to any

offer, term or condition of employment. The Facility will attempt to make reasonable

accommodations to the known physical and mental limitations of otherwise qualified

individuals with disabilities as required by law.

Harassment and Workplace Violence.

Each employee has the right to work in an environment free of harassment and

disruptive behavior. The Facility will not tolerate harassment by anyone based on the

diverse characteristics or cultural backgrounds of those who work with us. Degrading

or humiliating jokes, slurs, intimidation, or other harassing conduct is not acceptable

and will not be tolerated in our workplace.

Any form of sexual harassment is strictly prohibited. This prohibition includes

unwelcome sexual advances or requests for sexual favors in conjunction with

employment decisions. Moreover, verbal or physical conduct of a sexual nature that

46

interferes with an individual’s work performance or creates an intimidating, hostile, or

offensive work environment has no place in the Facility, and will not be tolerated.

Harassment also includes incidents of workplace violence. Workplace violence

includes robbery and other commercial crimes, stalking, violence directed at the

employer, terrorism, and hate crimes committed by current or former employees. As

part of our commitment to a safe workplace for all our employees, we prohibit all

personnel, agents, vendors and consultants from possessing firearms, other weapons,

explosive devices, or other dangerous materials while on the Facility’s premises.

Employees who observe or experience any form of harassment or violence should

report the incident to their supervisor, the Facility’s Administrator or the Facility’s

Compliance Officer.

Sanctioned Individuals.

The Facility has policies and procedures in place to ensure we do not contract

with, employ or bill for services rendered by an individual or entity that is excluded,

suspended, debarred, or ineligible to participate in federal health care programs; or has

been convicted of a criminal offense related to the provision of health care items or

services and has not been reinstated in a federal health care program after a period of

exclusion, suspension, debarment, or ineligibility, provided that the Facility is aware of

such criminal offense. The Facility routinely searches the Office of Inspector General

and General Service Administration’s lists of such excluded and ineligible persons.

47

License and Certification Renewals.

The Facility’s employees and independent contractors in positions which require

professional licenses, certifications or other credentials are responsible for maintaining

the current status of their credentials and shall comply at all times with federal and

state requirements applicable to their respective disciplines. To assure compliance, the

Facility will require evidence of the individual having a current license or credential

status. The Facility will not permit any employee or independent contractor to work

without valid, current licenses or credentials.

If a Facility employee has concerns about possible violations of the

above policies, the employee is expected to contact either his or her

supervisor, the Facility’s Administrator, the Facility’s Compliance Officer, or

the Compliance Hotline (888-202-8477). Calls to the Hotline will be treated

as confidential and may, at the caller's request, be anonymous to the extent

practical as discussed in the Hotline Section of this Plan.

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GOVERNMENT INVESTIGATIONS

It is the Facility’s policy to comply fully with the law and cooperate with any

reasonable, lawful demand made in a government investigation. In so doing, however,

it is essential that the legal rights of the Facility and of its personnel involved be

protected. If any employee receives an inquiry, a subpoena, or other legal document

regarding the Facility’s business, whether at home or in the workplace, from any

governmental agency, the Facility requests that the employee notify the Facility’s

Administrator or the Facility’s Compliance Officer immediately. If an individual is

contacted at home by a member of a governmental agency concerning the Facility’s

business, the individual has the right to ask the agent to come back at a more

convenient time, to speak with them at their place of business, to have an individual of

their choosing present during any questioning, and to be represented by counsel. If an

employee chooses to speak with an investigator, he or she is expected to answer

truthfully. The Facility requests that any employee who is contacted by a government

agent immediately contact the Facility’s Administrator or Compliance Officer to discuss

the matter. Usually, the Facility will arrange for counsel representing the Facility to

accompany any Facility employee to any interview by a governmental person. The

Facility wants to make clear that honest and truthful responses to an investigator’s

questions will not expose the employee to disciplinary action by the Facility.

Sometimes it is difficult to tell when a routine government inquiry, audit or

review escalates into a more formal governmental investigation. The Facility relies on

the common sense and alertness of its employees for making this important

49

determination and alerting the Facility’s Administrator or Compliance Officer in respect

of the initiation of any governmental investigation. In case of any doubt, employees

should consult with the Facility’s Administrator or Compliance Officer. Furthermore, as a

general rule it is best to consider all government inquiries, audits or reviews as

potentially serious with the potential of leading to more formal investigations and thus

act appropriately. Consequently, all documents in response to any such inquiries should

be reviewed by the Facility’s Compliance Officer and Director of Legal Affairs prior to

being submitted to the requesting authority.

If a Facility employee has concern about any governmental

investigation, the employee is expected to contact the Facility’s

Administrator, the Facility’s Compliance Officer, or the Compliance Hotline

(888-202-8477). Calls to the Hotline will be treated as confidential and may,

at the caller's request, be anonymous as discussed in the Hotline Section of

this Plan.

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COMPLIANCE WITH ENVIRONMENTAL LAWS

It is the Facility’s policy to comply with all environmental laws and regulations as

they relate to the Facility’s operations. The Facility will act to preserve our natural

resources to the full extent reasonably possible. The Facility will comply with all

environmental laws and operate its facilities with necessary permits, approvals and

controls. The Facility will diligently employ the proper procedures with respect to

handling and disposal of hazardous and biohazardous waste, including, but not limited

to, medical waste.

The Facility has a primary concern for the maintenance of the safety and well

being of its residents and employees. The Facility’s Administrator is charged with the

responsibility to develop programs to eliminate, or minimize to the extent reasonably

feasible, any hazards to the health and safety of employees and residents, in

accordance with applicable laws and regulations.

The Facility is committed to promoting sound corporate environmental practices

that will prevent and eliminate damage to the environment, enhance human and

community resources and reduce or avoid exposure to environmental liabilities.

Facility employees are expected to exercise good judgment with regard to

environmental aspects of the use of the Facility’s buildings, equipment, property, lab

processes, and medical products. Employees must comply with all applicable laws and

apply due diligence and care to minimize the generation, discharge and disposal of

medical waste or other hazardous materials. Employees who are uncertain of the

51

correct procedures for disposing of any such material are expected to consult their

supervisor for assistance.

Any Facility employee who detects an existing or potential condition hazardous to

human health or the environment or in violation of the Facility's environmental practices

will be expected to immediately report the condition to his or her supervisor. Prompt

disclosure of such events is critical to effective remedial action and to the Facility’s

efforts to ensure that such events do not recur. The Facility employees with

responsibility for the proper handling and disposal of hazardous substances and

infectious waste must ensure that contractors hired to dispose of such materials do so

in a proper manner.

In complying with these applicable laws and regulations, each employee must

understand how his or her job duties may impact upon the environment, adhere to all

requirements for the proper handling of hazardous materials, and immediately alert

their supervisor to any situation regarding the discharge of a hazardous substance,

improper disposal of medical waste, or any situation which may be potentially harmful

to life or to the environment.

If a Facility employee has concerns about improper or unlawful

practices of Facility employees in respect to environmental laws, the

employee is expected to contact either his or her supervisor, the Facility’s

Administrator, the Facility’s Compliance Officer, or the Compliance Hotline

(888-202-8477). Calls to the Hotline will be treated as confidential and may,

52

at the caller's request, be anonymous to the extent practical as discussed in

the Hotline Section of this Plan.

COMPLIANCE WITH COPYRIGHT LAWS

Photocopying and dissemination of material contained in books, newsletters and

other periodicals and computer software can result in substantial corporate and

personal liability for copyright infringement. However, the "fair use" doctrine potentially

can justify some copying of written material and there are certain alternatives available

to avoid or minimize exposure for copyright infringement.

Copyright Liability for Photocopying Newsletters and Other Periodicals.

Copying periodicals, even for internal distribution, can lead to substantial

corporate and personal liability for copyright infringement. Copyright law provides stiff

penalties against those who infringe registered copyrights, including recovery of costs

and attorney’s fees, as well as statutory damages. Statutory damages can range up to

$100,000 per infringement, if intentional copying is shown. Individuals actively involved

in copying can be personally liable, even if the copying was accomplished solely within

the scope of employment and solely for the employee’s benefit.

The "Fair Use" Defense.

The Copyright Act does allow the "fair use" of a copyrighted work, including such

use for purposes such as criticism, comment, news reporting, teaching, scholarship or

research.

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An important factor to consider when determining whether there has been "fair

use" is the amount and substantiality of the portion used in relation to the copyrighted

work as a whole. Copying an entire newsletter is qualitatively different from copying a

single page. Making a hundred copies of one page to disseminate to employees or use

in promotional packets is different from making one copy of an entire newsletter for

personal use.

The most important factor in determining whether there has been "fair use" is

the effect of the use upon the potential market for or value of the copyrighted work.

For instance, the systematic copying on a cover-to-cover basis of a newsletter arguably

deprives the newsletter publisher of a predictable stream of subscription revenue.

Facility employees should note that publishers of periodicals have often taken the

position that a license is required in order to make any copies, no matter how limited in

number or distribution. Given the uncertainty in the scope of the "fair use" defense, the

only sure method of avoiding copyright liability is to seek a license either directly from

the copyright owner or from the Copyright Clearance Facility, Inc. ("CCC") at 222

Rosewood Drive, Danvers, Massachusetts 01923.

CCC is a central licensing organization for approximately 1.5 million journals,

books, magazines and newsletters owned by more than 8,500 domestic and foreign

publishers. CCC offers two methods of securing permission to photocopy copyrighted

articles that have been registered with CCC. First, CCC permits the making of

photocopies, provided that a log is kept and appropriate payments made. Second, CCC

54

offers the Annual Authorizations Service, a blanket annual license granting an

organization the right to copy for internal distribution.

Purchasing Subscriptions or Copies.

Photocopying newsletters on a systematic and cover-to-cover basis, even for

internal use, creates a high risk of ultimately losing a copyright infringement lawsuit.

Rather than engaging in such wholesale copying, and if purchasing a license is not

deemed appropriate, Facility employees should consult their supervisor so it can be

determined whether it would be appropriate to purchase an additional subscription,

route existing subscriptions, and/or purchase back issues or reprints.

Describing Copyrighted Material.

Because copyright protects only expression, not ideas and not facts or factual

information, an alternative to photocopying is to describe the ideas and facts contained

in the copyrighted article in the employee’s own words and from the employee's

perspective rather than photocopying an article. This is an acceptable alternative for

Facility employees.

Computer Software.

Unless specifically allowed in the license agreement for the computer software

(by paying in advance for periodic, additional copying), Facility policy is that employees

should never copy computer software. Such copying is always infringement. There is no

"fair use" doctrine with respect to copying software. Failure to observe this policy can

55

result in serious consequences to the employee, such as termination or suit against the

employee by the software vendor.

If the license specifically allows copying the software, a Facility employee may do

so for use within the Facility but only after first checking the actual license agreement in

order (1) to confirm the ability to lawfully copy the software, and (2) to determine

whether an additional license fee is due the owner as a result of the copying.

If a Facility employee has concerns about practices possibly violating

copyright laws, the employee is expected to contact either his or her

supervisor, the Facility’s Administrator, the Facility’s Compliance Officer, or

the Compliance Hotline (888-202-8477). Calls to the Hotline will be treated

as confidential and may, at the caller's request, be anonymous to the extent

practical as discussed in the Hotline Section of this Plan.

BUSINESS INFORMATION SYSTEMS

Accuracy, Retention, and Disposal of Documents and Records.

Each Facility employee is responsible for the integrity and accuracy of the

Facility’s documents and records, not only to comply with regulatory and legal

requirements but also to ensure records are available to support our business practices

and actions. No one may alter or falsify information in any record or document.

Medical and business documents and records are retained in accordance with the

law and our record retention policy. Medical and business documents include paper

documents such as letters and memos, computer-based information such as e-mail or

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computer files on disk or tape, and any other medium that contains information about

the organization or its business activities. It is important to retain and destroy records

only according to our policy. You must not tamper with records, nor remove or destroy

them prior to the specified date.

Information Security and Confidentiality.

Confidential information about our Facility’s strategies and operations is a

valuable asset. Although you may use confidential information to perform your job, it

must not be shared with others unless you have permission and authorization from the

Facility. Confidential information includes, but is not limited to, personnel data

maintained by the organization; resident lists and clinical information; resident financial

information; passwords; pricing and cost data; information pertaining to acquisitions,

divestitures, affiliations and mergers; financial data; research data; strategic plans;

marketing strategies and techniques; supplier and subcontractor information; and

proprietary computer software. If your relationship with the Facility ends for any

reason, you are still bound to maintain the confidentiality of information viewed during

your employment. This provision does not restrict the right of a colleague to disclose, if

he or she wishes, information about his or her own compensation, benefits, or terms

and condition of employment.

Our clinical and business processes rely on timely access to accurate information

from our computer system. Your passwords act as individual keys to our network and

to critical patient care and business applications and they must be kept confidential. It

is not permissible to share or disclose your user identification or password to anyone

57

else, and it is not permissible for other employees to share their user identification or

password with you. It is part of your job to learn about and practice the many ways

you can help protect the confidentiality, integrity and availability of electronic

information assets.

Electronic Media.

All communications systems, including electronic mail, internet access, and voice

mail, are the property of the Facility and are to be primarily used for business purposes.

Highly limited reasonable personal use of the Facility’s communications systems is

permitted; however, you should assume these communications are not private.

Resident or confidential information should not be sent through the internet until such

time that its confidentiality can be assured.

The Facility reserves the right to periodically access, monitor, and disclose the

contents of e-mail and voice mail messages. Access or disclosure of individual

employee messages may only be done with the approval of the Facility’s counsel.

Employees may not use internal communication channels or access to the internet at

work to post, store, transmit, download, or distribute any threatening materials;

knowingly, recklessly, or maliciously false materials; or obscene materials including

anything constituting or encouraging a criminal offense, giving rise to civil liability, or

otherwise violating any law. Additionally, these channels of communication may not be

used to send chain letters, personal broadcast messages, or copyrighted documents

that are not authorized for reproduction; nor are they to be used to conduct an external

job search or open mis-addressed mail. Employees who abuse our communications

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systems or use them excessively for non-business purposes may lose these privileges

and be subject to disciplinary action.

Financial Reporting and Records.

We have established and maintain a high standard of accuracy and completeness

in the documentation and reporting of all financial records. These records serve as a

basis for managing our business and are important in meeting our obligations to

residents, employees, suppliers, and others. They are also necessary for compliance

with tax and financial reporting requirements.

All financial information must reflect actual transactions and conform to generally

accepted accounting principles. No undisclosed or unrecorded funds or assets may be

established. The Facility maintains a system of internal controls to provide reasonable

assurances that all transactions are executed in accordance with management’s

authorization and are recorded in a proper manner so as to maintain accountability of

the Facility’s assets.

If a Facility employee has concerns about any unethical or improper

activities related to the foregoing, the employee is expected to contact either

his or her supervisor, the Facility’s Administrator, the Facility’s Compliance

Officer, or the Compliance Hotline (888-202-8477). Calls to the Hotline will

be treated as confidential and may, at the caller's request, be anonymous to

the extent practical as discussed in the Hotline Section of this Plan.

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THE COMPLIANCE PROGRAM

Program Structure.

The Facility’s Compliance Program is intended to demonstrate in the clearest

possible terms the absolute commitment of the Facility to the highest standards of

ethics and corporate compliance. The elements of the program include establishing

written standards, effectively communicating those standards with all employees,

staffing the program with an individual in senior management, using due care in

delegating responsibility, providing a mechanism for reporting potential violations,

including establishing a HOTLINE, monitoring and auditing, ensuring consistent

enforcement of discipline, and providing a response and corrective action in the event

of non-compliance.

These elements are supported at all levels of the Facility. A Compliance Officer

and Compliance Committee consisting of senior management are responsible for the

development of the compliance standards; the development and delivery of ethics and

compliance training; auditing and monitoring compliance with laws, regulations and

policies; and providing a mechanism for reporting potential violations.

Resources for Guidance and Reporting Violations.

To obtain guidance on an ethics or compliance issue or to report a suspected

violation, you may choose from several options. We encourage the resolution of issues,

including human resources-related issues (e.g., payroll, fair treatment and disciplinary

issues), whenever possible and when you are comfortable with it, and think it

appropriate under the circumstances, with your supervisor. If this is uncomfortable or

60

inappropriate, another option is to discuss the situation with the Facility’s Administrator.

You are always free to contact the Compliance Officer directly or the Facility’s

Compliance Hotline.

The Facility will make every effort to maintain, within the limits of the law, the

confidentiality of the identity of any individual who reports possible misconduct. There

will be no retribution or discipline for anyone who reports a possible violation in good

faith. Any employee who deliberately makes a false accusation with the purpose of

harming or retaliating against another employee may be subject to discipline.

Personal Obligation to Report.

We are committed to ethical and legal conduct that is compliant with all relevant

laws and regulations and to correcting wrongdoing wherever it may occur in the

Facility. Each employee has an individual responsibility for reporting any activity by a

colleague, physician, subcontractor, or vendor that appears to violate applicable laws,

rules, regulations, or this Code.

Each employee shall be required to annually acknowledge and certify that he/she

has reread the Code of Conduct and Compliance Plan, that he or she is aware of no

situation involving fraud or abuse or inappropriate conduct at the Facility, and confirm

that during the past year he/she has been compliant with, and will continue to abide

by, the terms and provisions of the Code of Conduct and Compliance Plan.

Internal Investigations of Reports.

We are committed to investigating all reported concerns promptly and

confidentially to the extent possible. The Facility’s Compliance Officer will coordinate

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any findings from the investigations and immediately recommend corrective action or

changes that need to be made. We expect all employees to cooperate fully with such

investigation efforts.

Corrective Action.

Where an internal investigation substantiates a reported violation, it is the policy

of the Facility to initiate corrective action, including, as appropriate, making prompt

restitution of any overpayment amounts, notifying the appropriate governmental

agency, instituting whatever disciplinary action is necessary and appropriate, and

implementing systemic changes to prevent a similar violation from recurring in the

future.

Discipline.

All violators of the Code will be subject to disciplinary action. The precise

discipline utilized will depend on the nature, severity, and frequency of the violation and

may result in any or all of the following disciplinary actions:

• Verbal warning;

• Written warning;

• Written reprimand;

• Suspension;

• Termination;

• Restitution.

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Internal Auditing and Other Monitoring.

The Facility is committed to monitoring compliance with its policies. The Facility

also routinely seeks other means of ensuring and demonstrating compliance with laws,

regulations, and its policies. Additionally, the Facility regularly conducts self-audits

pursuant to compliance policies and procedures and routinely undertakes monitoring

efforts in support of those compliance policies.

Acknowledgment Process.

The Facility requires all employees to sign an acknowledgment confirming they

have received the Code of Conduct and Corporate Compliance Plan, understand it

represents mandatory policies of The Terrace at Hobe Sound and agree to abide by it.

New employees will be required to sign this acknowledgment as a condition of

employment. Each Facility employee is also required to participate in annual Code of

Conduct and Compliance Plan training, and records of such training will be retained by

the Facility for not less than seven (7) years.

Adherence to and support of the Facility’s Code of Conduct and participating in

related activities and training will be considered in decisions regarding promotion and

compensation for all employees. New employees must receive Code of Conduct and

Compliance Plan training within thirty (30) days of employment.

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COMPLIANCE HOTLINE

In order to provide all Facility employees with every avenue possible in which to

raise their concerns and report possible wrongdoing, the Facility has established a

Compliance Hotline (888-202-8477). This number may be accessed 24 hours a day, 7

days a week. Every call will be treated as confidential. Calls will not be traced; and the

caller will not be required to furnish his or her name. The Facility’s Compliance Officer

will investigate all calls and ensure that proper follow-up actions are taken. The

Facility’s policy prohibits any employee from taking retaliation against a Hotline caller,

and as stated above, the caller may remain anonymous to the extent practical if he or

she desires to do so.

If an employee prefers, they may contact either of the following individuals with

any concern that they may have with regard to any activity occurring at the Facility.

Corporate Compliance Officer

Allison Hillhouse (386) 236-7569

Director of Legal Affairs

Norman J. Ginsparg 12221 West Dixie Highway North Miami, Florida 33161 (305) 575-1092

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THE TERRACE AT HOBE SOUND’S

CODE OF CONDUCT

AND

COMPLIANCE PLAN POLICIES

65

PERSONNEL POLICY REPORTING COMPLIANCE PROBLEMS

If any employee perceives what he or she believes to be an illegal or unethical

act involving another employee or anyone acting on behalf of the organization, the

employee should report the activity to their immediate supervisor. However, if the

employee is not comfortable doing so, or if the employee believes that the immediate

supervisor's response to the report is unsatisfactory, the employee shall report the

suspected wrongdoing to the Facility’s Compliance Officer. The organization will make

every effort to keep these reports confidential, although complete confidentiality cannot

be guaranteed if the organization deems it necessary to investigate or take other action

regarding the report.

No employee will be punished solely because they reported what he or she

reasonably believes to be an illegal or unethical act. An employee whose report contains

an admission of personal wrongdoing, however, cannot be guaranteed protection

against disciplinary action. In determining whether, and to what extent, to discipline an

employee who reports wrongdoing for which the employee is partly or fully responsible,

the organization will give favorable consideration to the fact that the employee

volunteered the information. An employee may be subject to discipline if the

organization determines that the report of wrongdoing was knowingly fabricated, in

whole or in part, by the employee.

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COMPLIANCE TRAINING AND EDUCATION POLICY 1. All directors, managers, officers, department heads and employees shall be

exposed to training and education with regard to compliance and Medicare/ Medicaid integrity issues.

2. Training will be offered on a periodic (at least annual) basis and may vary in

length, depending on the role of the individual in the Facility. 3. Time required to train various position descriptions will be determined by the

Compliance Officer in conjunction with the Compliance Committee. Compliance training time will be documented in the employee’s personnel file.

4. Training will encompass: Federal and state statutes, regulations and guidelines;

policies of private payers; corporate ethics; and the organization's policy with regard to compliance with legal requirements and policy.

5. Independent contractors and significant agents of the practice, including

physicians and ancillary providers of medical care, should be exposed to training through attendance at training sessions or seminars, and/or specific manuals, documents, and publications that will serve to educate and inform.

6. Documentation of attendance at training sessions and receipt of manuals and

publications should be established and maintained. 7. New directors, managers, officers, department heads and other employees must

receive compliance training as part of their initial orientation and education. 8. Supervisors may assist or be involved in training, provided such training is

formally conducted in appropriate sessions and sufficiently documented, in accordance with the training policies of the practice.

9. Specific, in-depth training should be provided to include the following:

• government and private payer reimbursement principles;

• general prohibitions on paying or receiving remuneration to

induce referrals;

• proper confirmation of diagnoses for billing purposes;

• submission of claims for services;

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• signing forms for a physician without his or her authorization;

• alterations to medical records;

• prescribing/refilling medications and procedures without proper

authorization;

• proper documentation of services rendered;

• duty to report misconduct.

10. Periodic additional training should be provided to coding and billing personnel. Individuals with training and education in coding and billing will be given preference in hiring.

11. Specific professional education should be mandated by the education policies of

the Facility and attendance at training shall be a condition of continued employment. Failure to attend training will result in specific disciplinary action, up to and including possible termination.

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CODING AND BILLING POLICY 1. The Facility will charge for and bill only for services that are properly authorized,

ordered, and performed. 2. Coding and billing staff will exhibit appropriate knowledge of their position and

responsibility, including a working knowledge of third-party payer regulations and rules, billing practices, policies and procedures. Employees responsible for coding and billing shall have a firm working knowledge and understanding of billing and coding procedures and policies and the ability to answer questions regarding charging, coding, and billing. Employees who have questions regarding coding or billing should refer them to their supervisor, the Administrator or to the Compliance Officer.

3. Appropriate medical record documentation will be provided for every service

ordered and performed. In the event proper documentation for services is not in the record, the billing staff should immediately request a supervisor to review the record. In no case shall billing occur for services where there is insufficient or a lack of appropriate documentation.

4. Medical records and/or billing documents should never be altered, erased, or

added to except in strict accordance with applicable policy, laws and regulations. A medical record should never be inappropriately altered in order to increase charges or billing.

5. Co-payments or deductible amounts will be collected in all cases where a payer

agreement calls for the collection of these amounts. Waiver of deductible or co-payment amounts may only be made by supervisory or management personnel and where applicable a notice shall be placed on the billing form notifying the third party payer that a waiver has been given.

6. Reductions in charges may only be authorized by supervisory or management

personnel and should be in written form, a copy of which must be maintained in the medical record and where applicable a notice placed on the billing form notifying the third party payer of the reduction.

7. Any amounts not allowed by Medicare or Medicaid shall not be charged to

residents with Medicare or Medicaid unless it is for a service not covered. 8. Credit amounts owed residents or payers should be identified as soon as possible

and repayment issued promptly. 9. Charging, coding or billing errors identified by staff members should immediately

be reported to their supervisor, appropriate management, or to the Compliance

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Officer and appropriate action taken in compliance with the Facility’s policies and upon authorization of the Compliance Officer.

10. Coding and billing shall be performed in compliance with the applicable levels of

service, medical necessity, appropriate use of consultation codes, and appropriate billing for the services of non-physician health care employees including, but not limited to, physician assistants and nurse practitioner in accordance with applicable federal, state or commercial third-party payer rules, regulations and policies.

The Facility shall perform regularly scheduled internal audits of each physician’s

use of the documentation and coding and the billing department’s appropriate use of codes and modifiers.

11. The Facility shall maintain a resource library containing appropriate updated

forms required for Medicare, Medicaid and other third-party payer patients in order to comply with registrations, assignment of benefits, waivers, release of information and appropriate coding manuals and publications.

12. The Facility’s billing employees shall review with the physician any denials of

payment and shall review the patient’s medical record for appropriate documentation prior to resubmitting any further request for payment.

13. The Facility shall be familiar with Local Medical Review Policies for Medicare

services and Advanced Beneficiary Notices as they pertain to reasonable and necessary medical services.

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MEDICAL AND BUSINESS RECORDS ACCURACY AND STORAGE POLICY

It is the policy of this organization that records of all kinds, including medical and

financial records, are to be complete, accurate, and maintained in a safe and secure location. 1. All records of this organization are to be complete, accurate, and reliable. All

records, charts, books, documents, computer records, electronic media, data, and files are to be prepared properly and completely.

2. Employees should be informed and trained to the extent necessary to properly

and accurately complete the various records for which they are responsible. employees or individuals who feel that they are inadequately trained or informed should address this issue with their supervisor or the Administrator.

3. Records are to be maintained for the duration of time specified by federal or

state laws and regulations, or for the time specified by Facility policy, whichever is longer. Financial records should be maintained to comply with the provisions of the Internal Revenue Code and to comply with the provisions of the Social Security Act. It is the policy of this organization that medical records will be retained for at least seven (7) years past the last time the patient was seen, with two exceptions, where applicable:

a. the medical record of a minor will be retained until the minor would reach

his or her twenty-first (21st) birthday, or for ten (10) years past the last time seen, whichever length of time is the longer of the two; and,

b. the medical record of a deceased individual can be destroyed seven (7)

years after the date of death. Disposal of records should be properly researched, documented, and authorized

before any record is destroyed. No record shall be destroyed without the specific permission of the Facility’s Administrator.

4. All records of the organization are considered confidential. Medical Records,

however, are confidential by law and must be maintained in complete confidence. A complete Medical Records Confidentiality Policy is established by this organization and made accessible to all staff members dealing with medical record development, access and storage.

5. Employees are cautioned that they are responsible for providing accurate and

timely information for all records. Never enter false or misleading information into patient or business records. All information should be verified for accuracy

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and reliability before being entered. Should you feel it is necessary to change, alter or correct information that has already been entered into a medical or business record, please consult your supervisor and/or if necessary the Ethics and Compliance Officer before making any changes, alterations or corrections.

6. Records are to be maintained and stored in proper storage and maintenance

facilities. It is recommended that backup copies be made of all electronic data files related to business or patient records. One copy of the electronic data files should be stored in locked, fireproof storage on location, with one copy stored off-site in similar facilities. Medical record information that has not been accessed in three years can be stored through scanning into electronic media; photographically copied to microfiche or microfilm; or stored in hard copy. In all cases, medical records in storage should be identified with patient name and Social Security Number. (If the Facility utilizes a resident identification number system, a master index should be placed in the box and a copy maintained in the active medical records area or on a readily accessible computer, and should be available for immediate access at all times by medical personnel.)

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CONFIDENTIALITY AND PRIVACY POLICY

It is the duty of all Facility employees to protect the confidentiality of the resident's medical, and the organization's personnel and business information. 1. Medical Records Confidentiality: This Facility strives to protect the

confidentiality of the resident's medical record. This Medical Records Confidentiality Policy is part of the policies and procedures of this organization. In brief, it provides for the following:

a. Medical information, including, diagnosis, treatment, or prognosis of a

resident may not be released without specific authorization from the resident or his or her guardian or agent or appropriate government authorities, or as otherwise provided by law.

b. Specific authorization includes a written Consent to Release Medical

Information for the purposes of billing for services in a format that is acceptable to the Facility; Consent for Medical Records Transfer from one physician's care to another, or in the case of medical consults in a format that is acceptable to the Facility; a valid Subpoena by a Court of law having jurisdiction; or a valid Subpoena by federal or state agencies in the event of a specific investigation. Any medical record requested pursuant to a subpoena shall not be released without prior authorization of the Facility’s Counsel.

c. On entering the Facility, residents are asked to sign an authorization and

release providing authorization for the release of medical information for billing or medical treatment purposes.

d. Presentation of Subpoenas by federal, state, or local officers, or via mail,

should be forwarded to the appropriate manager or the Facility’s Administrator for response. A subpoena is a legal document requesting, or in some cases mandating, the release of specific information and generally corresponds to a legal investigation or court case.

e. Internal release of a resident’s medical record is on a need to know basis;

information should be disclosed only if the person requesting information has a legitimate medical interest in the resident's current regimen of care.

f. The release of specific information regarding HIV, AIDS, drug abuse,

alcohol abuse, substance abuse, mental health, mental impairment, genetic testing and immunization records without proper authorization may be additionally prohibited by state or federal law. Persons releasing medical records information may be subject to prosecution if the release

73

of information is inappropriate. Records containing this type of information are subject to additional protections and a separate authorization may be required before the information can be used or disclosed. Accordingly, a supervisor or the Ethics and Compliance Officer should be consulted prior to any use or disclosure if there any questions or concerns.

g. The complete Medical Records Policy maintained by the Medical Records

Department should be consulted in the event of questions or concerns regarding medical privacy. Protected health information should not be disclosed by email. Care should be taken when transmitting medical information by facsimile. Any fax machine used for transmitting medical records must be secure and on a secure line. Medical records should not be faxed, except as expressly permitted in the Medical Records and HIPAA Policy.

2. Business Information Confidentiality: Business information regarding the

organization should not be released to any unauthorized persons including, but not limited to, friends, family, or social acquaintances.

a. Business information should not be released to competitors, suppliers, or

outside contractors without appropriate approval from the Facility Administrator. This can include, but is not limited to, computer data or files, financial information or reports, customer or service lists, charge or fee information, computer programs or reports, or descriptions of Facility policies, procedures, planning, or operations.

b. Computer software and intellectual property should not be released

without proper written authorization from the Facility Administrator. Unauthorized copies of computer programs or reports made from Facility computers or used on Facility computers is prohibited and may be a violation of copyright laws.

c. Introduction of computer programs, software or files into the Facility's

computer system is prohibited without appropriate authorization. The introduction of data from outside sources may introduce computer viruses or other damage into the Facility's computer system and should be conducted, even after authorization, only when effective anti-virus software is in place.

d. Passwords and other security codes or measures are in place to protect

both the Facility and the user. Do not share passwords or codes. The employee is responsible for use of passwords and any damage that results from that use if he or she shares this information. Do not allow others to

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use your computer terminal when you are logged on using your password or code.

e. Any request for information regarding an employee or his or her

employment should be forwarded to the Facility’s Administrator. Employee information may be released only by the Facility’s Administrator, after first consulting with the Director of Legal Affairs. The release of such information is very strictly governed by laws regarding employee confidentiality.

f. Other information which relates to the Facility's operations should be

maintained in confidence. This applies to the privacy of your fellow employees. Do not engage in gossip or discuss information relative to employees if you do not have a specific authorization and business need to do so.

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RESPONSE TO GOVERNMENT INVESTIGATIONS POLICY

It is the policy of this organization to promptly and completely comply with any

governmental investigation or request for information. 1. The organization recognizes that governmental investigations of health care

operations and billing are common and that all non-federal facilities are, from time to time, the target of investigation by agencies authorized by federal and state law.

2. It is the policy of this organization to welcome the review of our operations and

billing and to utilize such review as an opportunity to improve performance. 3. Staff approached by or interacting with those identifying themselves as

government investigators should respond politely and professionally. They should:

• Request appropriate identification; • Immediately notify their supervisor or manager; and • Ask for the involvement of the organization's Compliance Officer,

Administrator, and Director of Legal Affairs. 4. Staff approached by those identifying themselves as government investigators

away from their workplace are entitled to consult with legal counsel before answering any questions about their employment, employer, work situation, or work activities. It is requested that staff promptly report any such contacts to the Facility’s Administrator or the Corporate Compliance Officer.

5. Employees should cooperate politely and appropriately with requests made by

government investigators. 6. Requests for information may include a Subpoena or a Civil Investigative

Demand Letter. Employees receiving such documents should immediately forward them to the Facility’s Administrator or the Corporate Compliance Officer.

7. Government Investigators seeking to take possession of documents, computers,

records, or reports should first present a search warrant giving them the legal right to remove materials. Should this occur, immediately notify the Facility’s Administrator, Compliance Officer or Director of Legal Affairs. Government investigators removing any items should provide a written receipt for any materials taken. Employees should keep a written, dated, signed log of all materials taken from their workplace.

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8. Facility staff is prohibited from: (a) Destroying, altering, or concealing records, documents, files, or information in anticipation of a request from a government investigation, court, or government agency, or when requested by an investigator, court, or government agency; (b) lying, or making false or misleading statements to any government investigator; (c) attempting to persuade other employees or other persons to provide false or misleading information to a government investigator; or (d) failing to cooperate with a government investigation.

9. Staff should refrain from making any public or private statements regarding

government investigations to the extent that those statements may violate the organization's responsibility to protect patient confidentiality or privacy.

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THE TERRACE AT HOBE SOUND’S

CODE OF CONDUCT

AND

COMPLIANCE PLAN QUESTIONNAIRES

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COMPLIANCE QUESTIONNAIRE FOR CLINICAL PERSONNEL

NAME: Position:

ADDRESS: ____ ZIP

SS #: _______________________ HOME TELEPHONE: (____) __________________

STATE LICENSED: LICENSE #:

CERTIFICATION or SPECIALTY(S):

MEDICAL or TECHNICAL SCHOOL:

YEAR of GRADUATION: PROVIDER #: NPI#:

1) List your current professional licenses, the state of issuance and expiration date. 2) Have you ever had your license suspended or revoked? If so, in which state(s)?

When? Summarize all reasons underlying this action. 3) Have you ever been convicted of a health care related felony (including a plea

bargain or other arrangement with prosecuting authorities)? If so, please explain.

4) Have you ever been excluded, suspended or debarred from the Medicare or

Medicaid programs or any other federally funded health care program? If so, please explain.

5) List any health care or related business in which you, or a member of your family

or household, has a direct or indirect ownership or controlling interest of 5 percent or more. Include Medicare or Medicaid provider numbers for each (attach extra pages if necessary).

6) Have any of the entities which you listed in response to question #5 above been

excluded, suspended or debarred from Medicare, Medicaid or any of the federally funded health care programs? If so, please explain.

7) Have you ever defaulted on a Health Education Assistance Loan? If so, please

explain.

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8) Have you ever been convicted of a felony (including a plea bargain or other arrangement with prosecuting authorities)? If so, please explain.

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COMPLIANCE QUESTIONNAIRE FOR CODING/BILLING STAFF

NAME: POSITION: ______________________ ADDRESS: ___ ZIP _____ S.S.#: HOME TELEPHONE: ( ) 1) Have you ever been convicted of a felony (including a plea bargain or other

arrangement with prosecuting authorities)? If so, please explain. 2) Have you ever been excluded, suspended or debarred from, or otherwise

sanctioned by the Medicare or Medicaid programs or any other federally funded health care program? If so, please explain.

3) List any health care or health care related business in which you or a member of

your family or household, has a direct or indirect ownership or controlling interest of 5 percent or more. Include any Medicare or Medicaid provider numbers for each (attach extra pages if necessary).

4) Have any of the entities which you listed in response to question #3 above been

excluded, suspended, or debarred from of otherwise sanctioned by Medicare, Medicaid or any other federally funded health care federally funded health care programs? If so, please explain.

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ACKNOWLEDGEMENT AND

CERTIFICATION

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ACKNOWLEDGEMENT and CERTIFICATION

I certify that I have received, read and, to the extent reasonably applicable to

my employment responsibilities, understand The Terrace at Hobe Sound’s Code of

Conduct and Compliance Plan and acknowledge that it represents mandatory policies of

the Facility and agree to abide by it. I agree to fully abide by the Facility’s Code of

Conduct and Compliance Plan and understand that any violation of the Facility’s policies

described in the Plan may lead to disciplinary action including, but not limited to,

termination of employment.

Signature: Name (Print): Position: Date: PROMPTLY RETURN THIS SIGNED ORIGINAL TO THE FACILITY’S ADMINISTRATOR

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