Exhibit 10.4

AMENDMENT TO CORPORATE INTEGRITY AGREEMENT
between the
Office of Inspector General
of the
Department of Health and Human Services
and
Beverly Enterprises Inc.

I.   Preamble and Scope of Amendment

On February 3, 2000, the Office of Inspector General (“OIG”) of the Department
of Health and Human Services and Beverly Enterprises Inc. (“Beverly”) entered
into a Corporate Integrity Agreement (“CIA”). This Amendment supersedes the
January 17, 2003 Amendment to the CIA.

II.   Term and Scope of the Amendment

     A. The period of the compliance obligations assumed by Beverly under this
Amendment shall be coterminous with the CIA (unless otherwise specified).
Notwithstanding the foregoing, upon completion of the third year of this
Amendment, the OIG, in its sole discretion, may waive Beverly’s obligation under
Section III.D infra to retain an Independent Monitor for the remaining term of
the Amendment. The effective date of this Amendment shall be the date on which
the final signatory executes this Amendment (“Amendment Effective Date”). The
“Reporting Period” shall be the calendar year. The first Reporting Period shall
be the period beginning with the Amendment Effective Date through December 31,
2004.

     B. The scope of this Amendment shall be governed by the following
definitions:

         1.“Covered Facility,” includes all the nursing home facilities that are
licensed, operated, directed, or administered by Beverly or in which Beverly has
an ownership or control interest, as defined by 42 U.S.C. § 1320a-3(a)(3).      
     2.“Amendment Covered Persons” includes the employees, contractors and
agents who work at a Covered Facility who:

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      (a) perform patient care or resident care duties;         (b) make
assessments of patients or residents that affect treatment decisions or
reimbursement;         (c) perform billing, coding, or assessment functions
described in Section III.A.4. of this Amendment;         (d) perform management
oversight on staffing, patient care, resident care, reimbursement, or the CIA
and this Amendment; or         (e) perform any function that relates to or is
covered by the CIA and this Amendment.

Notwithstanding the above, any non-employee who is hired on a part-time or
temporary basis and who works less than 160 hours per year in a Covered Facility
or any non-employee private caregivers and/or attending physicians hired by any
resident or the family or friends of any resident of a Covered Facility
regardless of the hours worked per year in a Covered Facility are not Amendment
Covered Persons.

III.   Corporate Integrity Obligations

Beverly shall ensure that its compliance program required by the CIA includes
the following elements.

     A. Compliance Officer, Committees, and Internal Audit and Review Functions.

          1. Compliance Officer. In addition to his or her other duties, the
Compliance Officer appointed pursuant to the CIA shall also provide reasonable
assurance that quality of care problems are being appropriately addressed and
corrected.

          2. Quality Compliance Committees.

  (a)   Corporate Quality Committee. Beverly has established a Corporate Quality
Council (“Corporate Quality Committee”). The purpose of the Corporate Quality
Committee is to monitor and improve quality of care at Beverly’s nursing homes.
At a

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      minimum, the Corporate Quality Committee includes the Compliance Officer,
the Corporate Medical Director, the Chief Operating Officer of the Nursing Home
subsidiary, the Sr. Vice President of Professional Services, representatives
from Beverly’s Regions, and any other appropriate officers or individuals
necessary to thoroughly implement the requirements of this Amendment that relate
to quality of care in the Covered Facilities.     (b)   Regional Quality
Councils. Beverly has established Regional Quality Councils (“Regional Quality
Compliance Committees”). The purpose of the Regional Quality Compliance
Committees is to address issues concerning quality of care at Beverly’s nursing
homes in each of its Regions. At a minimum, the Regional Quality Compliance
Committee includes the Regional Vice President of Operations, the Regional
Director of Professional Services, and any other appropriate officers or
individuals necessary to thoroughly implement the requirements of this Amendment
that relate to quality of care in the Covered Facilities. For each Regional
Quality Council meeting in the Region in which the covered facilities are
located, there shall be senior representatives from the Covered Facilities,
chosen on a rotating and random basis, to report to the committee on the
adequacy of care being provided at their applicable Covered Facility.

     3. Board of Directors’ Committee. Beverly currently has a Quality Committee
as part of its Board of Directors to provide oversight on quality of care issues
(“Quality Assurance Monitoring Committee”). This committee shall continue to:

  (a)   review the adequacy of Beverly’s system of internal controls, quality
assurance monitoring, and patient care;     (b)   ensure that Beverly’s response
to state, Federal, internal, and external reports of quality of care issues is
complete, thorough, and resolves the issue(s) identified; and

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  (c)   ensure that Beverly adopts and implements policies and procedures that
are designed to ensure that each individual cared for at a Beverly facility
receives the highest practicable physical, mental and psychosocial level of care
attainable. The individuals who serve on this committee shall be readily
available to the Compliance Officer, the Sr. Vice President of Professional
Services, and the Monitors to respond to any issues or questions that might
arise. When new members are appointed, or the responsibilities or authorities of
the Board committee are substantially changed, Beverly shall notify the OIG, in
writing, within fifteen (15) days of such a change.

     4. Quality Reviews. Beverly currently performs Quality reviews under the
Beverly Quality System. The Quality Reviews (known as the Facility Performance
Assessments), including quality review follow-ups, are described in a 2003
notebook, which Beverly has previously provided to the OIG. Beverly shall
continue to conduct Quality Reviews in a manner that devotes at least equal
resources to performing the function of quality review at the covered facilities
as that described in the 2003 notebook. Beverly shall notify the OIG within
fifteen (15) days of any material changes to the form, manner, or frequency of
these Quality Reviews. The Quality Reviews shall:

      a. make findings of whether the patients and residents at Covered
Facilities are receiving the quality of care and quality of life consistent with
basic care, treatment and protection from harm standards, including but not
limited to, 42 C.F.R. Parts 482 and 483 and any other Federal and state
statutes, regulations, and directives;         b. make findings of whether the
policies and procedures mandated by this Amendment are created, implemented, and
enforced;         c. make findings of whether training is performed in
accordance with this Amendment;         d. make findings of whether hotline
complaints are appropriately investigated;         e. make findings of whether
the reporting obligations are complied with in accordance with this Amendment;
and

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      f. make findings of whether corrective action plans are timely created,
implemented, and enforced.

    Notwithstanding the above, the obligations and findings required by
Sections III.A.4(b), (c), (d), and (e) above may be made by Beverly’s Internal
Audit function or any other Beverly review function whose primary responsibility
is not to conduct Quality Reviews under the Beverly Quality System.

        B. Written Standards.

     1. Policies and Procedures. Beverly has established written Policies and
Procedures regarding its Compliance Program and its compliance with relevant
Federal and state requirements, including, but not limited to, the requirements
of Federal health care programs. Beverly shall continue to assess and update as
necessary the Policies and Procedures at least annually and more frequently, as
appropriate. The Policies and Procedures shall be available to the OIG upon
request. To the extent not already accomplished, Beverly shall make the relevant
portions of its Policies and Procedures available to the appropriate Amendment
Covered Persons within 120 days after the Effective Date of this Amendment.
Compliance staff or supervisors shall continue to be available to explain any
and all Policies and Procedures. Within 120 days after the Effective Date of
this Amendment, Beverly shall review and analyze its Polices and Procedures to
ensure that, at a minimum, such Policies and Procedures specifically address
and/or include:

      a. Measures designed to ensure that Beverly fully complies with applicable
portions of Titles XVIII and XIX of the Social Security Act, 42 U.S.C. §§
1395-1395ggg and 1396-1396v, and all regulations, written directives and
guidelines promulgated pursuant to these statutes, including 42 C.F.R. 424 and
483, and any other applicable laws that address quality of care in nursing
facilities;         b. Measures designed to ensure that Beverly complies with
all applicable requirements of Medicare’s Prospective Payment System (“PPS”) for
long term care facilities, including, but not limited to: ensuring the accuracy
of the clinical data required under the Minimum Data Set (“MDS”) as specified by
the Resident Assessment Instrument User’s Manual; ensuring that facilities are
appropriately and accurately using the current Resource Utilization Groups

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      (“RUG”) classification system; and ensuring the accuracy of billing and
cost report preparation policies and procedures;         c. Measures designed to
ensure the provision of coordinated interdisciplinary care to long term care
residents, including, but not limited to the following areas addressed in 42
C.F.R. 483: resident assessment and care planning; nutrition; disease specific
care; wound care; infection control; appropriate drug therapies; appropriate
mental health services; provision of basic care needs, including the provision
of Activities of Daily Living (“ADL”); incontinence care; resident rights;
physical and chemical restraint use; therapy services; quality of life,
including accommodation of needs and activities; assessment of resident
competence to make treatment decisions; and professional services;        
d. Measures designed to ensure that staffing needs are decided first and
foremost upon achieving the level of care for Beverly’s patients and residents
required by Federal and state laws, including, but not limited to, 42 C.F.R. §
483.30 (nursing facilities);         e. Measures that specify that if the
director of nursing (or other person who is making staffing decisions at the
facilities) disagrees with a staffing determination that is not in compliance
with state or federal regulations or the CIA or this Amendment and that
significantly affects patient care made by the Administrator or other
individuals at the regional or corporate level, and is unable to resolve the
issue through the normal chain of responsibility, then that person must promptly
call the hotline and the Monitor. Nothing in this subsection prohibits such
person from contacting the hotline or Monitor without first going through the
normal chain of responsibility;         f. Measures designed to ensure
compliance with the completion of accurate clinical assessments as required by
applicable Federal law;         g. Measures designed to inform Covered Persons
of the staffing requirements of Federal and state law;         h. Measures to
inform Covered Persons during orientation and during other training required by
this Amendment that staffing levels are a critical aspect of patient and
resident care, and if any person has a concern about the level of staffing that
there are many avenues available to report such concerns,

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      including, but not limited to, the Administrator, the Hotline (as
described in Section III.E of the CIA), individuals at the district, regional,
or corporate level, or directly to the Compliance Officer or Monitor;        
i. Measures designed to minimize the use of individuals at any Beverly facility
who are from a temporary agency or not employed by Beverly (not including those
individuals who are included in the definition of Covered Persons) and measures
designed to create and maintain a standardized system to track the number of
individuals at each facility who fall within this category so that the
number/proportion of or changing trends in such staff can be adequately
identified by Beverly and/or the Monitor;         j. Measures designed to ensure
that all residents and patients are served in the least restrictive environment
and most integrated setting appropriate to their needs;         k. Measures
designed to promote adherence to the compliance and quality of care standards
set forth in the applicable statutes, regulations, and in this Amendment, by
including such adherence as a significant factor in determining the compensation
to Administrators of the facilities, and the individuals responsible for such
compliance at the regional, and corporate level;         l. Measures designed to
ensure cooperation by Beverly and its employees, contractors, and agents with
the Monitor in the performance of his or her duties as set forth infra;        
m. Measures designed to ensure that compliance issues identified internally
e.g., through reports to supervisors, hotline complaints, internal audits,
patient satisfaction surveys, CHSRA quality indicators, facility specific key
indicators, or internal surveys) or externally (e.g., through CMS or state
survey agency reports, consultants, audits performed by the Independent Review
Organization, or Monitor’s reports) are promptly and appropriately investigated
and, if the investigation substantiates compliance issues, Beverly assesses the
nature and scope of the problems, implements appropriate corrective action
plans, and monitors compliance with such plans;         n. Measures designed to
effectively collect and analyze staffing data, including staff-to-resident ratio
and staff turnover;

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      o. Measures designed to ensure that individuals and entities who fall
within the ambit of the Covered Contractor definition are appropriately
supervised to ensure that the Covered Contractor is acting within the parameters
of Beverly’s Policies and Procedures and the requirements of Federal health care
programs;         p. Measures designed to ensure that appropriate and qualified
individuals perform the internal quality reviews;         q. Non-retaliation
policies and methods for employees to make disclosures or otherwise report on
compliance issues through the Disclosure Program required by Section III.E of
the CIA;         r. Disciplinary guidelines to reflect the Code of Conduct
requirements as specified in Section III.B.1 of the CIA;         s. Measures
designed to ensure that Provider has a system to require and centrally collect
reports relating to incidents, accidents, abuse and neglect. The reports
required under this system shall be of nature to allow the Quality Assurance
Committees meaningful information to be able to determine: 1) if there is a
quality of care problem; and 2) the scope and severity of the problem; and      
  t. Measures designed to ensure that residents and patients are discharged only
for the reasons authorized by and in accordance with the procedures established
by applicable law and not discharged for financial reasons unless authorized by
law.

Beverly shall assess and update as necessary the Policies and Procedures at
least annually and more frequently, as appropriate. The Policies and Procedures
will be available to OIG upon request.

     C. Training and Education.

     1. Training in Covered Facilities. At least annual training conducted in
Covered Facilities will continue to be conducted in the same manner as exists as
of the date of this Amendment. Such training includes, at a minimum, training
covering the Policies and Procedures set forth in section B.1. above.

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     2. Additional Training. In addition, each facility shall conduct periodic
training on an “as needed” basis (but at least semi-annually) on those quality
of care issues identified by the Board of Directors Committee, the Compliance
Committee or through other means as set forth below. In determining what
training should be performed, these Committees will review and consider the
recommendations of the Monitor, the complaints received, satisfaction surveys,
staff turnover data, any state or Federal surveys, including those performed by
the Joint Commission on Accreditation of Healthcare Organizations (“JCAHO”) or
other such private agencies, any internal surveys, and the CHSRA quality
indicators. Such training will be for the length of time necessary to teach the
subject matter. Such training will be provided to all Covered Persons at the
facility who are responsible for patient or resident care, or whose job function
allows them to contribute to the correction of the alleged deficiency. Beverly
shall implement mechanisms to evaluate the individual’s competence with respect
to the training received.

Training materials shall be made available to OIG upon request. Persons
providing the training must have sufficient expertise in the subject area.

     3. Certification. An attendance log shall document the attendance of each
person who is required to attend the training. The member of the Compliance
Department or other person providing the training shall certify the accuracy of
the attendance log. The attendance log shall specify the type of training
received and the date received. Beverly shall retain the attendance logs and
certifications, and make all of these logs, certifications, and materials
available to OIG upon request.

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D. Independent Monitor.

Pursuant to the previous Amendment to the CIA, Beverly retained the Long Term
Care Institute (LTCI) as the appropriately qualified monitoring team (the
“Monitor”), approved by the OIG. Within thirty (30) days after the Effective
Date of this Amendment, Beverly shall revise its contract with LTCI to enable
LTCI to continue to serve as the Monitor pursuant to this Amendment. The Monitor
may retain additional personnel, including, but not limited to, independent
consultants, if needed to help meet the Monitor’s obligations under this
Amendment. Beverly shall be responsible for all fees and expenses incurred by
the Monitor, including, but not limited to, travel costs, consultants,
administrative personnel, office space and equipment, or additional personnel.
The Monitor shall charge a reasonable amount for his or her fees and expenses,
pursuant to a budget to be agreed upon by the Monitor, Beverly and the OIG. Any
dispute regarding the amount or the budget will be resolved by the OIG. As a
condition to retaining the Monitor, Beverly shall require the Monitor to enter
into a subcontract with an individual or entity, approved by the OIG, that has
the requisite expertise, capacity and access to MDS data directly from CMS to
perform quarterly Quality Indicator data analysis reports of the type described
in the attached Appendix # 1. Failure to pay the Monitor within thirty
(30) calendar days of submission of its invoices for services previously
rendered shall constitute a breach of the CIA and this Amendment and shall
subject Beverly to one or more of the remedies set forth in Section VI infra.
The Monitor may be removed solely at the discretion of the OIG. If the Monitor
resigns or is removed for any reason prior to the termination of the Amendment,
Beverly shall appoint another Monitor, after approval by the OIG, with the same
functions and authorities.

      1. The Monitor shall be responsible for assessing the effectiveness,
reliability and thoroughness of the following at or with regard to Covered
Facilities:

      a. Beverly’s Quality of Care internal quality control systems, including,
but not limited to, whether the systems in place to promote quality of care and
to respond to quality of care issues are acting in a timely and effective
manner; whether the communication system is effective, allowing for accurate
information, decisions, and results of decisions to be transmitted to the proper
individuals in a timely fashion; and whether the training programs are effective
and thorough;

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      b. Beverly’s response to quality of care issues at Covered Facilities,
which shall include an assessment of:

      (1) Beverly’s ability to identify the problem;         (2) Beverly’s
ability to determine the scope of the problem, including, but not limited to
whether the problem is isolated or systemic;         (3) Beverly’s ability to
create a corrective action plan to respond to the problem;         (4) Beverly’s
ability to execute the corrective action plan; and         (5) Beverly’s ability
to evaluate whether the assessment, corrective action plan and execution of that
plan was effective, reliable, and thorough.

      c. Beverly’s development and implementation of corrective action plans and
the timeliness of such actions; and         d. Beverly’s proactive steps to
ensure that each patient and resident in a Covered Facility receives care in
accordance with: (1) basic care, treatment and protection from harm standards;
(2) the rules and regulations set forth in 42 C.F.R. Parts 482 and 483;
(3) state and local statutes, regulations, and other directives or guidelines;
and (4) the policies and procedures adopted by Beverly and set forth in this
Amendment.

      2. Access. The Monitor shall have access to:

      a. Covered Facilities, at any time and without prior notice;        
b. The following types of documents: (1) the CMS quality indicators (for Covered
Facilities); (2) internal or external surveys or reports applicable to Covered
Facilities; (3) Beverly’s hotline

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      complaints regarding Covered Facilities; (4) resident or patient
satisfaction surveys for each Covered Facility; (5) staffing data for each
Covered Facility in the format requested by the Monitor, including but not
limited to reports setting forth the staff to patient ratios, temporary staffing
levels, and staff turnover data, as well as reports of any facility where
temporary agency staff constitutes more than ten percent of the nursing and
direct care staff; (6) incident, accident, abuse, neglect or death reports for
each Covered Facility; (7) reports of incidents involving a patient or resident
that prompt a full internal investigation at a Covered Facility; (8) patient or
resident records for Covered Facilities; (9) financial data for Covered
Facilities; (10) self-evaluative reports including, but not limited to, those
from quality assurance committees, applicable to Covered Facilities; and
(11) any other pre-existing data, including the reconfiguring of existing data
that the Monitor may determine relevant to fulfilling the duties required under
this Amendment in the format requested by the Monitor, to the extent
practicable; and         c. Immediate access to Covered Facilities’ current
patients, residents, and staff subject to: (1) their clinical condition; and
(2) their consent to conduct interviews outside the presence of Beverly
supervisory staff or counsel, provided such interviews are conducted in
accordance with all applicable laws and the rights of such individuals.

      3. Beverly’s Obligations. Beverly shall:

      a. Not impede the Monitor’s access to its facilities (pursuant to the
provisions of this Amendment) and shall provide any requested documentation
within the time frame specified by the Monitor, subject to any extensions and
modifications requested by Beverly and granted by the Monitor (the Monitor shall
balance the circumstances of the situation with the burden on Beverly when
making document requests);         b. Assist in contacting and arranging
interviews of Amendment Covered Persons, and not impede the cooperation by such
individuals;

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      c. Provide access to current residents or patients and contact information
for their families and guardians, in a manner consistent with the rights of such
individuals under state or Federal law, and not impede their cooperation;      
  d. Provide the last known contact information for former employees,
contractors, and agents, and not impede the cooperation from such individuals,
including but not limited to, refraining from placing any provision in
agreements that would limit such cooperation;         e. Provide the last known
contact information for former residents, patients, their families, or guardians
consistent with the rights of such individuals under state or Federal law, and
not impede their cooperation;         f. Address any written recommendation made
by the Monitor either by substantially implementing the Monitor’s
recommendations or by explaining in writing why it has elected not to do so;    
    g. Pay the Monitor’s bills for Monitor’s Costs within 30 days of receipt.
While Beverly must pay all the Monitor’s bills within 30 days, Beverly may bring
any disputed Monitor’s Costs or bills to OIG’s attention for resolution by OIG;
        h. Not sue or otherwise bring any action against the Monitor related to
any findings made by the Monitor or related to any exclusion or other sanction
of Beverly under this Agreement; provided, however, that this clause shall not
apply to any suit or other action based solely on the dishonest or illegal acts
of the Monitor, whether acting alone or in collusion with others; and        
i. When requested by the Monitor, provide the Monitor a report of each of the
following occurrences that may have happened during the time period requested by
the Monitor:

      (1) Deaths or injuries related to the use of restraints;

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      (2) Deaths or injuries related to the use of psychotropic medications;    
    (3) Suicides;         (4) Deaths or injuries related to abuse or neglect (as
defined in the applicable Federal guidelines); and         (5) Any other
incident that involves or causes actual harm to a resident when such incident
prompts a full internal investigation.         Each such report shall contain
the full name and date of birth of the resident, the date of death or incident,
and a brief description of the events surrounding the death or incident.

      4. The Monitor’s Obligations. The Monitor shall:

      a. Respect the legal rights, privacy, and dignity of all Amendment Covered
Persons, residents, and patients;         b. Where independently required by
applicable law or professional licensing standard, to report any finding to an
appropriate regulatory or law enforcement authority, simultaneously submit
copies of such reports to the OIG and to Beverly;         c. At all times act
reasonably in connection with its duties under the Amendment including when
requesting information from Beverly;         d. Simultaneously provide
semi-annual reports to Beverly and OIG concerning the findings made to date;    
    e. Submit bills to Beverly on a consolidated basis no more than once per
month, and submit an annual summary representing an accounting of its costs
throughout the year to Beverly and to OIG. Beverly shall have the opportunity to
review such bills and bring any issue of disputed bills or costs to the
attention of OIG for resolution

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      by OIG. The Monitor shall submit to Beverly an annual report representing
an accounting of its costs throughout the year;         f. Not be bound by any
other private or governmental agency’s findings or conclusions, including, but
not limited to, JCAHO, CMS, or the state survey agency. Likewise, such private
and governmental agencies shall not be bound by the Monitor’s findings or
conclusions. The Monitor’s reports shall not be the sole basis for determining
deficiencies by the state survey agencies. The parties agree that CMS and its
contractors shall not introduce any material generated by the Monitor, or any
opinions, testimony, or conclusions from the Monitor as evidence into any
proceeding involving a Medicare or Medicaid survey, certification, or other
enforcement action against Beverly, and Beverly shall similarly be restricted
from using material generated by the Monitor, or any opinions, testimony, or
conclusions from the Monitor as evidence in any of these proceedings. Nothing in
the previous sentence, however, shall preclude the OIG or Beverly from using any
material generated by the Monitor, or any opinions, testimony, or conclusions
from the Monitor in any action under the CIA or this Amendment or pursuant to
any other OIG authorities or in any other situations not explicitly excluded in
this subsection subject to the confidentiality provisions set forth in
Section V. of this Agreement;         g. Abide by the legal requirements of
Beverly’s facilities to maintain the confidentiality of each resident’s personal
and clinical records, and to maintain confidential and not to disclose the
records of Beverly’s Corporate Compliance Committee, Corporate, Regional or
District Quality Councils, Facility QAA Committees and self-evaluative reports,
including, but not limited to, those from, Internal Audit, the Hotline, medical
review committees, if any, quality assurance committees or peer review
committees, if any. See 42 C.F.R. §§ 483.10 and 483.75(o)(3)). Nothing in the
prior sentence, however, shall limit or affect the Monitor’s obligation to
provide information, including information from patient and resident clinical
records, to the OIG, and, when legally or professionally required, reporting to
other agencies;

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      h. Except to the extent required by law, maintain the confidentiality of
any proprietary financial and operational information, processes, procedures and
forms obtained in connection with its duties under this Amendment and not
comment publicly concerning its findings except to the extent authorized by the
OIG;         i. Visit each Covered Facility as often as the Monitor believes it
necessary to perform its functions;         j. Where appropriate, communicate
requests for access, documents or other information to the Compliance Officer;
and         k. When possible, identify the criteria under which it intends to
assess Beverly’s or individual Covered Facilities’ activities as set forth
herein and communicate those criteria to Beverly in advance of its assessments.

      5. Miscellaneous Provisions

      a. The Monitor may confer and correspond with Beverly and OIG on an ex
parte basis at any time.         b. If, after consulting with Beverly, the
Monitor has concerns about corrective action plans that are not being enforced
or systemic or repeated problems that could impact Beverly’s ability to render
quality care to its patients and residents, the Monitor shall: (A) report such
concerns in writing to the OIG, which in its discretion shall relay such
concerns to the Consortium (the Consortium consists of representatives of OIG,
the Department of Justice (DOJ) and CMS); and (B) provide notice and a copy of
the report to the Compliance Officer and the Board Committee. Beverly shall be
provided an opportunity to respond to the Consortium concerning any such report.
The Consortium shall seek to resolve any such dispute between the Monitor and
Beverly prior to OIG seeking any remedies pursuant to the terms of the CIA and
this Amendment;         c. The Monitor shall not control, manage or operate
Beverly.

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     E. Reporting of Material Deficiencies. The definition of Material
Deficiency set forth in Section III.H.4(iii) of the CIA and Beverly’s reporting
obligations set forth in Section III.H.2 of the CIA are hereby amended to
provide that Beverly no longer must report occurrences or instances meeting the
definition of Material Deficiency set forth in Section III.H.4(iii) if those
occurrences or instances occur in a Covered Facility.

IV.   Annual Reports

     A. Annual Report. Each Annual Report required by the CIA shall include, in
addition to the information required by Section V.B of the CIA, the following:

      1. any change in the identity or position description of individuals in
positions described in Section III.A of this Amendment, a change in any of the
committees’ structure or charter, or any change in the Quality Review program;  
      2. a certification by the Compliance Officer that, unless the
non-compliance is clearly and explicitly described in the Annual Report:

      a. all Covered Persons have completed the training and executed the
certification required by Section III.C; and         b. Beverly has effectively
implemented all plans of correction related to problems identified under this
Amendment Beverly’s Compliance Program, or Quality Reviews.

      3. notification of any changes or amendments to the Policies and
Procedures required by Section III.B of this Amendment and the reasons for such
changes (e.g., change in contractor policy);         4. a summary of the Covered
Facilities reviewed pursuant to Section III.A.4, a summary of the findings of
such review, and a summary of the corrective action taken under the Quality
Review Program; and         5. Beverly’s response/corrective action plan to any
issues raised by the Monitor.

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     B. Certifications. The Annual Reports shall include a certification by
Beverly’s Compliance Officer, under penalty of perjury, that: (1) Beverly is in
compliance with all of the requirements of this Amendment and the CIA (unless
the non-compliance is clearly and explicitly described in the Implementation or
Annual Report), to the best of his or her knowledge; and (2) the Compliance
Officer has reviewed the Report and has made reasonable inquiry regarding its
content and believes that, upon such inquiry, the information is accurate and
truthful. Each Report shall also include a certification the chair of the
appropriate committee(s) of Beverly’s Board of Directors certifying that the
committee(s)’ members have reviewed the Annual Report.

V.   Disclosures

The OIG will follow all applicable Federal laws concerning privacy and
confidentiality, including the Federal Privacy Act, 5 U.S.C. § 552a, to the
greatest extent allowed by law.

Consistent with HHS’s Freedom of Information Act (“FOIA”) procedures, set forth
in 45 C.F.R. Part 5, the OIG shall make a reasonable effort to notify Beverly
prior to any release by OIG of information submitted by Beverly pursuant to its
obligations under this Amendment or the CIA and identified upon submission by
Beverly as trade secrets, commercial or financial information and privileged and
confidential under the FOIA rules. Beverly shall refrain from identifying any
information as trade secrets, commercial, or financial information and
privileged and confidential under the FOIA rules. Beverly shall refrain from
identifying any information as trade secrets, commercial, or financial
information and privileged and confidential that does not meet the criteria for
exemption from disclosure under FOIA. With respect to the disclosure of
information, Beverly shall have the rights set forth in 45 C.F.R. § 5.65(d). The
OIG shall seek to protect confidential information under the FOIA rules to the
greatest extent allowed by law. The OIG shall provide the pre-disclosure notice
required pursuant to 45 C.F.R. § 5.65(d) to the Compliance Officer at the
address provided in Section VI of the CIA.

One of the purposes of the original CIA and this Amendment is to assist and
monitor Beverly to ensure that Beverly develops, revises, and maintains
effective internal controls that promote adherence to applicable Federal and
state laws and the program requirements of Federal and state health care
programs. Communication, record-keeping, reporting and frank and open
communication by and between the OIG and Beverly, its employees and its
Compliance Officer are essential to meeting the OIG’s expectations and the
purpose of the CIA and this Amendment.

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Nothing in this Amendment or the CIA, or any communication or report made
pursuant to this Amendment or the CIA, shall constitute or be construed as a
waiver by Beverly or Beverly’s attorney-client, work product, peer review, or
other applicable privileges, including, without limitation, the protections
contained in 42 C.F.R. § 473.75(o). Notwithstanding that fact, the existence of
any such privilege does not affect Beverly’s obligations to comply with the
provisions of the CIA or this Amendment or to provide documents and information
to the OIG pursuant to the CIA or this Amendment.

VI.   Breach and Default Provisions

Beverly is expected to fully and timely comply with all of the obligations
herein throughout the term of this Amendment or other time frames herein agreed
to.

  A.   Specific Performance of Amendment Provisions. If OIG determines that
Beverly is failing to comply with a provision or provisions of this Amendment
and decides to seek specific performance of any of these provisions, OIG shall
provide Beverly with prompt written notification of such determination
(“Noncompliance Notice”).     B.   Opportunity to Cure. Beverly will have thirty
five (35) days from receipt of the Noncompliance Notice either to demonstrate to
the OIG’s satisfaction that: (1) Beverly is in full compliance with this
Amendment; (2) the alleged failure to comply has been cured; or (3) the alleged
non-compliance cannot be cured within the thirty-five (35) day period but that:
(i) Beverly has begun to take action to cure the non-compliance; (ii) Beverly is
pursuing such action with due diligence; and (iii) Beverly has provided to the
OIG a reasonable timetable for curing the non-compliance; or to reply in writing
that Beverly disagrees with the determination of noncompliance and request a
hearing before an HHS Administrative Law Judge (“ALJ”), pursuant to the
provisions set for in Section VI.E of this Amendment. This purpose of the
hearing is to determine whether Beverly has failed to comply with the Amendment
and whether Beverly shall be required to implement the particular provisions at
issue.     C.   Stipulated Penalties for Failure to Comply with Certain
Obligations. In addition to the Stipulated Penalty provisions of the original
CIA, as a contractual remedy, Beverly and OIG agree that failure to comply with
certain obligations set forth in this Amendment may lead to the imposition of
the

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      following monetary penalties (“Stipulated Penalties”) in accordance with
the following provisions: A Stipulated Penalty of $1,000 (which shall begin to
accrue ten (10) days after the date OIG provides notice to Beverly of the
failure to comply) for each day Beverly fails to comply fully and adequately
with an obligation of this Amendment that is widespread or systemic in nature or
reflective of a pattern or practice. In its notice to Beverly, the OIG shall
state the specific grounds for its determination that Beverly has failed to
comply fully and adequately with the CIA or Amendment obligation(s) at issue.
The “Opportunity to Cure” provisions of Section VI.B. above apply to this
Section as though fully set forth herein.     D.   Exclusion for Material Breach
of the CIA

          Material Breach. In addition to the definition of Material Breach set
forth in the original CIA, Material Breach also means:

      a. a failure to address concerns raised by the Monitor as set forth in
Section III.D.1. above or otherwise meet an obligation under this Amendment that
has a material impact on the quality of care rendered to any residents or
patients of Beverly;         b. a failure to retain and use the Monitor in
accordance with Section III.D.

The notice and cure provisions of Section X.C. of the CIA apply equally to this
Section VI.D. of the Amendment as though fully set forth herein.

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     E. Dispute Resolution

     1. Review Rights. Upon the OIG’s delivery to Beverly of its Noncompliance
Notice, and as an agreed-upon contractual remedy for the resolution of disputes
arising under the obligations of this Amendment, Beverly shall be afforded
certain review rights comparable to those set forth in 42 U.S.C. § 1320a-7(f)
and 42 C.F.R. Part 1005 as if they applied to the specific performance,
Stipulated Penalties, or exclusion sought pursuant to this Amendment.
Specifically, an action for specific performance shall be subject to review by
an ALJ and, in the event of an appeal, the Departmental Appeals Board (“DAB”),
in a manner consistent with the provisions in 42 C.F.R. §§ 1005.2-1005.21.
Notwithstanding the language in 42 C.F.R. § 1005.2(c), a request for a hearing
involving specific performance shall be made within thirty (30) days of the date
of the Demand Letter.

     2. Specific Performance Review. Notwithstanding any provision of Title 42
of the United States Code or Chapter 42 of the Code of Federal Regulations, the
only issues in a proceeding for specific performance of Amendment provisions
shall be: (a) whether, at the time specified in the Noncompliance Notice,
Beverly was in full and timely compliance with the obligations of this Amendment
for which the OIG seeks specific performance; and (b) whether Beverly failed to
cure. Beverly shall have the burden of proving its full and timely compliance
and the steps taken to cure the noncompliance, if any. If the ALJ finds for the
OIG, Beverly shall take the actions OIG deems necessary to cure within twenty
(20) days after the ALJ issues such a decision notwithstanding that Beverly may
request review of the ALJ decision by the DAB.

     3. Finality of Decision. The review by an ALJ or DAB provided for above
shall not be considered to be an appeal right arising under any statutes or
regulations. Consequently, the parties to this Amendment agree that the DAB’s
decision (or the ALJ’s decision if not appealed) shall be considered final for
all purposes under this Amendment, and Beverly agrees to waive any right it may
have to appeal the decision administratively, judicially or otherwise seek
review by any court or other adjudicative forum.

     4. Review by Other Agencies. Nothing in this Amendment shall affect the
right of CMS or any other Federal or State agency to enforce any statutory or
regulatory authorities with respect to Beverly’s compliance with applicable
Federal and state health care program requirements.

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VII.   Effective and Binding Agreement

     A. This Amendment shall be binding on the successors, assigns, and
transferees of Beverly, except that facilities and entities which Beverly
subsequently divests shall be excused from the obligations under the Amendment
upon the assignment of a provider agreement or the disposition of assets to an
entity unrelated to Beverly.

     B. All other sections of Beverly’s original CIA will remain unchanged and
in effect and applicable to this Amendment, unless specifically amended upon the
prior written consent of the OIG.

     C. The undersigned Beverly signatories represent and warrant that they are
authorized to execute this Amendment. The undersigned OIG signatory represents
that he is signing this Amendment in his official capacity and that he is
authorized to execute this Amendment; and any modifications to this Amendment
shall be made only with the prior written consent of the parties to the CIA and
this Amendment.

     D. The Effective Date of this Amendment shall be the date the last
signatory signs the Amendment.

     E. The original CIA and this Amendment are by and between the parties
hereto and for their sole benefit and not for the benefit of any third parties.
Notwithstanding any language in the original CIA or this Amendment, neither the
original CIA nor this Amendment shall create or be construed or interpreted to
create any benefit for any person not a party to the original CIA or this
Amendment or create any right or cause of action in or on behalf of any person
(including without limitation any resident, patient or customer of Beverly)
other than the parties hereto.

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On Behalf of the Office of Inspector General
of the Department of Health and Human Services

 

     

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LARRY J. GOLDBERG
  DATE
Assistant Inspector General for Legal Affairs
Office of Inspector General
U. S. Department of Health and Human Services
   

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On Behalf of Beverly Enterprises Inc.

 

     

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DAVID DEVEREAUX
Executive Vice President and Chief Operating Officer
  DATE

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