Skilled Nursing Reshuffle Brings Uncertainty, New Opportunities

The skilled nursing sector is primed for change as the federal government cracks down on for-profit ownership. If you recall, last month we discussed some of the factors contributing to rising senior living valuations and the role private entities have played. As occupancy rates continue to rise and investors come off the bench looking to get into the senior housing game, it was only a matter of time before regulatory measures were brought into the mix. 

What the Numbers Say 

According to investment firm Ziegler, for-profit ownership made up the majority of skilled nursing transactions from 2015-2021, but between 2020 and 2021, 35% of transactions were for-profit. Consolidations also played a part, accounting for 27% of transactions over the last two years. Furthermore, an estimated 25% of nursing home closures from 2015 to 2019 were for-profit. This number increased to 2019 between 2020 and 2021. 
These numbers are telling and paint a high-level picture of what the senior housing industry has gone through over the last several years. It’s no secret nursing homes, assisted living facilities, and SNFs were hit the hardest during the pandemic; coupled with workforce challenges and potential regulations on the horizon, it’s no surprise the industry is primed for change. Experts point to the “interesting sort of transition and evolution we’re going through in terms of the business model” as well as a shift in the wants and needs of incoming seniors. 

Is More Funding Coming? 

SNFs are under enormous pressure right now as Baby Boomers are exploring options outside of traditional housing models. This is just one of the reasons not-for-profit (NFP) operators are asking for funding from the government and long-term investment from the Centers for Medicare and Medicaid Services (CMS). Without big change on this front, freestanding NFPs may start to dwindle as private investors jump on the opportunity to invest. California and other West Coast states are feeling this in particular, as rising construction costs and expensive building standards have tightened the reins on development. 
It will be interesting to see what opportunities this reshuffle brings and how providers of both profit and not-for-profit facilities move forward. If you are interested in buying or selling an SNF or any other type of senior housing or development in California or elsewhere in the U.S, please give our experts at Sherman & Roylance a call. We are constantly adding new listings, most of which are special off-market transactions.