Few real-estate assets are as tightly linked to public policy, demographic change, and labor economics as the skilled nursing facility (SNF). From the outside, valuation might look like a straightforward multiple of earnings. In reality, the number that lands on the page in 2025 is the result of dozens of interlocking variables—occupancy trends, reimbursement rules, technology investments, and even the competitive mood of buyers hunting for scarce inventory. The following guide unpacks those variables and outlines practical approaches investors, operators, and lenders can use to arrive at a defensible, forward-looking valuation.
The Valuation Landscape in 2025
The headline numbers paint a cautiously optimistic picture. Occupancy in the 31 NIC MAP Primary Markets climbed for a fourteenth straight quarter, reaching 84.5% in Q3 2024. That figure, paired with a 4.2% Medicare Part A rate bump for Fiscal Year 2025, has nudged national net margins closer to breakeven after years in negative territory. At the same time, more than 770 nursing homes have closed since 2020, creating what brokers now call a “
scarcity premium.” In other words, well-run buildings with clean surveys and stable census command a higher price not only because they earn more, but also because there are fewer like them to buy.
Yet optimism must be tempered by the realities of 24/7 RN staffing mandates, persistent wage inflation, and a Medicare Advantage penetration that now tops 50% in many states. Valuation in 2025 therefore revolves around a single question: Which forces will dominate over the five- to ten-year hold period—the tailwinds of higher occupancy and reimbursement, or the headwinds of
labor shortages and payer mix pressure?
Core Financial Drivers
Traditional appraisal frameworks for SNFs rest on three pillars: current income, replacement cost, and comparable sales. All three remain relevant, but the income approach carries extra weight in 2025 because of volatile expense lines and policy uncertainty. Every line item inside the pro-forma must be re-vetted against fresh data rather than last year’s cost reports; relying on historical averages alone is a recipe for missed targets and over-optimistic capital stacks.
Occupancy and Revenue Stability
Occupancy is more than a census percentage—it is the denominator for virtually every metric investors track. Rising to 84.5% across major markets might sound healthy, but a facility’s revenue stability depends on how that census is distributed across payers. A 120-bed building running at 90% occupancy with 35% Medicare Advantage and 45% Medicaid will almost always trail the cash flow of a comparable property at 85% occupancy but with a heavier Medicare Part A mix. Accordingly, advanced valuations assign separate revenue curves to each payer type, then stress-test them against local enrollment projections and managed-care contract renewals.
Cap rates, unsurprisingly, compress when buildings demonstrate not just census strength but also diversified high-margin payers and strong short-stay programs. On the flip side, facilities in certificate-of-need states with full Medicaid census are seeing higher cap rates despite occupancy recovery, reflecting perceived reimbursement risk.
Reimbursement Landscape
CMS’s 4.2% increase in Medicare Part A payments for FY 2025 is a direct value booster: every $100 000 of Medicare revenue translates to an extra $4 200 in top-line income, which ripples through net operating income (NOI). However, that benefit can be muted if a property’s payer mix has tilted toward Medicare Advantage, where plan rates can run 15-25% below fee-for-service. Meanwhile, state Medicaid uplifts, typically in the 3-4% range, barely cover cost growth. High-quality facilities participating in the expanded SNF Value-Based Purchasing (VBP) program may capture bonus points (and therefore higher payments) for low infection and successful community discharge metrics, but those gains hinge on operational excellence—not every seller can demonstrate that record.
Buy-side models in 2025 therefore include layered reimbursement assumptions: base rates, expected VBP adjustments, planned renegotiations with Medicare Advantage plans, and potential downward pressure if Congress revisits post-acute spending during budget talks.
Regulatory Environment and its Monetary Impact
Regulation is hardly new to the sector, yet FY 2025 stands out for layering new cost obligations on top of lingering pandemic fatigue. CMS’s nurse staffing final rule mandates 3.48 hours per resident day (HPRD), with an RN on site 24/7. Operators that relied on LPNs for overnight coverage must now budget deeper wage bills or accept the risk of civil monetary penalties that can erode EBITDA faster than a drop in census. Appraisers translate these mandates into dollar terms by estimating the incremental full-time equivalents required and multiplying by prevailing wages, which have risen aggressively due to a projected 80 000-RN deficit identified by the Health Resources and Services Administration.
The second piece of the regulatory puzzle is survey compliance. Facilities with multiple immediate-jeopardy tags often face enrollment freezes or payment denials, both of which depress value. Conversely, a deficiency-free survey can add meaningful basis points to valuation multiples because it signals lower
regulatory risk just as capital providers are tightening underwriting standards.
Staffing Mandates and Labor Economics
Labor costs in skilled nursing reached an estimated $49.2 billion in 2023, driven not only by wage rates but also by a growing reliance on contract staffing agencies. A thorough valuation must distinguish between permanent and agency labor, as buyers typically underwrite a gradual reduction in contract hours post-acquisition. Achieving that reduction, however, requires robust recruiting pipelines, local nursing school partnerships, and often salary enhancements that dilute the expected savings. Sensitivity analysis—testing NOI under scenarios where agency hours remain elevated—is now a standard appendix in lender packages.
Beyond pure wage expense, turnover costs matter. Every time a CNA walks out the door, the facility incurs orientation and overtime costs that can rival the base salary itself. Modern valuation models allocate a “turnover reserve,” usually between 1% and 2% of net revenues, to capture those hidden outflows. Facilities that document successful retention programs can argue for a smaller reserve, boosting pro-forma earnings and, by extension, valuation.
Market Dynamics: Consolidation, Scarcity, and Deal Flow
With more than 62 000 beds lost since 2020, investors describe 2025 as a supply-constrained landscape. The “scarcity premium” coined by
industry analysts reflects an environment where bid lists swell and time on market shrinks. Cap rates for top-quartile assets have compressed into the 10–11% range—territory once reserved for trophy suburban buildings—while lesser-performing facilities trade several hundred basis points wider.
Boutique brokerage firms such as
Sherman & Roylance have capitalized on this climate by running off-market, invite-only processes. By limiting exposure to a vetted pool of operators and private equity buyers, they can drive competitive tension without risking staff panic or payer scrutiny. For sellers, that discretion protects census; for buyers, it ensures they review deals that are fully scrubbed and operationally transparent. The broader lesson for valuation: comparable sales data must be segmented. A closed, high-price transaction handled confidentially may not appear in public databases, leading inexperienced analysts to undervalue similar assets if they rely solely on recorded deeds.
Technology as a Value Multiplier
Technology is no longer a novelty add-on. Roughly 40.4% of operators report high enthusiasm for artificial-intelligence-driven tools, from predictive staffing modules to automated MDS coding. The capital markets view tech through two lenses: cost containment and revenue enhancement. On the cost side, AI scheduling can cut overtime and agency reliance by forecasting shift demand. On the revenue side, accurate clinical documentation captures all eligible PDPM minutes, boosting Medicare reimbursement.
During due diligence, appraisers assign tangible value to technology when it demonstrably improves margins or mitigates risk. For instance, a facility with AI-enabled infection-control alerts may avert costly hospital readmissions, protecting its VBP score and reimbursement. Investors routinely discount facilities that still track vitals on paper, anticipating higher cap-ex outlays post-close. Thus, a clear technology roadmap—and proof of execution—can add 25–75 basis points of cap-rate benefit compared with tech-laggard peers.
Crafting a Forward-Looking Valuation Strategy
Static point-in-time valuations feel increasingly outdated given the sector’s fluid risk profile. Instead, sophisticated buyers build layered models that toggle census, wage growth, reimbursement, and exit multiples over a five-year horizon. Key to this approach is identifying “break points”—levels at which a change in one variable flips the investment case from viable to questionable. For example, how low can Medicare Advantage rates dip before the debt-service coverage ratio breaches covenants? Or how high must agency utilization climb before EBITDA turns negative despite occupancy gains?
Scenario modelling also helps parties bridge bid-ask gaps. A seller confident in occupancy growth may accept an earn-out tied to census milestones, while a buyer worried about wage spikes might require an escrow funded at close to cover unexpected staffing costs. By quantifying both upside and downside, stakeholders arrive at structures that align interests and keep transactions moving even in an uncertain operating environment.
Scenario Modelling and Sensitivity Analysis
The building blocks of scenario modelling are granular inputs: payer-specific daily rates, hourly wage bands, therapy utilization assumptions, capital expenditure schedules, and regulatory compliance reserves. Analysts then generate base, downside, and upside cases. The base case often mirrors trailing-twelve-month performance adjusted for known changes (for instance, an RN wage increase already in effect). The downside case layers in events like a 5% Medicare Advantage rate cut or a 10% rise in agency hours, while the upside case assumes successful VBP bonuses and incremental census lift.
Sensitivity charts illustrating EBITDA swings against single-variable changes are especially powerful. They spotlight which levers matter most and where management focus should be directed post-acquisition. In many 2025 evaluations, labor cost and payer mix emerge as the dominant sensitivities, eclipsing even occupancy in magnitude of impact.
Leveraging Specialist Advisors
Given the complexity of SNF valuation,
specialist advisors add outsized value. Firms such as
Sherman & Roylance combine brokerage reach with deep operational insight, offering tailored marketing processes, payer-mix benchmarking, and confidential data rooms accessible only to vetted buyers. Their datasets include private transactions unavailable through public records, enabling more accurate comp analyses. Additionally, experienced advisors maintain dialogue with state Medicaid agencies and managed-care payers, supplying real-time reimbursement intelligence that generic appraisers often miss.
For distressed or underperforming facilities, advisors with healthcare bankruptcy expertise can structure debtor-in-possession financing or shepherd assets through §363 sales, preserving going-concern value and staff retention. In expansion scenarios, development arms can model new-build projects by incorporating construction inflation indexes, pre-marketing strategies, and realistic lease-up timelines—all of which feed into the valuation of an existing portfolio when growth potential is under consideration.
Conclusion: A Multifaceted Equation
Skilled nursing facility valuation in 2025 sits at the intersection of optimism and caution. Rising occupancy and incremental Medicare funding provide momentum, yet staffing mandates, labor shortages, and payer-mix shifts inject volatility. Accurate valuations demand a holistic approach—meticulous financial scrutiny, rigorous sensitivity testing, and an appreciation for how technology and operational excellence translate into risk-adjusted returns.
In a market where deals close rapidly and supply remains thin, stakeholders who ground their numbers in current data and leverage expert advisors will be best positioned to navigate price expectations, secure financing, and—ultimately—capture sustainable value in the skilled nursing landscape.
