Headwinds in the skilled nursing industry have forced many non-profits to operate at a significant financial loss, to the point that SNF assets are becoming a drag on their overall health.
That’s according to Lisa McCracken and Dan Revie, writing in Ziegler Investment Banking’s Senior Living Z-News, which covered the dispositions and closures of not-for-profit skilled nursing properties. McCracken serves as director of senior living research and development at Ziegler, while Revie serves as director of corporate finance—senior living at Ziegler.
“Many not-for-profit providers got into the stand-alone skilled nursing business years ago to enhance their mission,” the authors wrote in Z-News. “However, the changes in the skilled care industry have caused a large percentage of the nursing facilities to operate at a significant financial loss, and in turn, have now become a detriment to their mission.”
The attrition has been particularly high for freestanding nursing homes. Ziegler has tracked the closure of 35 not-for-profit sponsored nursing homes, assisted living facilities, and continuing care retirement communities (CCRCs) since 2010. Almost 66% of the closures were freestanding nursing homes.
In addition, almost 220 not-for-profit communities have been sold to the private sector in the past several years. Of those dispositions, more than half were freestanding nursing homes, Ziegler said.
“Providers cannot wait too long to make key decisions on the future of their skilled nursing business,” McCracken and Revie said in the article. “These decisions are indeed difficult, but if a particular property is financially challenged, has very low occupancy or is in need of significant capital improvements, the ability to sell at a competitive price will be difficult.”
Skilled nursing occupancy has been declining for some time, according to data from the National Investment Center for Seniors Housing & Care (NIC). The pressures for the SNF industry are compounded by investors showing less interest in purchasing skilled nursing properties in 2017.
Other pressures include the shift to value-based payments, changing consumer preferences, an increase in treatment plans that leave out post-acute rehabilitation, and higher-acuity patients, Ziegler noted.
“As providers strategize about the future role of healthcare units within their organization, awareness of the trends in your local market is important,” McCracken and Review wrote. “What is right for one organization might not be appropriate for the next.”
Written by Maggie Flynn