Sabra Health Care REIT’s (Nasdaq: SBRA) CEO Rick Matros said Thursday that the federal government’s premature release of the minimum staffing mandate shows a lack of consideration given to the thousands of comments submitted against it, leaving the sector with no choice but to challenge it.

During the California based real estate trust’s (REIT) quarterly earnings call, in which the company reported improved deal flow, Matros said the staffing mandate could be addressed “legislatively.”

“There’s no way – given the 50,000 comments – that [the federal government] could have thoughtfully reviewed all of those [comments], not in this model,” Matros said. ”So it’s left the industry with no position, with no option other than to take legislative action and potentially legal action as well.”

Yet, he said, that time will show how the mandate plays out.

“The impact of this, if it doesn’t go away, is two to five years out,” he said. “So, we’ve got some time right now to see the remedies, if you will, that the industry is going to undertake to get rid of this mandate once it takes hold.”

When the minimum staffing rule was finalized, Matros called the legislation – which mandates a minimum of 3.48 hours per resident per day (HPRD) of total staffing, with specific allocations for registered nurses (RN) and nurse aides – “unacceptable.”

That said, if the rule is implemented, most of Sabra’s buildings are in good shape to bear the impact.

“Labor has been improving. Certainly, contract labor, as I noted, has improved dramatically. It’s a little bit hard to anticipate…There’s going to be a lot of operators in certain markets completely unable to fill positions.”

Matros criticized the one-size-fits-all approach to the mandate, especially regarding the exclusion of LPNs.

“Even in the final rule, [CMS] didn’t really didn’t address the criticisms about the lack of inclusion of LPNs, which are a backbone to every operator in the business,” he said

Staffing decisions should be based on acuity rather than arbitrary numbers, as this approach doesn’t correlate with better quality outcomes, Matros said.

“Operators staff buildings based on acuity, both in terms of total hours and in terms of the mix of those hours between RNs, LPNs, and nursing assistants,” he said. “You’ve got facilities that bring in NPs, so any evidence that you look at will tell you pretty clearly that one-size-fits-all does not work, and does not lead to better quality outcomes.”

Skilled nursing forecast

Matros said that since it’s still early in the year, Sabra is going to wait until the second quarter to release guidance.

“Our deal flow is improving, we’re finally starting to see some skilled nursing opportunities,” Matros said. “Both skilled and SHOP sellers’ pricing has moved towards buyers, but we don’t have new investments to announce this quarter based on current activity,” Matros said. “We expect to be in a position to announce new deals on our second-quarter earnings call. We are running better than anticipated on a forecast, including for our SHOP performance.”

Sabra saw improvements in operating performance and balance sheet strength, with growth opportunities in skilled nursing homes and senior housing leases, Matros said. Occupancy rates and mix in these areas have improved, and contract labor costs have decreased, he said.

“So, this quarter is really just a continuation of the last couple of quarters. Our operating performance continues to improve. Our balance sheet strength has us in a position to grow. Our skilled nursing home coverage continues to notch up, exceeding pre-pandemic coverage. Our senior housing triple net lease coverage continues to improve and is near pre-pandemic levels.”

Sabra’s skilled occupancy is up 110 basis points sequentially, he added.

“Our skilled mix is higher than it’s been in several quarters,” he said.

In the first quarter of 2024, Sabra reported a normalized FFO of $0.34, beating analysts’ consensus estimates of $0.33.

Sabra’s stock closed Thursday at $14.49, down 38 cents, or 2.56%.