As the skilled nursing industry looks ahead to 2025, analysts are better positioned to project which states are easiest and most difficult to navigate for providers, especially in the wake of political shifts following the election of Donald Trump.

Factors such as Medicaid reimbursement rates, regulatory complexity, and labor challenges determine whether a state is a good place to operate a skilled nursing facility, while all these issues ultimately also impact dealmaking in certain markets.

“To me, [dealmaking] is primarily correlated to the Medicaid rate environment, and then secondarily, also to staffing as well as regulatory pressures that differ state by state,” Dominic Porretta, director of public finance at Cain Brothers, told Skilled Nursing News.

The most favorable status for operating – and dealing making by extension – considers a balance between all these factors that ultimately weigh on a facility’s finances.

“What’s driving [the favorability status] is really a combination: rate increases, the regulatory regime, and then thirdly, unionized labor, the presence of big labor [and] if you’re worried every night whether the lender is going to foreclose on you,” David Young, managing director of health care finance at Greystone, told SNN.

From the regulation standpoint, Massachusetts and Hawaii are two of the top most difficult states, but in Hawaii legislators delivered a sizable Medicaid rate increase in January, followed by another one in July, Young said.

“This makes Hawaii a good state to operate in from that perspective now, but Massachusetts is still very difficult, as is Connecticut particularly,” he said.

Favored states 

For Young, certain states go straight to the top without much argument.

“Some good states to operate in are Virginia, and I’d say Florida,” Young said.

Virginia and Florida are often seen as having more favorable environments for providers given appropriate regulation and rate increases that take into account inflation. Virginia, in particular, has been a solid state for skilled nursing providers given its more manageable regulatory environment and a stable reimbursement system, he noted. Meanwhile, Florida, despite its challenges, is also seen as a market where well-managed facilities can thrive.

The difficult state

On the flip side, Young pointed to Texas as one of the most difficult states to operate in. Despite being politically aligned with conservative values, Texas suffers from poor Medicaid reimbursement rates, which have been stagnant for over a decade, he said. 

“They haven’t had a rate increase in 11 years,” Young explained.

Small adjustments in the interim, such as the reinstatement of a COVID add-on rate, don’t do enough to address the underlying financial issues.

“They had this minor increase a year ago, but all that did was reinstate a COVID add-on rate of 16 bucks. So it was kind of like an insult,” Young said.

The state’s reimbursement challenges are compounded by the quality incentive payment program which, while well-intentioned, fails to provide meaningful financial relief to operators, Young said.

“Texas is a tough environment, and its regulatory framework, while not as burdensome as states like Massachusetts, still doesn’t offset the financial strain caused by poor reimbursement rates,” he said.

Elections impact

Young also spoke about how the political climate plays a role in shaping these dynamics. While many associate red states with favorable conditions for business, and blue states with more regulation, the reality is more complex, he said.

“It’s not as simple as just looking at party affiliation,” Young said. Take Texas , for example. It’s a red state, but the financial environment is terrible, he said. On the other hand, Hawaii is a blue state, but it’s still a solid place for skilled nursing providers if you can navigate the regulatory and labor challenges.

Young suggested that the outcome of the 2024 election could further impact the industry, particularly regarding federal regulatory policies such as minimum staffing mandates.

A Kamala Harris administration would have likely put in place stringent regulations, with the possibility of the minimum staffing standards for nursing homes. Better-run facilities would have clearly benefited, but those struggling with staffing would have fallen further behind, he said.

However, Trump’s victory could lead to more deregulation now, potentially allowing states to determine their own staffing standards, he said.

Under Trump, there will likely be a rolling back of the federal mandate, and it will be more about what states decide to do individually, Young said.

If the staffing mandate were to remain in place by an outside chance, facilities will continue to shut down leading to a desert of care provision from the reinforcement of minimum staffing, Young said.

“With Trump, you’ll see it rolling back, and I think you’ll see deregulation in general. And I think that it will become more variegated, because it will now become really based on certain states. So, certain states will simply have their own minimum staffing as exists right now,” Young said.