Sufficient reimbursement, less regulation and adequate staffing are all attractive features for dealmaking, impacting operator decisions on which states and regions offer the path of least resistance when it comes to expanding their footprint.

It may boil down to price per bed and the ease of the change of ownership (CHOW) process when determining desirability for expansion. However, some operators may consider additional factors such as proximity to strong leadership and even community ties to a region as these ultimately impact staffing.

And while it’s not a perfect science predicting the best and worst states for dealmaking, Skilled Nursing News spoke to sector experts to get their view on what states will be notable for mergers and acquisitions in 2025.

“It’s tough to categorize [the worst and best] when it comes to the states because I think there are solutions for each of those particular markets,” Dominic Porretta, director of public finance at Cain Brothers, told SNN. “But there is definitely a correlation between buyer activity, M&A volume and price per bed.”

For example, Florida has a lot of M&A activity because facilities have “good” prices per SNF beds, Porretta said. Meanwhile, the state of West Virginia has extremely high prices per bed because there’s a finite number of facilities there with really good reimbursement through the case mix add-on, he explained.

Top states for dealmaking, with Medicaid rates as drivers

Meanwhile, Medicaid rate increases slated for 2025 for certain states such as South Carolina, North Carolina and Virginia, and certain Mid-Atlantic states, will push some deal activity in these regions, Porretta said.

“This increases buyer interest, where they’re excited to put dollars to work,” he said.

According to Cascadia Healthcare’s Chief Legal Officer and Executive Vice President of Corporate Affairs Steve LaForte, among Western states, Oregon is a highly desirable state to be in although not a lot of transactions are currently going on in the state. He cites an easier CHOW process when compared to Washington and California, as one of the reasons that M&A activity might improve in Oregon.

Idaho-based Cascadia operates 58 facilities across five western states.

Moreover, Idaho is also relatively easy to operate in, especially with the Upper Payment Limit (UPL) offering good reimbursement, LaForte told SNN, referring to a supplemental payment that can be made to nursing facilities, hospitals, and physicians.

And, Arizona is also on LaForte’s list for an attractive state for dealmaking, given an easy CHOW process and a good reimbursement environment, albeit one that is highly tied to managed care contracting, LaForte said.

As for Montana, LaForte said that the state offers optimal conditions for expansion from Cascadia’s standpoint.

“Montana is relatively easy all around to get a CHOW done, and their reimbursement was just increased significantly, but there are not a lot of facilities at baseline, only about 50, and there is not a lot of trade right now,” LaForte said.

As for Porretta’s view on which states could be attractive, Ohio is on his watch list for mergers and acquisitions, with several favorable factors – including more health systems and attractive Medicaid reimbursement rates – expected to drive deal making.

“Ohio is unique in that you have some really key metro areas like Columbus, the state capital, with more population density. That’s where there is a lot of interest,” said Porretta. “They’re growing cities [within Ohio], right? There’s a lot of things there to get excited about in Ohio.”

That said, Ohio’s M&A climate is not without its flaws.

“There are a lot of health systems there [but] on the flip side of that, in sort of the corners of the state, you can have really rural areas where staffing is challenging and where agency usage hasn’t yet been resolved,” he said.

And so Columbus versus Northwest Ohio “can be two completely different operating environments that someone would have to contend with,” he said.

Less favorable states for dealmaking

Washington, Maine and Iowa figure into many expert lists of not being the best states in which to expand due to higher bureaucratic burdens or higher price per bed or oversaturation. But California, even with its tougher regulatory scrutiny, is going strong with mergers and acquisitions.

“From our experience, as recently as this summer, Washington is probably the most difficult,” said LaForte.

This is due to a number of factors such as change of ownership, timing and unnecessary bureaucracy burdening the dealmaking process.

“It’s not simply about vetting better or worse operators [in Washington]. It’s just bureaucratically slow and inefficient,” LaForte explained.

A state that Cascadia has stayed away from thus far is California, given an even more cumbersome bureaucratic process entailed in dealmaking, LaForte said, calling it “dangerous.”

“California is probably slower than Washington, and, to my understanding, its (regulatory environment) is more substantive than Washington,” he said.

Add to that the cost of doing transactions, which is higher in California, and that makes California a nonstarter for many operators looking to expand.

That said, California continues to have decent M&A volume, according to Porretta, who said that the Golden State is home to a lot of “higher quality markets.”

Porretta agreed that the regulatory environment can be tougher in California, which often makes it a difficult state for expansion for nursing homes – and the results are being felt in the form of bottlenecks at hospitals. The number of avoidable bed days at Scripps Health hospitals, for example, has increased across the system, noted Porretta.

However, that may be fueling demand for nursing homes and driving deal activity in California.

“When you think about a lot of those cities in California, especially in Southern California, and in certain pockets of Northern California, the regulatory environments there can be difficult from a change of ownership perspective,” Porretta said. “But California – just from a regulatory perspective – can be challenging, but those facilities do generally go at pretty attractive per bed prices.”

The state of Maine, on the other hand, has been suffering from staffing challenges, and it has also been incredibly difficult in which to operate overall, Porretta said. As a result in Maine, dealing making remains relatively quiet.

Moreover, a state like Iowa, Porretta said, has been plagued by having too many beds and a lot of rural facilities. And, these factors combined with tough staffing challenges make Iowa a hard sell that even a Medicaid rate increase won’t make attractive, he said.