Nursing home assets for National Healthcare Investors (NYSE: NHI) are stable, with coverage increasing during the first quarter, and executives suggesting Tuesday that its skilled nursing portfolio was largely insulated from potential Medicaid cuts.

NHI’s geographic exposure was one factor protecting it against any reductions to federal funding. Much of the company’s skilled nursing facility (SNF) revenue comes from states that did not expand Medicaid under the Affordable Care Act (ACA), making these states potentially less vulnerable, executives said.

“In addition to our strong SNF coverage and tenant credit, we believe our geographic exposure can mitigate the impact of potential cuts,” said Chief Investment Officer Kevin Pascoe, suggesting that NHI’s well-capitalized operators are better positioned to absorb funding changes without compromising rent payments.

During the first quarter, NHI reported strength in both its entrance fee and skilled nursing facility (SNF) portfolios. The SNF portfolio improved to a solid 3.06 times coverage in the first quarter, up from the last quarter’s 3.05.

SNF coverage, which is primarily driven by National Healthcare Corporation (NHC), will provide a cushion against any potential revenue losses stemming from policy changes, he said.

That said, Pascoe did caution that it was all too early to determine the exact impact from any cuts to Medicaid.

Despite the strong performance of NHI’s SNF assets, the real estate investment trust’s (REIT) focus is shifting more toward senior housing rather than expanding further into skilled nursing, he said. 

During the first quarter, NHI posted funds from operations (FFO) of $1.15, beating Wall Street expectations by $0.02. NHI reported revenue of $89.3 million, surpassing estimates by $5.26 million.

On Tuesday, NHI shares closed at $76.36, up 36 cents, or 0.47%.

Deal flow

Deal activity is accelerating, with a largely $264 million senior housing-focused pipeline in progress at NHI, with additional large deals under evaluation outside of that pipeline, Pascoe said.

“We are also evaluating some larger deals with nine figure valuations that are not included in the pipeline,” Pascoe said. “The current market seems to show no dearth of sellers.”

While the buyer pool is “somewhat limited,” Pascoe said that NHI has a competitive cost of capital and solid access to debt and equity capital.

Overall, NHI continues to prioritize investments with strong growth profiles and attractive yields while expanding their internal team to support potential growth.

“And we expect that 2025 investments will be materially higher than 2024,” he said.

On NHI tenant PACS

Regarding PACS, an NHI tenant that has drawn attention recently due to a internal investigation into its billing practices that have delayed the nursing home giant from sharing quarterly results over the last two quarters, Pascoe said business was as usual.

NHI has remained in “regular contact” with PACS and that the PACS buildings continued to pay rent as agreed, Pascoe said.

He noted that PACS’ underlying performance is steady, but they have no additional insights beyond what is publicly available.

“The buildings continue to pay rent as agreed, and their underlying performance is doing fine. But you know, in terms of where they’re at, I don’t know any more than you do,” Pascoe said.