Cautious on Acquisitions, Some Nursing Home Operators Shift Focus to Value-Based Investments

Some nursing home leaders are approaching mergers and acquisitions (M&A) with caution in 2026, citing inflated asset prices and questioning whether current valuations justify the investment. Meanwhile, their broader investment strategies focus instead on the evolving value-based care environment.

One of the reasons for treading carefully in buying new assets stems from nursing home industry’s aging and outdated inventory, and leaders must not rush into acquisitions without a clear plan for modernization and long-term sustainability, according to Deke Cateau, CEO for Georgia nonprofit operator A.G. Rhodes.

“We have a dilapidated national inventory of nursing homes. They’re old buildings,” said Cateau. “If you’re going to do it, take your time and do it the right way. I’m wary of anyone who’s just rushing out to [buy].”

Tennessee-based Diversicare has been trimming its footprint for a healthy group of properties moving forward, exiting the Texas market while looking for strategic purchases with normalized bed prices, Becky Bodie, COO for Diversicare told Skilled Nursing News.

Cateau, Bodie and Lori Strubbe, CEO for Texas-based Focused Post Acute Care Partners, discussed investment priorities, M&A hesitation and how to balance administrative burdens and sub-par rates with the many opportunities baked into managed care in the years ahead.

These conservative stances on expansion stand in contrast to the view held by about 40% of respondents in a survey conducted by Skilled Nursing News recently, who said that they planned on purchasing assets this year, and that private equity would be the top buyer.

M&A tactics

Inflated asset prices have sector leaders concerned and wondering if the current valuations justify the cost.

For Focused Post Acute, growing in Texas is a challenge right now, Strubbe said, with nursing home real estate pricing in the state remaining incredibly high. Growth would have to be outside of the state, something leadership at her organization isn’t willing to do right now.

As for Diversicare, Bodie said her organization spent the last couple years “pruning” its footprint, exiting Texas, and is being particular about potential acquisitions while also investing in its existing portfolio.

“We are interested in purchasing, but [buying] smart purchases because the price per bed is so high. Now there are individuals and companies out there that are willing to pay a high rate,” said Bodie. “We’re trying to be wise in that, and also stay within our portfolio for the most part.”

Looking ahead, time and resources may be better spent on thoughtful, resident-centered development rather than rapid expansion, Cateau said.

For A.G. Rhodes, the completion of large capital projects including $40 million in renovations in 2024 means the nonprofit can now focus on managing debt service and ensuring financial models work before expanding further.

Investment priorities

Nursing home providers are also putting a lot of resources into value-based care success, from participating in institutional special needs plans (I-SNPs) to data investment crucial in proving outcomes in a value-based environment.

“We are spending a lot of money on data proving that we are able to be a good partner in a value-based world,” said Cateau. “You put your money where your mouth is now.”

But I-SNP participation involved a steep learning curve and cost considerations, Strubbe said.

“I still am pro I-SNP. I think that they serve a certain patient, and I think that they serve a really good purpose,” said Strubbe. “But strategically, when we first got into the I-SNP business as an organization we were predominantly Medicaid payer-based, but we thought, let’s get participation.”

It cost Focused Post-Acute time and money to drum up participation and get it to stick, she said. Strategy has changed for investment, she said, to put the patient first and foremost – looking at all the options for the patient and looking at their payer source.

“It’s a very different approach, and I think it’s a much more strategic approach,” Strubbe noted.

Partnership opportunities for I-SNPs and accountable care organizations (ACO) are being explored, she said.

If operators invest in specialty programs like dialysis or in-house therapy, such services need to align with patient needs and payer mix. And if services are at a hospital level, or higher acuity, different regulatory requirements could come into play.

In addition to starting its own pharmacy last year, Diversicare has converted one of its centers into a behavioral health hospital.

“Even if it’s only 10 beds, requirements are very different from what we are accustomed to, day in and day out on the SNF side. You have to change your perspective,” said Bodie.

Managed care evolution

Looking ahead, Bodie said Diversicare remains strategic and selective when it comes to managed care since some contracts reimburse at rates lower than even Medicaid. The company actively pursues contracts and works collaboratively with managed care plan partners.

In most of its markets, managed care skilled mix exceeds traditional Medicare skilled mix, Bodie added.

Strubbe said that clinical teams are in a more influential position considering PDPM places greater emphasis on clinical care rather than therapy-driven revenue. The transition creates an opportunity to strengthen specialty programs too, along with deepening ACO participation and building stronger partnerships with insurers and clinician groups.

Operators should ask themselves how much revenue has historically been outsourced and to explore bringing more services in-house, like employing nurse practitioners directly, Strubbe said.

Balancing managed care opportunities with administrative burdens and costs will continue to be a puzzle for nursing homes to solve, Bodie added. Lengths of stay for managed care residents is still shorter – around 15 days – requiring tight coordination of admissions and discharges, while audits, prior authorizations and administrative burdens can delay or interrupt payments until reviews are completed.

Bodie looks to the American Health Care Association (AHCA) to work with the Centers for Medicare & Medicaid Services (CMS) to address these burdens and improve the managed care system.

For Cateau, it’s important to be realistic about the challenges that come with a managed care contract. “The earlier you buy that apple and find where that worm is, I think the better off you are,” Cateau said of balancing the opportunities and shortcoming of managed care. This balance is magnified for smaller providers that don’t have the negotiating power or staff to ensure maximum reimbursement. But operators must still look at their options now rather than later.