Tuesday, May 26, 2015

The Effect of Rising Levels of Acuity in Rehab and Nursing Homes on M&A Activity

Here is an interesting item from a recent Senior Care Investor News, published by Irving Levin & Associates:

"The rise in acuity in post-acute care is certainly having its impact in the skilled nursing M&A market. Historically, the range in price per bed for skilled nursing facilities has been approximately $100,00 to $125,000 per bed, according to the 2015 Senior Care Acquisition Report. Every year, there are always sales between $10,000 and $20,000 per bed, with the occasional sale below $10,000 per bed. And there have always been sales above $100,000. But in 2014, while the low price was a typical $9,000 per bed, the high was an astounding $268,500 per bed, resulting in a spread of $259,500. There was also a record number of deals valued over $100,000 per bed, with 19 transactions, which just goes to show the rise in acuity is pushing up prices across the board."

What would be driving the market for "skilled" beds to a higher figure, especially given the continued dependence on Medicaid as the primary payer for skilled care, combined with the fact that Medicaid pays below (and arguably significantly below) actual costs of skilled care?  This market data seems illogical to me, and I'm sure I'm missing something.  

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Comments

Thank you for posting this.

The investor interest in SNFs might relate to the anticipated demand by ACOs (and bundled payment programs) for more sub-acute care to be delivered outside the hospital. Yes, you are correct, this will change some facilities (more RNs on staff, physician in residence, etc.) -- a phenomenon I call "not your mother's nursing home."

Posted by: Ann Marie Marciarille | May 27, 2015 10:18:27 AM

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