Public-Private Market Disconnect Continues

Record prices again for skilled nursing facilities in 2015, while some of the larger players still struggle.

You know I have been talking about the disconnect in the public equity markets for a few months. Some of the largest skilled nursing companies have seen a rough patch recently, and rougher for some than others. One would think that this would also translate into the acquisition market, where buyers might become more conservative as Medicare lengths of stay shorten amid reimbursement pressure, especially with Medicare Advantage plans. But no, the skilled nursing acquisition market is as strong as ever. After setting a record in 2014, the average price per bed soared again in 2015 to a new record above $80,000 per bed. Why? A record number of transactions above $100,000 per bed. What is hard to understand is why some of the largest and most sophisticated skilled nursing operators out there are having difficulties managing some of the changes in the marketplace, while smaller guys are paying up to compete with them. Is it a question of size, with smaller being better with more hands-on management? Or staffing? I would say yes to the first one, not sure on the second one, but there continues to be a definite difference in sentiment between public and private investors.

 

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