Three experts chimed in about what the future holds for skilled nursing, and while headwinds persist, they were all positive on the sector.
I have been remiss in not talking about the excellent webinar you may have missed (link here) on June 13 about investing in the skilled nursing market. While the panelists all agreed that the operating environment will continue to be challenged for a while, they were all positive on what the new PDPM reimbursement system will do for most providers, and the sector as a whole.
While there has been some compression in skilled nursing cap rates, the historical average of 12% to 13% seems to be one that will be around for a while, despite the 10-year Treasury dropping by 100 basis points since last year. There will be portfolio deals with cap rates below 10%, and there are always those picture-perfect, high-occupancy, and high-cash flowing stand-alone facilities that also can command sub-10% cap rates.
One interesting comment that came out of the webinar was that with PDPM the potential patient pool should expand, despite therapy usage declining. What this means is that SNFs should be able to take care of patients who in the past they were prohibited from caring for, as barriers are broken down and they are properly compensated for what they do. As I have said many times, skilled nursing is not going away, it is just going to evolve.