In some ways, the pandemic only rubbed salt in the wound in terms of occupancy across skilled nursing facilities nationwide. Average census across the skilled nursing industry was already languishing between the mid- to low- 80% range before the pandemic temporarily shut the doors to many facilities, paused elective surgeries and sent more post-acute patients home to recover. These problems adversely affected the older, mostly-Medicaid facilities and were only made worse in 2020.
That means digging out from the pandemic will be a tougher assignment, and buyers paid accordingly in 2020, averaging $55,300 per bed for non-stabilized facilities reporting occupancy lower than 85% according to the 26th Edition of The Senior Care Acquisition Report. The average price per bed paid for these facilities has actually been remarkably consistent in the last three years, hovering between $52,700 per bed and $55,700 per bed. For facilities under 80% occupied in 2020, the average price drops to $48,900 per bed, giving buyers even more wiggle room to turn things around. In the end, a number of these facilities will just be closed and their licensed beds either transferred to another facility in the buyer’s portfolio, sold or eliminated by the respective state.
However, as the SNF market continued to deteriorate in the last couple of years, investors have paid up for quality. The average price per bed paid for stabilized facilities (with occupancy of 85% or more) steadily rose from just over $100,000 per bed in 2018 to just under $110,000 per bed in 2019 and finally to $119,300 per bed in 2020.
The occupancy figures reported to us were almost always trailing (unless pro forma better reflected reasonable historical performance and was in line with how the buyer priced the facility) and surely dropped further throughout the pandemic. Also, some transitional care facilities can be quite profitable at 80% occupancy, considering their higher quality mix and more medically complex patients, but would fall into the “non-stabilized” category. For the most part, these “stabilized” facilities tend to have better referral relationships, attentive and sophisticated management, and higher levels of in-place cash flow, all of which should help accelerate their recoveries post-pandemic.
