Reports of the skilled nursing industry’s death have been greatly exaggerated, but plenty of facilities will not survive the pandemic. These are, for the most part, 50 or 60-year old facilities with few private rooms, significant capex needs and mostly Medicaid census that makes them far less profitable, if at all, amid higher labor expenses. So, many will shut their doors for good, but owners may also start to explore other uses for the facilities.
Increasingly, that may be behavioral health, which has rising demand post-pandemic, higher rates and better lease coverage than the SNF business. In their latest earnings reports, a couple of companies announced new behavioral health strategies, most notably CareTrust REIT which has plans to repurpose a number of its assets into addiction recovery properties, with up to 32 assets slated for sale, re-tenanting or that repurposing. Sabra Health Care REIT also revealed a couple of adaptive reuse projects converting an inpatient rehab facility and a shuttered hotel into substance abuse centers. Perhaps some SNFs may follow suit, and then other SNF owners.
For the industry, taking these facilities offline could have other benefits in census and labor needs, especially as lengths of stay could theoretically decrease with advances in healthcare and home care.
