Average cost of skilled nursing beds rises by 40% in 2004

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The average price per skilled nursing bed last year soared by more than 40%, to $44,600 per bed. That followed a 17% drop in the price per bed in 2003, according to an industry newsletter.

Transactions at the high end of the market influenced the average in 2004, said a report in the current issue of The SeniorCare Investor, a newsletter published by Irving Levin Associates Inc. The median increased by 34% to nearly $36,000 per bed. The spread between the average and the median was the highest ever recorded, another sign of higher-quality facility sales.

Prices for 2004 are more similar to prices in 2002, which resembled costs in 2001 and 2000. The introduction to the market of high quality, newer and profitable nursing home facilities, especially in high priced real estate markets, was one of the reasons for the spike in the average price per bed last year.

Also, the Medicare rate increase that went into effect during the past 18 months affected all nursing facilities participating in the Medicare program, regardless of quality. Medicare-related profits helped boost cash flow of providers, permitting the prices paid to rise.