By some accounts, the long-term care field is in some very deep trouble.
A two-years-and-counting pandemic has decimated occupancy levels, driven up costs and made adequate staffing an almost impossible task. And let’s not forget, there was virtually no new skilled care construction to speak of for years before COVID-19 arrived.
The associations representing this sector have spent a good chunk of time lately hounding lawmakers for relief, while also begging regulators to call off the dogs.
While there may be some early signs that the worst is over, the industry remains hobbled. That reality is not likely to change soon.
Given these brutal conditions, one might think investors are staying far away. And one would be wrong. For if anything, the moneyed class is lining up in search of bargains — or at least a piece of the action.
As a general rule, capital providers tend to be anything but naïve, misinformed or rubes. So what is going on here?
Is long-term care a sickly patient wheezing toward a death rattle? Or a vigorous youth eager to embrace adulthood? It can’t be both, can it? Turns out, maybe it can.
Here’s why: Long-term care operators and investors are playing very different games.
For operators, it’s all about — or at least mostly about — survival. Skilled care is essentially a subsidized business, one that is seemingly never subsidized enough. Running a long-term care enterprise is a bit like driving an ‘05 Buick LeSabre with a quarter million miles on the odometer: Something is always about to break, if it hasn’t already.
But for many eager investors, skilled nursing facilities are all about opportunity. Yes, they are aware of the day-to-day challenges operators face. But my gosh, will you just take a look at those demographics! The first wave of the aging boomers — of which we add another 10,000 or so each day — are turning 76. Guess what they are going to need a lot of in the years to come? That’s right, help.
Help with activities of daily living. Help with surgery recovery. Help with cognitive decline and other aging-related challenges. And it’s a pretty safe bet a lot of those folks are going to end up in nursing homes, especially once the hospitals are done wetting their beaks.
Simply put, investors don’t want to miss out on a golden opportunity to get in the game. And there are plenty of operators who will be more than willing to let them play along.
John O’Connor is editorial director for McKnight’s.
