Have you ever been happier to start an uphill climb? I haven’t.
After the year all of us in the long-term care industry just experienced, I couldn’t be more ready to climb out from the depths of the pandemic. While we certainly aren’t out of the woods yet, I’m heartened to see residents returning to skilled nursing facilities as vaccines continue to roll out across the country. Patients and their families need the care we provide, and pandemic or not, that isn’t going to change.
What has changed is the healthcare transactions market, particularly as it pertains to long-term care facilities.
Prior to COVID, long-term care was the most active segment of the market. Then we were hit with a double whammy – first, the rollout of the Patient-Driven Payment Model (PDPM) had experts predicting that smaller and single-site operators would rush for the exits, unsure they wanted to weather the impending changes to reimbursement. Then, the pandemic walloped skilled nursing facilities of all sizes, leading to unprecedented challenges as operators tried to protect residents from the virus while sourcing and funding new personal protective equipment and maintaining staffing levels.
The common assumption was that financial losses caused by the pandemic would hasten the downfall of operators who had already been struggling, resulting in a market flooded with distressed businesses. Instead, the federal government approved billions in financial support for skilled nursing providers, stabilizing the industry as it dealt with sudden increased costs and declines in occupancy. Thanks to those rescue funds, even distressed operators were able to stay afloat – but as they start to run out, it remains to be seen if those businesses that faced challenges pre-COVID will be able to persist.
The prospect of picking up a failing business at a discount has bargain-hunting buyers who spent the last year on the sidelines eager to get back into the game. But there are opportunities for more than just struggling operators right now – national and regional buyers have come to the market in recent months looking for quality operations to add to their portfolio. There are also new players entering the market, without industry experience, like private equity-backed buyers and traditional investors who are diversifying after the pandemic hammered their investments in commercial real estate and hospitality businesses.
Transaction activity continues to heat up, and if you’re a skilled nursing operator who has been thinking about the future, it’s a great time to begin exploring your options. But before you take that next step, there are some things you need to consider to make sure you get the most value for your business in today’s market.
First, it’s important to understand how the influx of government rescue funds has affected valuations. Savvy buyers know that a facility’s current financials likely include pandemic relief funds and thus may not accurately reflect its operating position, so they’re excluding those funds when it comes to determining valuations. That means it’s even more critical for sellers to show they run a high-quality operation that’s worth top dollar in an acquisition.
How can you prove that your facility is a quality addition to a buyer’s portfolio? Focus on improving resident health outcomes. Maintaining a lower staff-to-resident ratio, empowering your clinicians to make direct care decisions and engaging your residents in the proactive management of their chronic conditions are all steps you can take to show that your facility is a top performer. But don’t forget the impact of simple, routine preventative health services like hearing and eye exams and dental care on your residents’ health and quality of life.
Providing your residents with preventative care is critical. Routine check-ups by trained specialists can identify problems that, with time, might endanger your residents’ health and safety – like vision problems that could lead to an increased risk of falls or hearing impairments that could lead to feelings of social isolation and depression. Any discussion of your residents’ health outcomes must necessarily include how you can ensure they have access to regular preventative care examinations.
As the long-term care industry continues to emerge from a dark and difficult year, now’s the time to position your skilled nursing facility for future success. By focusing your continuing efforts on improving resident satisfaction and health outcomes, you can use conditions in the current mergers and acquisitions market to your advantage.
John Griscavage is the CEO of AriaCare Partners.
The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.
