Nursing care bed prices have risen 21% from their pre-pandemic levels, despite a glacially paced occupancy recovery and ongoing stigma against the sector, a noted long-term care analyst reported Tuesday.

Bill Kauffmann, senior principal at the National Investment Center for Senior Housing & Care, outlined the continuing sales phenomenon in a blog post Tuesday, using NIC MAP Data.

In late 2019, the price per nursing care bed averaged $80,000, a value that tumbled to a pandemic low of $74,900 in the third quarter of 2020. But even with occupancy yet to fully recover, the price per bed at the end of the third quarter averaged $97,300.

“At the same time, there are headwinds against higher prices,” Kauffman wrote. “These include the risk of Medicare reimbursement cuts, low occupancy rates, chronic underfunding of Medicaid reimbursement in many states, a staffing crisis, and ongoing elevated inflation including wage rate growth.”

Private buyers have dominated transactions in the past three years, Kauffman pointed out, driving up prices through bidding.

The percentage of closed transactions attributed to these buyers has steadily increased. Through the third quarter of 2022, private buyers made up 94% of buying activity, up from 82% in 2020.

That trend tracks with findings released earlier this week by LeadingAge and Ziegler that showed many large nonprofit providers have been reducing their footprint in the skilled care market. 

Beset by horrible news of pandemic infection and deaths of residents and staff, employee flight, census drops and facility closures, the nursing home market has been a symbol of COVID pain. Yet, Kauffmann wrote, investors see enough opportunity that they are actively bidding and buying.

He attributed the high sales values to:

*Strong private buyer interest;

*Compelling demographic trends favoring the necessary care required for aging adults with more complex medical needs;

*Changes in capital and debt markets;

*Financial support from the federal government during COVID.

Kauffman wrote that the Patient Driven Payment Model, started before the pandemic has the potential to create higher cash flow for operators of skilled nursing properties because it rewards levels of care rather than volume of it. 

“Buyers can justify paying higher prices per bed if they are estimating higher cash flow,” wrote Kauffman.

He added that higher interest rates and labor market challenges could soon provide additional reasons for sellers to bring properties to market. A rush of available beds could slow the explosion in value.

 “If more sellers do come to market and the cost of capital increases as inflation and interest rates continue to stay elevated, the pace of increases in the price-per-bed for skilled nursing properties may be limited in the near-term.”