Seniors Housing Weekly Update -- SNF Market Stronger Than Some Think
June 4, 2013
SNF Market Stronger Than Some Think
After reading about the results from a study on the financial condition of the skilled nursing sector completed by a consulting company, you might think the end was near for skilled nursing owners and operators. That, in fact, was one of the conclusions, as their study said that SNF net income margins had plummeted by 50% since 2010, and that the average was just 0.99% in their sample, with one-third of the facilities either losing money or operating with a zero net margin. And their sample was several large chains. Fortunately, the sky is not falling quite yet and Chicken Little can return to the chicken coop. The study was paid for by the Alliance for Quality Nursing Home Care, which is returning to its original home at the American Health Care Association, but I don’t think they got their money’s worth. People look at cash flow margins, not net income margins, so the analysis needlessly exaggerates the reimbursement problem facing SNF operators. Yes, reimbursement needs to be fixed, but let’s have an honest discourse about it. If it’s so bad, why do buyers continue to line up to purchase them? Not for a zero margin.