The nursing home sector remains largely fragmented, as evidenced by the fact that just under a third of the sector is currently made up of single-site providers.
But that number is starting to slowly decline — after dropping two percentage points during the Covid-19 pandemic, according to NIC MAP Data, powered by NIC MAP Vision.
Even before the challenges that were exacerbated by Covid, industry leaders across the country were the least optimistic for self-employed skilled nursing workers. Specifically, 36% of respondents to Lancaster Pollard’s 2019 Housing and Aged Care Survey rated the outlook as “poor”.
While single-site SNFs may actually have a competitive advantage in occupancy and staffing, industry experts believe the wide variation in operational performance between these organizations could lead to sales and closures in years to come. coming.
Cory Rutledge, CliftonLarsonAllen (CLA) industry general manager, healthcare, said he expects that number to eventually decline as buyers of skilled nursing facilities do not enter the market to purchase a establishment.
“A lot of these are private companies or multi-site investors looking to add to their portfolio. Even if single sites and multiple sites sell at the same rate, the overall percentage of single sites will decrease over time as the vast majority of buyers are multi-site,” he wrote in email responses to Skilled Nursing News.
Rutledge expects to see more regional providers in three to five years with between 10 and 30 facilities that have a geographic focus.
A competitive advantage
When comparing the performance of single sites to multiple sites, the data shows that free-standing retirement homes can have a competitive advantage when it comes to occupancy and staffing.
For example, the average number of nursing hours per day is higher for single sites (4.72) than for multiple sites (4.26), according to data from the 2021 Medicare Cost Report analyzed by CLA.
Agency staffing as a percentage of all nursing is also lower for single sites — 9.24% versus 10.51%. Occupancy is also “significantly higher” for stand-alone establishments (81.61%) compared to multi-site providers (71.57%).
On the other hand, the occupancy of smaller operators tends to be more unpredictable, according to NIC senior data analyst Omar Zahraoui.
“Generally, the smaller the property, the more volatile the occupancy due to the impact of a few moves…especially if they’re not part of a larger portfolio,” he said.
The biggest opportunity for single site operators is reputation and local community engagement, according to Rutledge.
“Skilled nursing has struggled with public perception nationally, but a single-site facility that is an integral part of the community has the potential to generate both referrals and workforce work if it can turn its reputation into a strategic advantage,” he told SNN.
Chelsey Gray, transformation manager at Revive Health Senior Care Management, saw this firsthand as a small operator in Northern Nevada.
Gray and her husband, Zachary Gray, bought their first retirement home together in 2019 and were single-site providers until they acquired two more facilities earlier this year.
Being a small operator allowed them to understand where there were opportunities for efficiency in all positions, whether it was housekeeping for a registered nurse – and what they needed to do their work.
Gray said their goal was to ultimately transform how people think about skilled nursing in the state of Nevada, and being small and living in the state where they operate allowed them to develop relationships. with state legislators.
“Zach and I are also licensed CNAs. I did it to get to know the industry better, because that’s the biggest part of our staff… And we did everything from washing the dishes to cleaning the rooms. Honestly, part of it was because of understaffing or being called, but other parts are that we need to understand the departments and where their gaps might be and how to improve them,” Chelsey Gray told Skilled Nursing News.
Rutledge said one of the ways vendors have managed to operate with fewer employees overall has been to leverage outsourced help, especially with roles like human resources, accounting, financial reporting, invoicing and collections, among others.
To look forward
Despite some of the community and reputation-based benefits that exist with a stand-alone qualified nursing facility, the headwinds are, in many cases, stronger than those of a multi-site regional provider. said Rutledge.
The main issue impacting transactions today is financial viability – particularly considering the negative operating margins over the past 18 months and the largely dried up federal government support related to Covid, noted Rutledge.
Regarding the ability to generate cash, measured by the EBIDA margin, these figures are slightly lower for single sites (11.36%) than for multi-site operators (11.60%).
And this can vary greatly depending on the type of unique site provider. Stand-alone nursing homes fall into one of three categories: private (33%), government-run (19%) or non-profit (48%).
But there are scenarios in which there is a real possibility that each of these types of facilities will end up in the hands of a multi-site provider, according to Rutledge.
For example, facilities that are privately run in many cases are owned by people approaching retirement age who have no succession plan.
In the case of government-run facilities, many cities and counties review their budgets and determine if they have the finances and skills to operate the retirement homes under their jurisdiction. Those who decide that running an SNF is not a priority will close or sell to a multi-site operator.
For nonprofit autonomous operators, Rutledge likened it to the “haves” and the “have-nots.”
“High performers may have the resources to continue to succeed, but nonprofits in financial difficulty will likely sell or go out of business. My advice to struggling nonprofits is to raise your hand and start affiliation discussions before they are under financial duress. The number of options for a financially viable nonprofit are many, but those options quickly dwindle in times of financial hardship,” he said.