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Skilled Nursing Market Focusing on the skilled nursing market, its average price per bed dropped 14% from $93,000 in 2019 to $79,700 in 2020. We have seen larger percentage declines in the past, most recently an 18% decline from the $99,200 per bed average price in 2016 to $81,355 per bed in 2017. Considering the circumstances of 2020, there could have been a steeper fall in average price, with the sale of many ailing facilities by highly motivated owners. But federal and state aid programs prevented many owners from having to sell, leading investment demand for SNFs to outpace supply of facilities available for sale. That helped push up the average purchase price in the first half of 2021 to $88,500 per bed. But this strength in average pricing does not show that the bifurcation of the market grew in the pandemic. Alongside the sales of plenty of struggling facilities in 2020, including eight properties selling
below $10,000 per bed and more than 30 priced under $25,000 per bed, there is another side of the market with newer transitional care facilities that care almost exclusively for Medicare and private pay patients, usually at a higher acuity too. The introduction of the Patient Driven Payment Model (PDPM) reimbursement rule change in October 2019 had previously ushered in a buying boom in the transitional care market, as these facilities were primed to benefit the most from it. That may not have been first on the mind of some SNF buyers since the pandemic began, but they still paid up for the higher and steadier stream of cash flow. In addition, the premium placed on strong existing cash flow likely only rose as the pandemic drove many struggling, older facilities into financial distress and to sell at steep discounts. Throughout the 21st century, skilled nursing cap rates have gradually fallen, but compared to the seniors housing market, the average has remained remarkably steady. However, it should be noted that
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National Investment Center for Seniors Housing & Care
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