Buying or selling skilled nursing facilities

Identify the operation and property being sold

Start by distinguishing the operating company from the real estate. The seller may own both, lease the building from a related entity or operate under a third-party lease. The purchase can involve assets, equity, property, lease rights or several linked agreements. Those choices affect the financial and approval analysis.

List the legal entities, licensed locations, certified participation, contracts and service lines involved. Review whether therapy, management, staffing or other support comes from related businesses. Expenses omitted from one entity may still be necessary to run the facility after the sale.

A nursing facility can serve residents with different care needs and payment arrangements. Do not infer the whole business model from the term skilled nursing or from a short-stay rehabilitation advertisement. Understand the actual resident population and services before comparing the facility with another operation.

The OpCo and PropCo guide explains the distinction between operating and property ownership. Define the package clearly so the buyer, seller, lender and advisers are pricing and reviewing the same transaction.

Understand the revenue behind a resident day

Revenue per resident day is useful only when the payer mix and underlying definitions are clear. Separate Medicare Part A, Medicaid, managed-care, private-pay and other actual sources. Review applicable contracts, rates, authorizations, adjustments and collection experience for each group.

CMS's Patient Driven Payment Model classifies SNF patients in covered Medicare Part A stays. Its scope should not be extended automatically to Medicaid or every long-term resident in the building. Reimbursement specialists should evaluate the target's actual payment records and relevant rules. (Source: CMS PDPM)

Compare collected revenue with the cost of delivering the required services. Higher daily reimbursement can accompany greater resource needs or administrative work. A change in payer mix can therefore alter labor, supplies, therapy, collections and working capital at the same time.

Keep service activity, billing and cash separate

Reconcile patient days to claims, revenue recognition, contractual adjustments and bank receipts. Explain receipts for older services and any refunds or settlements. A strong cash month may reflect collection of prior balances rather than improved current operations.

Use AR aging by payer to examine unresolved balances. Ask why amounts remain open, what documentation supports collection and what has been received since the reporting cutoff. The sale process should distinguish a timing issue from revenue that may never be collected.

Define capacity before interpreting occupancy

A licensed bed count does not prove that every bed can be used immediately. Identify certified capacity, operational capacity, staffed capacity and any rooms taken out of service. Ask what restrictions or practical constraints account for differences.

The occupancy-rate definition explains why percentages can differ without any change in resident count. State whether the measure uses beds, units or resident days, and whether it is a point-in-time or period measure. Compare like measures across reports.

If a buyer plans to reopen a wing or increase admissions, require evidence for each dependency. The plan may need staffing, repairs, approvals, payer participation, referral demand and cash before additional capacity can generate revenue. Empty beds alone do not establish a supportable growth forecast.

Separate growth potential from the existing earnings being sold. Both may matter in negotiation, but the seller should not present an unverified expansion concept as current operating performance or a guaranteed buyer opportunity.

Build a supported earnings picture

Organize monthly financial statements, tax returns, the ledger, payroll, contracts, patient-day activity and collections into a consistent review period. Identify unusual receipts, temporary expenses, owner duties and related-party arrangements. Explain adjustments individually rather than presenting one unsupported add-back total.

Required replacement work must remain in the economic model. If a seller acts as administrator or provides another essential service, determine who will perform it after closing and at what cost. A departing owner's compensation is not automatically an expense that disappears.

Distinguish earnings from capital spending and financing. An operating business can show positive earnings while requiring substantial building work or additional cash for collections. The valuation pillar helps separate these questions before selecting assumptions.

No verified nationwide nursing-facility transaction multiple or universal price per bed is supplied here. Comparisons must match the facility's property inclusion, earnings definition, condition, payer mix and actual deal terms.

Assess staffing against the residents and the operation

Current federal nursing-services rules require sufficient staff with appropriate competencies, informed by resident assessments, care plans and the facility assessment. The rule contains additional provisions and conditional waivers that require careful application. A general labor-cost ratio is not a substitute for this assessment. (Source: 42 CFR 483.35)

The December 2025 federal action repealed specified 2024 staffing provisions. It did not establish that every federal or state staffing obligation ended. Use the staffing-rule guide with current professional review of the actual facility.

Examine days, nights, weekends, vacancies and backup arrangements. Consider nursing leadership, employee and agency coverage, competencies and the cost of recruitment and retention. A buyer's plan to reduce agency expense needs evidence of replacement capacity and its cost.

Review the consequences of proposed service or population changes. A facility taking on residents with different needs may require different resources. Financial projections should follow a supportable care model rather than forcing the operating team to fit an arbitrary margin target.

Use the facility assessment as a planning document

The federal facility-assessment requirement addresses residents, capacity, care needs, staff skills, buildings, equipment, third-party agreements and health-information resources. It requires review at least annually and when changes require substantial modification. (Source: 42 CFR 483.71)

For a buyer, the assessment helps identify whether the proposed operation and budget account for necessary resources. For a seller, an organized and current assessment can help explain the business and avoid contradictory assumptions in marketing and diligence.

Qualified reviewers should examine the document together with current practices and resident needs. Merely finding a completed form does not demonstrate that every resource is available or that the buyer's changes will be appropriate. Record the specific questions the review leaves open.

Read staffing data and public ratings with their limits

CMS's PBJ system collects auditable direct-care staffing information, including agency and contract staff. Reconcile the facility's submissions with payroll, time records and operating schedules. Determine whether differences reflect reporting definitions, errors or an issue requiring further review. (Source: CMS PBJ)

CMS's current PBJ page describes the August 17, 2026 launch of functionality in iQIES. Include authorized access, reporting roles and upcoming submissions in the handoff plan. A system login should not depend on an employee whose role ends at closing.

The Five-Star system supplies an overall rating and separate health-inspection, staffing and quality-measure ratings. CMS presents it as a comparison tool with limits. Use it to formulate questions and review the underlying dates and evidence, not as a complete acquisition conclusion. (Source: CMS Five-Star system)

Avoid treating public data as a live view of today's staffing or a guarantee of clinical quality. Site-specific operational and professional reviews remain necessary, and a broker's business analysis does not replace them.

Separate payment incentives from rating summaries

The SNF Value-Based Purchasing program uses performance information to affect applicable Medicare fee-for-service Part A payments. Request the facility's confidential feedback and payment reports, and identify the relevant performance and program years. (Source: CMS SNF VBP)

Keep confirmed adjustments separate from a forecast of future performance. The current CMS resource includes discussion of upcoming program years; do not apply a future measure set or payment assumption to an earlier period automatically.

A buyer should understand whether anticipated receipts depend on already determined performance, a future operating improvement or an unresolved appeal. These have different levels of certainty. A favorable star rating is not proof of a particular payment amount.

Investigate surveys and unresolved matters before final terms

Collect survey findings, complaint records, plans of correction, follow-up evidence, enforcement correspondence, claims and other known issues. Track the latest status, responsible person and potential cost of each material matter.

Distinguish a proposed correction from an accepted or verified resolution. Ask how the facility has maintained any change and what the incoming operator must continue. A historical finding can have a practical transition implication even when the parties believe the principal issue has been addressed.

Counsel should evaluate the allocation of identified and contingent liabilities, recourse and any negotiated reserve. Contractual allocation does not necessarily control what a regulator, payer or other third party can pursue. Keep those legal questions separate from an accountant's earnings adjustment.

Connect the building condition with financing

Assess property condition, maintenance, safety systems, permitted use and necessary improvements with qualified professionals. Determine responsibility under the existing or proposed lease. Include the timing of repairs and their impact on available capacity and care delivery.

Value the real estate and operating business consistently. If the seller owns both, avoid counting the same economic benefit twice. If the buyer leases, include sustainable rent, renewal risk, assignment consent and capital obligations in the operating analysis.

HUD's Section 232 framework can support eligible residential-care facility mortgages, with project-specific underwriting. Review the HUD 232 guide with a qualified lender; the program does not make every nursing-facility purchase financeable. (Source: HUD ORCF)

Funding must cover more than the price. Account for transaction costs, required improvements, deposits, staffing and operating liquidity. A reserve for a disputed liability should not simultaneously be treated as free cash for property repairs.

Establish the ownership and operating-authority pathway

Review state licensing, federal provider-agreement treatment, payer contracts, property consents and any additional approvals required for the actual transaction. Asset and equity labels are useful descriptions, but they do not settle every regulatory question.

Federal CHOW rules describe assignment of provider agreements and conditions that remain attached, including existing plans of correction. Counsel should assess the actual structure and obligations before the parties assume continuity or a liability shield. (Source: 42 CFR 489.18)

Use a status matrix that distinguishes application submission, completeness, review, approval and required notices. The nursing-facility diligence checklist connects those approvals with financial, staffing and property evidence.

Test the difference between earnings and available cash

Consider a fictional facility with $600,000 of supported annual EBITDA, $240,000 of annual debt service and a $150,000 estimate for recurring capital spending. Subtracting the latter two items leaves $210,000 before taxes, working-capital changes and other cash obligations. These are illustrative assumptions, not a market benchmark or a valuation of a real facility.

The example shows why a buyer cannot treat EBITDA as money freely available for distribution. The debt terms and capital estimate need separate evidence, and changes in collections can create another cash requirement. If the property also needs a one-time renovation, fund that project separately rather than assuming the annual recurring allowance covers it.

Use consistent treatment in the model. If rent is already included in the operating earnings, do not subtract it a second time when calculating cash. If property ownership changes the rent assumption, reconcile that change before comparing alternative structures. Have the accountant and lender review the bridge from operating earnings to actual funding needs, with the timing and purpose of each deduction clearly identified.

Prepare a confidential process and a dependable handoff

An owner can organize the sale with an anonymous overview, qualified-buyer screening and staged disclosure. Keep identifiable resident information out of early marketing. Any necessary clinical-record access requires a lawful purpose and safeguards, not only an NDA. (Source: HHS minimum necessary)

Required notices and resident protections belong in the schedule from the start. Plan who communicates with residents, representatives, staff and agencies, and which statements the buyer can support. Confidentiality should not become a promise to withhold information that must be provided.

Before closing, confirm leadership, staffing, payroll, vendors, records access, billing and reporting responsibility. Refresh material facts if a key person leaves, a payment issue appears or a new notice arrives. The first 90 days guide helps carry diligence findings into a funded, accountable operating plan.