Skilled Nursing Facility Due Diligence Checklist

Set the scope, cutoff date and review team

List the entities, locations, operating rights, property and contracts in the purchase. Identify related companies that supply staff, therapy, management or space. State which costs and assets sit outside the target's accounts. Ask the seller to explain what changes after those relationships end or are replaced.

Agree on matching periods for resident days, claims, payroll and cash. Record the cutoff date and known later events. The buyer's accountant should understand changes in reporting methods before comparing monthly results. An unexplained difference is a question to investigate, rather than an automatic add-back or confirmed loss.

The skilled-nursing rent exercise asks whether two earnings labels include the same occupancy cost. Its fictional calculation resolves only the stated rent difference. Other adjustments may still matter. Review them alongside care duties and the asset package before either figure is used to support a conclusion about business value.

The SNF seller exercise matches a fictional bank balance and deposit in transit with resident ledgers. The amount remains resident money. Use the comparison to keep account totals distinct from ownership and proper handling. It does not approve charges or place those funds in the buyer’s cash reserve.

Use the skilled-nursing overview for the broader business model. This checklist organizes the evidence and decisions for a particular purchase. Give each issue a reviewer, current status and next action so unresolved work does not become an unsupported assumption in the price.

Reconcile payer activity through to collection

Request patient-day reports, claims, adjustments, denials, remittances, refunds and receivable aging. Match totals to the ledger and bank records. Trace later receipts to the right service period, and identify amounts still disputed. A bill is not evidence that its full face value will be collected.

PDPM covers classification for Medicare Part A SNF stays; it should not be applied to all residents. (Source: CMS PDPM) Have the payment reviewer assess each material payer group using the actual terms and claim support.

Use AR aging by payer to separate timing from unresolved collectability. Inspect retained accounts, open payment reviews and proposed settlements. State how old invoices, refunds and mixed-period receipts will be handled in the purchase documents. Neither a price adjustment nor an indemnity supplies immediate operating cash.

Explain the usable capacity and growth assumptions

Request the licensed and certified bed counts, room records and daily census. Ask why each offline bed cannot be used. Check whether the buyer's forecast counts licensed beds, staffed beds or beds ready for admission. The occupancy definition helps keep denominators and reporting periods consistent.

Use the SNF bed and boundary review to locate each count on the actual map. It tests a fictional wing exclusion without assuming that the remaining beds form an approved carveout or resolve existing resident needs.

Compare those records with billed activity. Investigate material differences and changes over time. A high percentage against a smaller usable denominator may reflect a closed wing rather than strong use of the whole facility. Do not interpret each open bed as an immediately available revenue source.

If the plan includes reopening space, request the required approvals, costed property work, staffing plan and evidence of demand. Identify when each condition could be met. Keep unsupported growth out of current earnings, and test the cash needed before additional collections could begin.

Compare payroll, PBJ and the actual coverage plan

Inspect schedules, time records, payroll, agency invoices and PBJ submissions for the same dates. Distinguish scheduled, worked, paid and reported hours. Check nights, weekends and backup arrangements. Ask the reviewer to explain discrepancies before treating them as evidence of a violation or a saving.

CMS PBJ draws on auditable staffing records, including agency and contract staff. Its current page describes the August 17, 2026 iQIES launch and required reporting roles. (Source: CMS PBJ) Assign authorized access, corrections and submission responsibility during the transition.

Test proposed labor savings against actual replacement capacity. A fictional buyer might remove agency invoices from a forecast while leaving the same shifts unfilled. The next step is a costed coverage plan, not acceptance of the larger earnings figure. Include benefits, recruitment, orientation and backup in that review.

Connect resident needs with the facility assessment

Request the current facility assessment and evidence of updates. Federal rules require review as needed, at least annually, and for changes needing substantial modification. (Source: 42 CFR 483.71) Compare it with the actual population, resources and proposed operating changes.

Have qualified reviewers assess nursing coverage and competencies under current federal and state requirements. Federal nursing-services duties remain after repeal of specified staffing provisions. (Source: 42 CFR 483.35) The staffing guide explains that distinction.

Translate supported findings into roles, equipment, vendor support and cost. A completed assessment does not prove that every resource is available today. If the buyer changes the resident mix or services, ask what must change in the plan. Clinical judgments belong with qualified reviewers, not the financial model.

The SNF buyer exercise tests a fictional plan for more rehabilitation work with four unchanged inputs. These concern staff skills, therapy terms, rooms and intake. The records may support today’s services without supporting that change. Use the questions to assign the missing reviews before accepting the new earnings forecast.

Trace surveys and quality issues to their current status

Collect surveys, complaint findings, correction plans and later agency letters. Ask the right specialists to review open disputes, payment issues and survey matters. Track what the seller proposed, what the agency accepted and what follow-up review confirmed. Those are separate stages.

CMS ratings have separate inspection, staffing and quality components. (Source: CMS Five-Star system) Use their dates and underlying findings to guide the review. The summary is not a current certification of all conditions in the building.

When a seller claims the rating improved, compare the dated SNF releases and measurement periods. The fictional staffing example shows how more total hours can accompany a lower raw ratio. It does not calculate CMS stars or establish adequate staffing.

Request actual SNF VBP feedback and payment reports for the relevant years. (Source: CMS SNF VBP) Keep these payment adjustments separate from star ratings and hoped-for future improvements. For each material open issue, identify required work, possible cash effects and the evidence that would change the recommendation.

Tie each property finding to a funded response

Obtain title or lease documents, condition reports, maintenance records and relevant safety-system evidence. Have qualified professionals define necessary work and approvals. Confirm who pays and whether the buyer will have possession and access under the proposed terms. An operating license does not answer every property question.

Separate immediate work, recurring maintenance and longer-term capital needs. Include the effect of taking beds out of use and changes to daily operations. A contractor estimate without timing or disruption costs can leave the cash plan incomplete.

Review financing for the actual property and operator. HUD's Section 232 framework provides for eligible residential-care facility mortgages; it is not a commitment to this deal. (Source: HUD ORCF) Keep rent and property expenses consistent with the OpCo/PropCo model used to value the business.

Track approvals and continuing obligations separately

Ask healthcare counsel to assess provider-agreement treatment, state licenses, payer terms and the proposed legal structure. Federal CHOW rules address assignment and attached conditions, including correction plans. (Source: 42 CFR 489.18) A general claim that an asset deal removes all historical exposure is insufficient.

Use the CHOW guide to frame questions. Maintain separate entries for filing, completeness, review, approval and required notices. Confirm the authority needed to operate and receive payment, along with conditions that must remain in place after closing.

Protect records and required communication

Keep financials and identifying facility, owner, resident, staff, vendor and referral details out of pre-NDA outreach. Later commercial review can use controlled, authorized access. Small aggregates and codes can still identify people or the business, so assess the combination of details before sharing.

Set a lawful purpose and safeguards before anyone reviews sensitive records. HHS guidance explains the minimum-necessary duties where they apply and ways to de-identify records. An NDA does not by itself permit disclosure. (Source: HHS minimum necessary; Source: HHS de-identification)

Use the records-custody guide to plan access, retention, later requests and buyer withdrawal. Keep charts out of public website tools. Build required notices into the transaction schedule; confidentiality does not cancel resident rights or legally required communication.

Make a closing recommendation the buyer can act on

Summarize verified earnings, uncertain balances, required work, continuing duties and unresolved approvals. Separate a missing document from a confirmed problem. For each issue, explain the commercial effect, responsible reviewer and what evidence remains necessary. Some findings change price; others require a remedy or make closing premature.

Build the working-capital plan around actual payroll, vendor and collection timing. Keep dispute reserves separate from repair funds and ordinary operating cash. Show what happens if expected receipts arrive late, and identify the funds available to cover that gap.

Connect the recommendation to the first 90 days plan. Confirm leadership, payroll, records, vendors, billing and reporting responsibilities before closing. Refresh material facts when circumstances change. The buyer should acquire a supported operating plan as well as signed documents and a price.

Use the PDPM definition to check payment scope and the case-mix example to read a weighted report. Neither measure settles the quality or cash review.

Use the Five-Star rating definition to check how the headline score relates to its domains. Use the Special Focus Facility definition to identify the dated program category. Keep those separate questions visible in the diligence file.

The SNF evidence map assigns participation, coverage and property questions to separate files. Use it to track missing evidence without treating the provider's name or number as a complete operating review.