Skilled Nursing Facility Due Diligence Checklist

Define the facility, transaction and review period

Identify the legal operator, property owner, licensed locations, certified participation and contracts included in the proposed purchase. Clarify whether the buyer acquires assets, equity, real estate or lease rights. Include related entities that supply staff, management, therapy or property so shared costs are visible.

Agree on a financial cutoff date and reporting periods. Payer revenue, patient days, payroll, contractor invoices and cash receipts should be comparable. Ask the seller to explain changes in accounting methods or reporting definitions before the reviewers attempt a reconciliation.

Keep an issue log that records the question, evidence, responsible reviewer and decision needed. Separate missing information from a confirmed problem. This helps the parties decide whether to extend diligence, revise an assumption, require a remedy or reconsider the transaction.

Reconcile resident days and collections by payer

Obtain patient-day reports, claims, contractual adjustments, denials, refunds, remittances and receivable aging. Reconcile the totals to the ledger and bank activity. Review the age and cause of unresolved balances instead of treating every dollar billed as a dollar available for debt service.

CMS describes PDPM as the classification model for patients in covered Medicare Part A SNF stays. That scope matters: a buyer should not apply a Medicare Part A payment assumption to all nursing-facility resident days. (Source: CMS PDPM overview)

Separate each material payer group. Inspect the actual Medicaid arrangements, managed-care contracts, private-pay agreements and any other participation. Document authorization, rate, collection and adjustment issues. Compare contribution after the cost of required services rather than ranking payer groups by gross daily revenue alone.

Explain the capacity behind occupancy

Use the occupancy-rate definition to identify the denominator in each report. Licensed beds, certified beds, staffed beds and beds currently available for admission may differ. Ask which rooms or units are offline and why.

Reconcile the daily census with billing and operating reports. Identify temporary closures, renovation, staffing constraints or other restrictions. A high percentage against a reduced operational denominator does not establish that the entire licensed facility is fully used.

If the forecast assumes reopening capacity, require a plan with necessary approvals, property work, staffing, admission demand and cash. The unused bed count is an investigation question, not automatically a growth asset with a supported purchase value.

Compare staffing reports with actual coverage

Request staffing schedules, time records, payroll, contracted staff invoices and PBJ submissions for matching periods. Explain differences between hours scheduled, worked, paid and reported. Examine weekends, nights, vacancies and agency dependence rather than relying only on one facility-wide average.

CMS requires auditable direct-care staffing information, including agency and contract staff, through PBJ. Its current page also describes the August 17, 2026 move of PBJ functionality into iQIES. Confirm authorized reporting roles and responsibility during the ownership transition. (Source: CMS PBJ staffing submission)

Do not assume a reporting discrepancy proves a staffing violation. Investigate the cause with the appropriate specialists. Equally, a successful submission does not prove that current staffing is sufficient for resident needs. Reporting accuracy and operational sufficiency are separate review questions.

Use the facility assessment to test labor assumptions

The current federal facility-assessment rule addresses residents, capacity, acuity, staff competencies, the physical environment and resources for ordinary operations and emergencies. It requires review at least annually and when changes require substantial modification. (Source: 42 CFR 483.71)

Ask qualified operating and clinical reviewers whether the proposed staffing model fits that assessment and the resident population. Review leadership, training, competencies and contingency coverage. A forecast based only on a target labor percentage can miss the resources the facility needs.

Current nursing-services rules retain sufficient-staffing requirements after the December 2025 amendment. State obligations also need review. Do not convert repeal of specified federal numerical provisions into an assumption that staffing costs can be reduced without limit. (Source: 42 CFR 483.35)

Read surveys and quality reports through to their outcomes

Collect survey reports, complaints, plans of correction, follow-up correspondence, enforcement matters and disputed findings. Record the latest status of each material issue. A seller's response or corrective plan is not the same as a documented resolution.

CMS's Five-Star system has an overall rating and separate inspection, staffing and quality-measure ratings. Use the underlying components and dates to develop questions. A summary rating cannot establish all current care, financial or property conditions. (Source: CMS Five-Star Quality Rating System)

Keep payment programs separate from ratings. Request the facility's SNF VBP feedback and payment information for the relevant program years. A favorable rating is not evidence of a specific future incentive payment. (Source: CMS SNF VBP program)

Tie the property review to a costed operating plan

Determine who owns the building and which repairs belong to the operator or landlord. Obtain condition assessments, maintenance records, relevant safety-system reports, lease provisions and proposed improvements. Qualified professionals should evaluate issues requiring technical judgment.

Separate immediate work from recurring maintenance and longer-term capital needs. If repairs would take beds out of service, include lost availability and operating disruption in the scenario. A repair estimate without its timing and operating effect is an incomplete funding assumption.

HUD's Section 232 program concerns eligible residential-care facility mortgages and project underwriting. It is not proof that a particular facility or acquisition qualifies. Align lender requirements with the actual property and operator structure. (Source: HUD Office of Residential Care Facilities)

Review provider agreements and state authority separately

Have healthcare counsel assess the proposed transaction under federal CHOW rules and applicable state requirements. Review provider-agreement assignment, existing conditions, state license changes, payer consents and any additional approvals for the actual facility.

Under 42 CFR 489.18, assigned provider agreements remain subject to applicable terms and conditions, including existing plans of correction. Do not assume historical obligations disappear merely because the parties choose an asset purchase. (Source: 42 CFR 489.18)

Use the CHOW explanation to organize questions, then obtain transaction-specific advice. Identify the required evidence before closing rather than relying on a broad representation that all licenses will transfer.

Protect records while obtaining useful clinical review

Start commercial review with aggregate information. Define the purpose, legal basis and safeguards before qualified reviewers receive patient-level records. An NDA alone is not a complete privacy analysis.

HHS minimum-necessary guidance informs applicable uses and disclosures. The parties should also plan records custody, authorized access, retention responsibilities and responses to later payer or resident requests. (Source: HHS minimum necessary)

Do not send resident charts or identifying narratives through a public website tool. Use the records-custody guide to develop the appropriate transaction process with counsel.

Produce a closing recommendation the buyer can fund

Summarize supported earnings, disputed balances, necessary capital work, open liabilities and required approvals. Explain which estimates remain uncertain and what would change the conclusion. Keep accounting adjustments separate from one-time transition spending.

Prepare a working-capital plan that covers payroll, vendors and collection timing. A negotiated indemnity does not place operating cash in the buyer's bank account, and an escrow for one exposure should not be counted twice as repair funding.

Finish with a day-one responsibility map and a process for material updates before closing. The recommendation should connect price, financing, care capacity and operating authority. A lower price cannot resolve an acquisition that lacks the resources or approvals needed to operate responsibly.