AHCA’s Parkinson: Despite ‘Enticing’ Offers To Sell, Independent Operators Will Stick Around

October 6, 2021, Alex Zorn, Skilled Nursing News - Despite the robust acquisition market currently seen in skilled nursing, Mark Parkinson, CEO and president of the American Health Care Association, believes the sector will continue to be dominated by independent operators.

“I do think that you will see some independent owners [exit], but I don’t think it will be enough to change the fact that this will continue to be a highly decentralized, fragmented business without major market domination by any large companies,” he said.

One incentive for smaller, independent operators to exit the industry is that the price per bed in the skilled nursing market continues to skyrocket. 

Buyers have been willing to pay $17,000 more per bed compared to 2020 in terms of evaluation, according to data recently presented by Evans Senior Investors during a webinar.

Parkinson admitted that some independent operators are getting daily phone calls asking them if they are willing to sell their buildings with some offers that are “so enticing” that a number have made the decision to sell and get out.

Still, he doesn’t anticipate a dramatic shift in nursing home ownership demographics coming out of COVID.  He said that more than half of the skilled nursing buildings are owned by people who own 10 or fewer facilities. 

“For as long as I’ve been involved in this space, people have said that this will be the year that finally the independent operators will sell out and there’ll be a lot of consolidation,” Parkinson explained.  “Well despite that, the number of different independent operators has continued to increase.”

COVID-19 occupancy recovery

Parkinson said the industry was on track to recover from the COVID-19 pandemic before the delta variant hit.

“If we had been able to continue on the trajectory [we were on], we would have been pretty close to recovery by the end of 2021,” he said.  “The delta variant came along, and it has caused a pause in our census recovery.”

For the past six to eight weeks, the industry has stayed at around 72.5% occupancy.

“We still have about 7% to go to achieve recovery,” Parkinson said.  “Even with that, we’re not going to be totally recovered by the end of 2021.  It’s going to take another year.  The pause in census recovery combined with increased staffing costs have been devastating.”

He believes a federal vaccine mandate may also make it difficult on operators.

Parkinson feared that if “very suddenly” there’s a vaccine mandate with “no alternatives” there will be buildings, particularly in rural areas that will “lose a number of workers and it will end up making the staffing problem even worse.”

“We believe CMS really needs to give the sector a glide path to the mandate, which would include an alternative, a testing alternative to the vaccine and or some kind of a delay in implementation, to give people time to actually get the vaccine,” he said.