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Nursing Homes and Assisted Living Facilities

Assisted living facilities and nursing homes are two options on the spectrum of housing and care. Most widely known for seniors; however, many facilities also serve disabled individuals.

The primary difference between assisted living and nursing homes is that assisted living is housing that provides some care while nursing homes are primarily caring facilities that also provide housing.

Skilled nursing facilities (SNFs)

SNF owners should make sure internal financial statements reflect an efficient operation and a true cash flow picture. Bad news doesn’t kill deals, but surprises do so you don’t want to present financial statements that are not reflective of your true cash flow.

Cash flow is king

The average and median price per bed in SNFs may have some weight when it comes to underwriting, but not nearly as much weight as cash flow. Typically, you underwrite a skilled nursing based on the cash flow. At the end of the day, buyers tend to look more at the price per bed as a cap as opposed to what the median or average is…. it’s more of a guideline, a check on what you’re paying for a particular facility.

Medicare and Medicaid

SNF operators may be focused on growing Medicare reimbursement, but the reality is that most of the money taken in and most of your residents will be Medicaid based. It’s important to understand the drivers and realize that no matter what you’re going to do in the short, and the medium, and probably even in the long term, Medicaid is going to be a part of your facility and understanding it, learning it and then eventually mastering it, is going to be very important in your success.

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