Marcus & Millichap

Seniors Housing Skilled Nursing Research Report

First Half 2019

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New Reimbursement Model Set to Alter Skilled-Nursing Sector

Cost savings may be headed to skilled-nursing sector. Occupancy stabilized at skilled nursing facilities last year, according to NIC MAP®️ Data Service. Rents, meanwhile, continue on an upward trend, largely as facilities pass on higher costs, particularly for labor. The new Patient-Driven Payment Model (PDPM), which is set to go into effect at the beginning of the fourth quarter, supports cost savings at skilled-nursing properties. Administrative and paperwork costs, in particular, should be realized when PDPM replaces the current resource utilization groups. However, therapy companies will shift their business model and potentially lose revenue with the new reimbursement program. In terms of supply, construction is below the level of dilapidated stock that is removed from inventory each year.

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