How to Sell a Skilled Nursing Facility: A Step-by-Step Guide

Selling a skilled nursing facility can be more complex than most business transitions—and yet, owners often overlook critical factors until it’s too late. Are you fully prepared to navigate regulatory pitfalls, staffing dependencies, and varying payor sources to maximize your sale price? In this guide, we’ll reveal often-missed details that can make or break your deal and outline practical steps to position your skilled nursing facility (SNF) for a successful transition.

Why Skilled Nursing Facilities Are Unique

Essential Healthcare Services

Skilled nursing facilities lie at the core of the senior care continuum, bridging the gap between hospital-level care and home-based solutions. Providing around-the-clock supervision, skilled nursing care, and rehabilitative services, these facilities play a crucial role in maintaining patient well-being.

Unlike other healthcare businesses that might focus on outpatient procedures, an SNF offers ongoing clinical oversight and monitoring—such as wound care, intravenous therapies, and post-acute rehabilitation. SNFs must maintain high patient satisfaction to remain attractive to new admissions and referral sources. The facility’s ability to deliver quality care directly influences its reputation and value in a potential sale.

Because these services are medically essential, skilled nursing facilities exhibit more stable demand than many non-healthcare small businesses. Even in periods of economic turbulence, the need for skilled nursing support persists. However, competition from alternative care settings (e.g., assisted living or in-home care options) warrants close attention to market positioning.

Licensure and Quality Ratings

Certificates of need (CON), state licenses, and Medicare/Medicaid certifications are integral to the operations of a skilled nursing facility. Buyers pay close attention to these elements during due diligence, specifically:

• Valid operating licenses from state health departments.

• Medicare and Medicaid provider numbers.

• Clinical compliance records, including survey results and fines.

Quality ratings such as the Centers for Medicare & Medicaid Services (CMS) Five-Star Quality Rating System can significantly impact a facility’s reputation, competitive advantage, and financial performance. Maintaining a high star rating not only attracts better payor contracts but also instills confidence in potential buyers eager to acquire a well-regarded skilled nursing business.

Recurring Revenue Potential Through Long-Term Stays

Where many healthcare segments rely on one-time procedures or short outpatient visits, a skilled nursing facility often benefits from longer patient engagements, particularly for post-acute care and chronic long-term care residents. This creates an element of recurring revenue, as reimbursements can be more consistent when:

• Occupancy rates remain stable or consistently high.

• There’s an ongoing influx of referrals from hospitals, medical networks, and community providers.

Nonetheless, reimbursements can center heavily on Medicare, Medicaid, or Managed Care, so changing government policies and variable payor rates must be factored into valuation. Properly balancing private pay and government-funded residents can be an asset when selling a nursing facility.

Payment Streams: Government vs. Private Funding

Medicare and Medicaid

Medicare and Medicaid reimbursements often form the foundation of a skilled nursing home’s revenue. These payors typically provide coverage for:

• Short-term rehab stays after a hospitalization.

• Long-term care for low-income or medically complex residents.

Because so much depends on government pay structures, the facility’s star rating, survey history, and compliance can significantly affect reimbursement levels. Even your floor’s or wing’s average daily census (ADC) can fluctuate based on policy changes such as the Patient-Driven Payment Model (PDPM) for Medicare or varying Medicaid base rates.

Managed Care Contracts

Managed care organizations (MCOs) and insurance providers also play a significant role, especially as value-based payment models continue to expand. These payors:

• Negotiate per-diem or bundled payment rates with providers.

• May require specific quality metrics or reduced readmissions to maintain attractive contract terms.

• Often look for streamlined care transitions and viable tracking of patient outcomes.

Demonstrating positive relationships with managed care and private insurance companies can enhance your facility’s perceived stability, as buyers appreciate revenue diversification beyond purely federal or state-funded sources.

Private Pay and Supplemental Revenue

Although private pay may represent a smaller share of total revenue compared to Medicare or Medicaid, it can significantly boost margins. Offering deluxe rooms, additional patient amenities, or specialized care programs can generate extra revenue streams. These supplemental services typically include:

• Therapy upgrades (physical, occupational, speech therapy beyond standard offerings).

• Private-room differentials.

• Specialized memory care units or private dining experiences.

A balanced payor mix that includes private pay revenue helps reduce reliance on government reimbursements and makes your nursing business more attractive to buyers looking for stable profitability.

Operational Factors Affecting Valuation

Staffing and Retention

Staffing shortages are one of the largest pain points in the senior care industry. A high turnover rate among registered nurses (RNs), licensed practical nurses (LPNs), and certified nursing assistants (CNAs) can:

• Disrupt continuity of care and lower patient satisfaction scores.

• Increase recruiting and training expenses.

• Signal potential buyers that the facility may be unstable or difficult to manage.

To operate smoothly and enhance your skilled nursing facility’s market value, consider:

• Implementing robust training, career development, and recognition programs.

• Offering competitive pay and benefits that align with industry standards.

• Cultivating a supportive workplace culture that retains talent.

Documenting these processes in measurable, trackable ways (e.g., sharing staff satisfaction survey scores) reassures buyers that the facility can sustain quality care post-sale.

Regulatory Compliance and Risk Management

Regulations in skilled nursing can be both complex and swift to change. From infection control requirements to life safety codes, your facility must remain current on all local, state, and federal regulations. Potential buyers will scrutinize:

• Deficiency reports: Any repeated deficiencies or citations can negatively impact value.

• Infection prevention measures: Especially in light of recent global health events.

• Resident rights and complaint logs: Evidence of unresolved grievances can hamper buyer confidence.

Proactively addressing these compliance matters signals that you’ve invested in a well-run, low-risk operation. Staff education, standard operating procedures (SOPs), and external audits are powerful tools for maintaining your facility’s good standing.

Financial Statements and Cost Management

Separate your personal finances from the business and ensure your financial statements adhere to Generally Accepted Accounting Principles (GAAP). Buyers will look for:

• Seller’s Discretionary Earnings (SDE) or Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent (EBITDAR).

• Evidence of stable or growing net operating income (NOI).

• Transparent operating expenses, including insurance, utilities, and outsourced services (e.g., therapy providers, lab tests).

Clean bookkeeping and thorough documentation of all transactions further reduce perceived risk and can justify stronger valuation multiples for your nursing business.

Growth Potential and Market Trends

Service Expansion

Offering specialized programs can diversify revenue, serve broad patient needs, and strengthen your brand’s reputation. Popular service expansions in skilled nursing might include:

• Memory care units: Tailored programs for residents with dementia or Alzheimer’s.

• Respiratory therapy programs: Ventilator care and tracheostomy management for patients with chronic respiratory conditions.

• Advanced rehabilitative services: State-of-the-art physical therapy equipment or aquatic therapy programs.

These service lines boost census by attracting specific resident populations and can justify premium daily rates or additional private pay opportunities.

Partnership and Referral Sources

About 40% or more of new admissions can flow from hospital referrals or physician networks. Establishing and maintaining relationships with:

• Acute care hospitals and discharge planners.

• Home health agencies looking to refer patients who need more intensive care.

• Community organizations supporting seniors and adult day care.

These partnerships often foster a robust admission funnel. Buyers view strong referral pathways as a valuable intangible asset that ensures occupancy levels remain predictable.

Market Consolidation in Senior Care

Ongoing consolidation in the senior care sector means many skilled nursing owners receive unsolicited inquiries from large regional operators, private equity groups, or real estate investment trusts (REITs). Market data showing increased demand for specialized geriatric care only adds to this trend. By aligning your strategy to capitalize on consolidation—through stable revenue, robust compliance, and identifiable growth opportunities—your business can command a premium price.

Who’s Buying and Why It Matters

Regional Operators and Competitors

Local or regional operators often look to expand by acquiring skilled nursing homes in contiguous markets. They seek:

• Economies of scale in staffing, purchasing, and administrative processes.

• Opportunities to integrate existing management systems and training programs.

• A facility that already has a solid regulatory track record and stable census.

If you can demonstrate that the facility’s staff structure and patient care processes align well with a larger operator’s network, you can position your nursing business for a strategic sale.

Private Equity and Real Estate Investors

For private equity firms or REITs, skilled nursing investments can offer relatively stable, recession-resistant returns, particularly when:

• The SNF is located in an area with favorable demographics (e.g., a growing senior population).

• Well-established payor contracts and compliance protocols reduce operational risks.

These investment groups often retain existing management if performance metrics are robust. Your well-documented SOPs, consistent staffing, and quality assurance programs become major selling points to them.

First-Time Investor-Operators

Individuals or small groups new to the senior care industry may be drawn to an SNF as a financially sound venture, particularly if:

• There is an opportunity to learn from experienced staff or through a transitional consulting agreement.

• The facility has a positive reputation and stable occupancy, reducing the buyer’s learning curve.

When preparing to sell to individual buyers, emphasize clarity in financial records, operational procedures, and staff training so the new owner can step in smoothly.

Practical Steps to Increase Your Valuation

Taking strategic action to boost your SNF’s perceived value can pay dividends when it’s time to market the business. Whether you’re planning to sell a nursing home now or in the near future, consider these measures.

Maintain Clean Financial Records

• Separate business and personal expenses.

• Ensure your P&L statements, balance sheets, and cash flow statements align with GAAP.

• Track your occupancy, daily revenue metrics, and ancillaries (e.g., therapy) in detail.

This transparency helps build trust during buyer due diligence and may improve your bargaining power.

Focus on Staff Stability

• Create retention programs and competitive pay scales.

• Recognize high performance through consistent employee appreciation initiatives.

• Develop career ladder opportunities to promote from within.

A loyal, well-trained team can maintain clinical quality and customer satisfaction, which buyers notice immediately.

Diversify Payor Mix and Grow Private Pay

• Negotiate or renegotiate managed care and insurance contracts to expand coverage.

• Consider specialized services or premium offerings that attract private pay families.

• Aim for a balanced payor breakdown that limits overreliance on any single source.

Spreading risk across multiple payers reduces sudden revenue disruptions if Medicare or Medicaid rates shift.

Review and Improve Compliance Standing

• Conduct regular internal audits to preempt potential issues.

• Stay informed about state and federal regulatory changes.

• Address past deficiencies aggressively and maintain a track record of prompt corrections.

Proactively managing compliance demonstrates strong leadership and operational discipline.

Map Out Growth Opportunities

• Explore expansions in therapy, memory care, respiratory services, or tele-health consults.

• Cultivate relationships with new hospital systems and community-based providers.

• Evaluate the feasibility of adding new wings or upgrading rooms for private pay.

Presenting a clear plan to expand occupancy, increase census, or enhance per diem rates can justify higher valuation multiples.

Example Scenario: Two Skilled Nursing Facilities

Facility A

• Services: Well-rounded post-acute rehabilitation, memory care program, strong therapy offerings.

• Occupancy: Averages 90% with an even mix of Medicare, Medicaid, and private pay.

• Operations: 4-star CMS rating, minimal staffing turnover, robust compliance history.

• Growth: Evaluating telemedicine partnerships and respiratory therapy expansion for chronic conditions.

• Estimated Valuation Multiple: ~7–8× EBITDA (high-star rating, balanced payor mix, stable census).

Facility B

• Services: Primarily traditional long-term care with limited rehab options.

• Occupancy: Hovers around 70%, heavily reliant on Medicaid funding.

• Operations: Cited for multiple deficiencies in the last two surveys, moderate staff turnover.

• Growth: No formal strategy, limited hospital referral agreements.

• Estimated Valuation Multiple: ~4–5× EBITDA (regulatory risks, limited services, uncertain future earnings).

Summary

• Essential Services & Quality Ratings: Skilled nursing facilities operate at the core of the healthcare ecosystem, where regulatory compliance and patient-centered care are paramount.

• Payor Mix: Balancing Medicare, Medicaid, managed care, and private pay revenue stabilizes your cash flow and may elevate buyer confidence.

• Operational Efficiency: From low staff turnover to methodical compliance management, an efficient operation signals reduced risk and can lead to stronger valuation multiples.

• Growth Potential: Whether through specialized programs, expanded partnerships, or facility upgrades, articulating a clear path for future expansion can significantly boost your SNF’s market value.

• Types of Buyers: Familiarity with your likely buyer pool—regional operators, private equity, or first-time owners—helps tailor your preparation and negotiation strategy.

Next Steps

Positioning your skilled nursing facility for a premium sale price requires strategic planning, meticulous record-keeping, and strong management. If you’re ready to explore how to maximize value for your nursing business:

• Perform an internal audit of compliance, staffing, and financial statements.

• Identify potential revenue opportunities in specialty services or private pay enhancements.

• Reach out to valuation experts familiar with the intricacies of skilled nursing facility transactions.

By proactively addressing your facility’s operational and financial status, you’ll be prepared to meet buyer expectations—and potentially secure a final sale price that truly reflects the exceptional care your facility provides.

OffDeal leverages advanced technology and expertise to help small business owners achieve the same quality of M&A service previously reserved for large corporations. Our mission is to ensure every business owner has the opportunity to maximize their value when they're ready to sell.