Transitions in ownership or sponsorship among not-for-profit senior living and care providers reached an all-time high in 2023, according to an update released this week from Ziegler.
Transitions among such providers have been on an upward trajectory since 2015 and even more so since the 2020, fueled by financial challenges related to the pandemic, the specialty investment bank said.
Since 2015, 900 not-for-profit senior living communities or skilled nursing facilities have undergone transitions, “reflecting the increasing view of affiliation as an important strategic option in an organization’s toolkit for growth,” Vice President of Senior Living Research Cathy Owen wrote. Eighty-four of those transitions occurred in 2015; there have been 876 so far in 2023.
Also since 2015, approximately 53% of the not-for-profit properties undergoing transitions in ownership or sponsorship have been acquired by for-profit owners and operators.
“Most of these transactions have been in the form of freestanding NFP nursing homes and communities that are financially distressed to the point where it is too difficult for another NFP to come in and take over sponsorship and operations,” according to Owen.
Many nursing home closures have taken place in recent years “due to insufficient reimbursement to cover costs in an increasingly regulated environment,” the expert said. She noted that 70% of long-term care closures since 2010 have been in the nursing home segment.
In 2023, according to the update, many not-for-profit organizations entered into bidding competitions with for-profit providers in the acquisition process.
“This shows that many NFP organizations have financial capacity, are adding resources and doing the work at the board level to quickly respond to these situations when they arise,” Owen noted.
Not all mergers and acquisitions come from a place of financial distress, however, she observed. Sometimes it’s a matter of weighing the benefits of scale of the combined resources versus going it alone.
“We observe this in a number of cases whereby there is a retiring CEO, and the board explores an affiliation as a form of succession planning rather than conducting a formal search for a new executive,” Owen said. “These healthy organizations in transition are some of the more likely communities to seek an NFP affiliation partner rather than be sold to the private sector.”
