As the nursing home sector closely monitors macroeconomic factors – labor pressures chief among them – consolidation, restructuring, and a shift to regional models are all part of deal making trends observed in 2023.
The sector has grappled with escalating labor costs, exacerbated by the use of expensive temporary agency labor and staffing shortages stemming from the pandemic. Additionally, low Medicaid reimbursement rates and an uneven recovery of occupancy rates have added to the financial challenges faced by companies.
And while the challenges may have been similar, the approaches that operators took toward dealmaking were varied.
Companies like Heritage opted for a strategic downsizing and restructuring approach in response to these complex challenges, after a long road of advocating for legislative measures to address financial burdens.
Meanwhile, Omega Healthcare Investors (NYSE: OHI) sold a large chunk of its nursing homes as a part of an ongoing restructuring effort, and adjusted to Guardian Healthcare’s exit from the industry.
And, the Evangelical Lutheran Good Samaritan Society – the largest non-profit operator of rural nursing homes – also moved to consolidate its operations to align with a broader trend in the nursing home sector, where large national operators shrunk in size but maintained their presence as large regional players. The regional model allowed organizations to focus resources.
In yet another facet of 2023’s deal activity, the acquisition of 10 facilities by Cascadia was seen as a value-added play, emphasizing cultural alignment and the intention to maintain consistency in care.
Few, but notable players in the sector moved to expand their footprint.
This was the case for Genesis Healthcare, which recently announced its plans to add 38 nursing homes, marking the company’s largest expansion since transitioning to a market model for patient care. It was a significant move for the industry, especially considering the challenges Genesis faced in recent years, marked by divestments and a reduction in the number of facilities operated.
Here are some of the most significant and most-read deals of 2023.
Omega Sold 29 LaVie Nursing Homes for $305M, Adjusted to Guardian’s Exit
Omega Healthcare Investors (NYSE: OHI) sold 29 LaVie nursing home facilities for $305 million, significantly reducing its exposure to LaVie assets and minimizing associated risks. The sale was part of Omega’s broader restructuring efforts, which had involved transitioning a total of 48 facilities out of the LaVie portfolio through asset sales and re-tenanting agreements. Omega’s CEO, Taylor Pickett, highlighted the company’s strong financial performance in Q3 2023, attributing it to higher-than-expected interest income and unanticipated rent payments from some operators.
It was an eventful year for Omega. In an unexpected twist, Guardian Healthcare exited the industry. Guardian had entered into a restructuring agreement with Omega, resulting in the sale of 12 facilities.
During Omega’s last earnings call, the company said that it was in discussions with Guardian regarding the remaining facilities in its portfolio, and efforts were underway to re-tenant the facilities with a goal of concluding the transitions by year-end. Omega emphasized its readiness to make acquisitions, citing over $600 million in cash on hand as of Nov. 1 and over $1.4 billion available under its line of credit.
Omega’s leadership acknowledged the slow positive trends in occupancy recovery within its portfolio, but noted regional variations.
Evergreen Health Group Closed on EmpRes Acquisition, Adding 42 Skilled Nursing Properties to Its Portfolio
In September, Evergreen Health Group completed the acquisition of EmpRes Healthcare, a skilled nursing facility (SNF) operator based in Vancouver, Washington.
The acquisition added 46 senior care facilities, including four senior housing properties, across six states to Evergreen’s portfolio. The deal was facilitated by Tony Cassie, Gideon Orion, and Mark Myers of Walker & Dunlop.
“We did confidentially market the deal and had 6 very competitive offers in the process,” Orion said in an email. The economics of the deal remained undisclosed.
Evergreen CEO Issac Yenowitz considered the acquisition a significant step for both organizations.
EmpRes’ home health and home care services, along with palliative care and hospice operations (Eden Health), will be separated from Evergreen’s operations, with Brent Weil continuing to lead Eden Health.
“With the separation of EmpRes and Eden, I am excited to continue leading Eden Health,” EmpRes CEO Brent Weil said in a statement. “This move allows us to concentrate on our strengths while ensuring that EmpRes centers are in capable hands with Evergreen Healthcare Group. Our shared dedication to quality care assures a bright future for both organizations.”
Nursing Home Giant Good Samaritan Society Exited 15 States, Focused on Core Markets
In a bold move, the Evangelical Lutheran Good Samaritan Society, a major skilled nursing provider in the United States, consolidated, shrinking its footprint across 22 states to seven in early 2023.
The consolidation focused on South Dakota, North Dakota, Iowa, Minnesota, Nebraska, Kansas, and Colorado, where about 70% of the older adults served by the organization resided. Over the year, Good Samaritan exited the additional 15 states gradually, with facilities transitioning to other operators.
Eagle, Idaho-based Cascadia Healthcare acquired 10 former Good Samaritan facilities, three in Idaho, three in Oregon, two in Washington, and one in Montana.
Cascadia, known for its regional model, saw this as an opportunity to strengthen its presence and create synergies, building on its existing portfolio in Arizona, Idaho, Montana, New Mexico, Oregon, and Washington.
“Given the scale we have in those four states, we can build up the resource support even more to deliver great care and increase access and drive census coming out of the Covid period,” Cascadia CEO Steve LaForte said.
Heritage Operations Sold 22 of its 44 SNFs, Citing Labor Shortages and Costs
Illinois-based Heritage Operations Group also significantly reduced its skilled nursing operation in 2023 – divesting 22 of its 44 skilled nursing facilities and an assisted living facility, citing challenges posed by labor shortages and increased staffing costs amid a challenging economic climate.
Ben Hart, the President and CEO of Heritage, stated that the company, with locations across Illinois, is strategically evaluating its approach to delivering healthcare services in the future, and that the decision to sell these facilities is part of a broader effort to navigate financial pressures, and Heritage will continue to operate the remaining nursing homes and senior living facilities while maintaining its headquarters in Bloomington, Illinois.
SNN reported that government filings reveal that 69 employees at the company headquarters will be let go, starting in April, with the sale expected to be finalized by June 1.
“As a result of the divestiture, our corporate office in downtown Bloomington will be restructuring and reducing its size. Heritage Operations Group will continue to manage skilled nursing facilities and senior living facilities at a reduced size and scope,” said Hart.
Genesis Added 38 Nursing Homes in Largest Expansion Since ‘Market Model’ Launch
Genesis Healthcare Inc. expanded its services significantly with the addition of 34 nursing homes in Pennsylvania and the management takeover of four facilities in Colorado in 2023.
This move marked the largest expansion for Genesis since the adoption of a market model approach to patient care. The company, which had faced a challenging period leading to divestments, aimed to recover through a strategic restructuring plan in 2021, including reducing debt by $256 million and securing a $50 million capital infusion from ReGen Healthcare LLC.
Having voluntarily delisted from the New York Stock Exchange and sold 51 facilities, Genesis shifted to a market-focused model as part of ongoing restructuring efforts. The new approach aimed to create a vertically integrated community-based healthcare system in each market, supported by centralized resources. Despite the challenges, Genesis executives said they saw improvements in retention and emphasized fostering leadership roles in its facilities.
“We talk now about buildings first, the building needs to run the care. They need to be supported by a national structure or market structure,” COO Melissa Powell told SNN. “We kind of took down those barriers of almost like how do we support the building, not do it for the building … and that’s the perfect mix.”
The move also re-established a deeper relationship with Welltower, which had purchased most of Genesis’ real estate in 2011. The newly acquired facilities were previously operated by ProMedica and became part of a joint venture between Integra Health and Welltower, with Integra subleasing them to 15 regional operators after ProMedica surrendered its 15% interest.
