As the long-term care industry continues to examine its future, many are banking on an ongoing division between home and communal-based care. It’s a divide that’s already beginning to play out in the dealmaking arena, said Cynthia Romano, global director of CohnReznick Advisory’s Restructuring and Dispute Resolution Practice.

“Care is no doubt going to be needed in the future — I don’t think anyone thinks parents are going to be moving back in with their kids,” Romano told McKnight’s Business Daily. “But the question has become where to best provide that care. Some in the senior care industry are making big bets on home care, while others on upgraded nursing homes.”

Romano added that many are struggling to predict what the future may hold for skilled care, particularly with regard to the recovery of census, which was dropping even before the pandemic began. Another piece of the puzzle are the current Medicare and Medicaid reimbursement rates, which continue to plague the bottom line for many operators.

“The Medicaid reimbursement rate within many states is actually below cost, which, if you think about running a business, that’s like buying goods to produce a product and selling it below cost. It just doesn’t work,” Romano said.

She noted that although many deals are still making their way through, most are moving more slowly and pricing is down. This likely is due to all of the uncertainty around how to price a deal when the market is as artificially depressed as it has been amidst the virus. 

“We are seeing a big push for capital expenditures right now — to upgrade technology so that families can communicate better at a distance, and to update infection control mechanisms, isolation areas, and air handling,” Romano said. “All of that takes money and drives deals because obviously anything anyone has to put in to upgrade takes away from the value.”

This article appeared in the McKnight’s Business Daily, a joint effort of McKnight’s Senior Living and McKnight’s Long-Term Care News.