Mergers and acquisitions activity in senior living and care faltered in 2023 for various economic reasons, but M&A is expected to rebound this year, according to accounting and consulting firm CliftonLarsonAllen.
CLA said that last year’s decline was due to economic turmoil, such as increased interest rates, inflation and capital market challenges. Evenso, the experts are optimistic that a rebound is forthcoming through acquisitions, consolidations and partnerships.
“Senior living owners and operators are shifting from pandemic response to strategic rebalancing for future growth,” CLA wrote in an online post. “Their focus is moving beyond overcoming challenges to architecting substantial gains through resilience, innovation and foresight.”
Long-term care providers are focusing on enhancing margins in 2024.
“This involves a meticulous balance between right-sizing rates and boosting census across portfolios,” CLA wrote. “The industry is diligently working to strengthen bottom lines by driving top-line volume, optimizing rates and calibrating operating costs where feasible. Strategic redesign options are also being explored to improve margins.”
Debt maturity is also a concern for many providers, with millions coming due within the next year or two, according to CLA. This presents an opportunity for well-capitalized companies to seek acquisition opportunities, the experts noted.
Occupancy
Occupancy, too, is on the rebound, the company said.
“In 2023, the senior living and care industry witnessed positive occupancy gains across all settings [home health, independent living, skilled nursing, assisted living and memory care], and this upward trend is expected to persist in 2024,” CLA reported.
Skilled nursing occupancy is increasing toward pre-pandemic levels more slowly than the other segments. Economics and regulations influence the skilled nursing space, creating differences when comparing state data against national trends.
Workforce challenges
Continued headwinds from workforce challenges are expected to continue to affect senior living and care this year, according to the CLA. Providers are trying to navigate challenges, such as staffing shortages, wage increases and the need to raise resident rates, the firm said.
The industry is focused on reducing staff turnover and improving workplace culture, “which is seen as an investment that will ultimately pay dividends,” according to CLA.
There is also a trend toward reducing dependence on agency staff, which can be costly.
Additionally, a proposed nursing home staffing mandate is expected to have an effect on the industry — many types of providers will compete for workers — and likely will be a prime concern for owners and operators down the road. Federal regulators have said, however, that it may take up to three years to finalize the rule.
