Prices for both nursing home beds and retirement housing units increased significantly during the past two years, according to The Senior Care Acquisition Report, 1996 edition, issued by Irving Levin Associates.
The average price per nursing home bed jumped to $39,000 in 1995. The 21% rise, compared with 1994 prices, was the largest annual increase of the decade.
Even though the specter of Medicaid and Medicare reform loomed before long-term-care providers throughout 1995, the nursing home market flourished, according to Stephen Monroe, a partner at Irving Levin Associates, a New Canaan, Conn.-based consulting and research firm specializing in senior housing and healthcare investments.
Buyers, mainly publicly traded chains, are paying a premium for facilities that strengthen their regional networks, Monroe said. Having geographic reach, along with footholds in targeted markets, enables providers to negotiate better with managed-care companies, he said. In addition, providers are making acquisitions to gear up for future capitated, post-acute-care contracts.
For retirement housing, the average price per unit increased 32% in 1994 to $50,000 and 9% in 1995 to $54,000.
Many purchasers of retirement communities plan to convert units to assisted living, Monroe said. The trend of assisted-living companies going public-five firms did so in 1995-also led to an influx of capital that allowed companies to buy aggressively, he said.
Sixty mergers and acquisitions in the senior-care market were announced in 1995, the report said.