Skilled care facility operators across the country are poised for some financial relief in the very near future. Many states have provided significant aid to skilled care facility operators via increased Medicaid rates. This includes operators of Medicaid waiver assisted living facilities, which have also seen rate increases in certain instances. “These Medicaid rate increases have been independent of any pandemic-related add-ons or stimulus,” noted Cambridge Realty Capital Vice President Zachary Scardina. It is welcome news to operators who are still recovering from the unique challenges that the pandemic created.

“Many of these rate increases have been quite substantial,” he added, “and have been a long time coming for skilled nursing operators, as most operators provide care to Medicaid residents at a net loss.” Historically, Medicaid rates have been chronically below the cost for the operator to provide the necessary care or service. Because of this, operators frequently relied on other payors such as Medicare to “make up” for the losses incurred by Medicaid residents.

“We have seen these rate increases occur across the country in many different states,” Scardina said. “Additionally, a number of states have new legislation in process to increase rates or to provide further increases. We expect that to resolve as the current legislative sessions conclude in the near term.”

Scardina pointed out that operators who have received Medicaid rate increases at their facilities will benefit from a financing standpoint, as Cambridge can underwrite the new increased rate once the rate has been published by the respective state authority. This will lead to more proceeds and better viability to transact. In fact, “Cambridge has already been actively financing facilities in states where rate increases/rebasings have occurred and sees further opportunity in states that expect to pass new legislation in the near term,” according to Scardina. “These transactions have included aiding borrowers in refinancing away from high variable rate mortgages. Increased Medicaid rates can also help make exercising purchase options for buildings and financing capital improvements more realistic.”

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