The skilled nursing sector may have found its post-pandemic footing, but the road ahead looks steeper. CLA’s 40th Annual SNF Cost Comparison and Industry Trends Report shows national median occupancy reached 83.3% in 2024 while operating margins climbed to 1.8%—both signs of stabilization—yet looming Medicaid financing changes and a deeper pivot to value-based contracts will test operators’ resilience.
Key 2024 Benchmarks: Occupancy, Margins, and Staffing
Median occupancy recovered to 83.3% in 2024, up from pandemic lows. Median operating margin landed at 1.8%, with paid nursing hours per resident day holding steady around 3.8–3.81.
Medicaid remains the dominant payer at a median 62.2% of mix, underscoring the sector’s exposure to state funding and policy shifts.
Medicaid’s New Math—and the OBBBA Shock
The report flags the “One Big Beautiful Bill Act” (OBBBA) as the most consequential Medicaid shift in decades—combining a 10-year staffing mandate moratorium with $900 billion in federal Medicaid reductions and tighter eligibility. Operators should expect intensified rate pressure, uneven state responses, and the need for aggressive advocacy and data-driven storytelling to influence policy and capital.
Medicare Advantage Era: From Referrals to Risk
With MA penetration deepening, SNFs that earn preferred status and master value performance can unlock more sustainable margins. Some operators are creating or joining Institutional Special Needs Plans (I-SNPs), funding on-site clinical resources like NPs and care-model tech to capture savings from avoidable events.
TEAM Arrives in 2026: Hospitals Will Choose on Quality and Cost
Medicare’s mandatory Transforming Episode Accountability Model (TEAM) starts January 1, 2026, placing hospitals on the hook for cost and quality in 30-day surgical episodes—including SNF care. Expect hospital partners to favor SNFs that curb ED trips, avoid readmissions, and maintain appropriate lengths of stay.
Quality as Currency—And a Profit Engine
CLA quantifies what many operators feel: moving up the CMS star ladder pays. Median operating margin rises from 0.4% at 1-star to 2.6% at 5-star, while occupancy climbs from 79.3% to 86.0%. Higher-rated buildings also lean less on contract labor (8.5% at 1-star vs. 4.4% at 5-star) and deliver better outcomes (readmissions 24.8% → 21.4%; ED visits 12.8% → 9.6%).
“High quality is now the foundation of economic sustainability,” the report notes, linking star ratings to occupancy, margins, underwriting, contracts, and reputation.
Modernizing the Business of the Business
CLA urges investment in the operating backbone—data integration, automation, and cybersecurity—to unlock staff capacity and scale performance. Priorities include an IT roadmap aligned to strategy, interoperable systems, and workflow automation. The message: technology won’t solve everything, but operators who embed it into execution will create leverage.
Leadership Perspective
Industry leaders at CLA frame the moment as a “sustained period of pressure and opportunity,” driven by complex patients, a historic Medicaid trajectory, and the impact of AI.
What This Means for Skilled Nursing Leaders
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Pressure-test Medicaid exposure and model OBBBA scenarios by state; plan advocacy now.
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Build MA-ready capabilities (preferred networks, I-SNP partnerships, analytics, NP coverage).
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Treat star improvement as a financial strategy—reduce contract labor, document outcomes, and close referral loops.
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Prepare for TEAM by negotiating hospital alignment around readmissions, ED utilization, and LOS discipline.
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Modernize the back office to speed cash, cut admin burden, and surface real-time performance.
The bottom line: stabilization is real, but so is the gauntlet. In today’s SNF market, quality isn’t a differentiator—it’s the ticket to payer partnerships, hospital referrals, and margin.
