New York, NY—Amid a wave of mergers and acquisitions, the skilled nursing facility (SNF) market appears to be moving towards an oligopoly, raising concerns about patient care quality, pricing, and decreased competition. Over the past decade, a significant consolidation trend has washed over the healthcare sector, with the skilled nursing market being a prime target for large conglomerates seeking to expand their healthcare portfolios.
This trend was underscored by a report from the National Investment Center for Seniors Housing & Care, which revealed that transaction volume in the skilled nursing space hit $4 billion in 2021, showcasing the market’s attractiveness to both private equity and strategic buyers. The gusto for consolidation seems to be spurred by economies of scale, the ability to negotiate more favorable terms with insurers, and a strategy to diversify service offerings.
Experts worry that this ongoing consolidation could pave the way for an oligopolistic market structure, where a few large entities control the majority of market share. Critics argue that such a scenario could lead to diminished competition, potentially resulting in higher costs for both patients and insurers and a decline in service quality. “When the market shrinks to a few key players, the balance of power shifts significantly. Patients might find themselves with fewer choices and less bargaining power,” says Dr. Maria Benedetto, a healthcare economist at the University of California.
Despite these concerns, proponents of consolidation argue that it can lead to more efficient operations, better patient outcomes through the standardization of care protocols, and the financial robustness necessary to invest in state-of-the-art facilities and technologies. They point to a fragmented market struggling with thin margins and a lack of resources to adequately invest in improving patient care quality or adopting innovative care models.
The Federal Trade Commission (FTC) has been keeping a watchful eye on these developments, pledging to scrutinize mergers and acquisitions in the healthcare sector more closely to prevent anticompetitive practices. However, with the ongoing push towards consolidation, regulators find themselves in a challenging position to maintain market health without stifling growth.
As the debate continues, stakeholders are calling for a balanced approach that protects competition and innovation while allowing for the efficiencies and improvements that can come from larger, more financially stable entities. The path forward remains uncertain, with the industry at a crossroads between maintaining a competitive market and embracing the perceived benefits of consolidation.