There are several ways how an operator would go about acquiring bed licenses (see Four Ways To Adjust Bed License Capacity). In this article, we would like to focus more on the ‘why’. Whether trying to grow the top line, or it being a strategic decision, operators are still out in full force acquiring bed licenses.To be clear, when we refer to Bed Licenses (“Beds”), we are talking about the right to operate the beds, or the licenses. We are not referring to any transactions that include real estate as part of the transaction.1)  New Construction. It’s no secret that the average age of skilled nursing facilities is much older than what patients prefer to see. Aside from the best quality care for its patients and the lowest possible re-hospitalization rates, an operator’s next best competitive advantage is a newly constructed facility. Patients are now looking for the best amenities, latest technology and ancillary services to be housed within the new facilities (see Mixed-Age Skilled Nursing Facilities Face Significant Barriers and Modern Skilled Nursing Must Have Tech Foundation). Developers and operators typically require a significant amount of beds (more than 50) before they break ground.2)  Addition to Existing Real Estate. Similar to new construction, operators are looking for a competitive edge to showcase the new, modern amenities. They may be looking to renovate their existing facility, along with expanding their footprint. Another case where an addition to an existing facility makes sense is when an Assisted Living, Long-Term Acute Care Hospital (LTACH), acute care hospital, CCRC, etc., sees an opportunity to add a Skilled Nursing Facility or a skilled nursing wing to its property. The amount of beds needed for these types of additions vary greatly by the kind of addition, the operator, and the size of the land.3)  Convert Existing Real Estate. Operators have little leeway when it comes to their top line. If an operator has square footage not being utilized, they will do whatever they can to increase their revenue/sqft. Sometimes this means it may make sense to convert their space to skilled nursing care. Acute care hospitals have also been known to take an entire floor of their hospital and convert it into skilled nursing. These conversions can often come with a JV partner if the operator has little to no skilled nursing experience. The amount of beds needed for conversions rely on amount of square footage the operator is willing to convert.
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4)  Convert Rooms From Private To Semi-Private. Yes, you read that right. It seems counter-intuitive in today’s market. However, there are operators who need to address immediate demand. Hospitals have significantly reduced the amount of facilities they refer patients to, therefore increasing the amount of market share those operators who remain. Some operators have seen their waitlists grow, and need a way to address the issue today. These operators will often buy beds in smaller quantities, and if successful, will acquire additional beds for an addition to their existing facility if there are no land constraints.Certificate of Need CON Bed Licenses Licensed Beds5)  Keep Beds Out Of Competitor Hands. All of the above-mentioned reasons could ultimately increase revenue if implemented properly. On its own, this last reason is more of a strategic move for operators. However, in almost all cases, operators will note one of the above four reasons for acquiring bed licenses, and source this reason as a supplement to the main reason why an operator acquires additional bed licenses.This article is not to be considered advice. Before making investment or disposition decisions, consult a professional for legal advice.Bed License Exchange is a trusted platform that introduces buyers and sellers to an entire marketplace of bed licenses in the healthcare industry. Bed licenses ranging from acute care, post-acute care and senior living are available for operators and investors, to act either as a buyer or a seller on the auction-style platform. Bed License Exchange is a subsidiary of HealthSwap Advisors, LLC.