Demand has never been more certain. Survival has never been less certain. The gap between those two sentences is where your operating model lives.
The Most Certain Demand Curve in American Business
Almost no industry knows its future customer count with the precision post-acute care does. The population aged 65 and older grows from 57.8 million in 2022 toward 88.8 million by 2060. The 85-and-older cohort, which drives the overwhelming share of post-acute utilization, nearly triples from 6.5 million to 17.5 million. The first baby boomers turned 80 this year. Senior housing occupancy closed 2025 at 89.1% after 18 consecutive quarters of gains, with new inventory growing less than 1%, and skilled nursing occupancy has climbed back to a median of 80.2%.
Now hold that next to a second fact. 45% of nursing homes were operating at a loss in 2024, and 774 have closed since 2020, eliminating 62,567 beds and displacing 28,421 residents. Two large operators, Petersen Health Care and LaVie Care Centers, filed Chapter 11 in 2024. LaVie entered bankruptcy with 43 facilities, down from roughly 140 in 2020, citing high labor costs directly.
An industry with guaranteed demand should not be producing that casualty list. That it does is the single most important fact in the sector, and it means the losses are not being caused by the market. They are being caused by the operating model.
The Reimbursement Squeeze Is Real, and It Is Not the Whole Story
The pressure is genuine. MedPAC has recommended cutting skilled nursing base payment rates by 3% for fiscal 2026, on the argument that freestanding facility Medicare fee-for-service margins remain above 20%. CMS recalibrated the PDPM parity adjustment downward by 4.6% beginning in fiscal 2023. Home health absorbed a net rate reduction for calendar 2026 built from a 2.9% market basket increase, a 0.4% productivity cut, and a 1.975% permanent behavioral adjustment, and once sequestration and value-based purchasing are layered on, some agencies face effective reductions above 5% in a single year.
The bigger structural shift is payer mix. Medicare Advantage now exceeds half of Medicare enrollment in many states, and it generally pays skilled nursing facilities below traditional Medicare while managing length of stay more aggressively. On the other side of the ledger, 62% of nursing home residents rely on Medicaid, which reimburses only part of the cost of care, and the Medicaid reductions enacted in 2025 are measured in the hundreds of billions of dollars. Meanwhile, the federal minimum staffing rule was vacated, delayed to 2034, and repealed, which relieves a compliance obligation without changing the arithmetic of who will actually deliver the care.
Here is the point that gets missed in every reimbursement conversation. Every operator in a given state faces the same rates, the same Medicare Advantage penetration, the same demographics, and the same labor market. Some are earning double-digit margins in that environment, and some are filing Chapter 11. Reimbursement explains the difficulty. It does not explain the divergence.
The Divergence Is a Labor Story
Direct-care nursing expense in skilled nursing reached $49.2 billion in 2023. Labor is the largest cost line, the largest compliance surface, and the largest driver of the quality scores that increasingly determine referral flow and reimbursement. So, the question of who wins in post-acute is, to a first approximation, the question of who manages labor better.
The evidence on that point is unusually clean. Contract labor usage rose 12.2% from 2019 levels specifically among facilities with operating margins of negative 4% or worse. Read the causality carefully because it runs in both directions. Weak margins force agency use, and agency use weakens margins further, at a premium of roughly 55% to 70% over employed staff. Worse, facilities in the top quartile of agency use show 7.7 percentage points higher permanent RN turnover than their peers, so the purchased hour degrades the workforce that would have prevented the next purchase. That is a doom loop, and it is the mechanism behind a meaningful share of the closures.
The quality consequence closes the circle. In a market moving toward narrow networks, star ratings and turnover data are published on Care Compare for every referral source to read. An unfilled shift becomes a survey citation, becomes a rating, becomes a lost referral, becomes an empty bed, becomes the margin that funded the staffing in the first place.
Exhibit 1. Two Operating Models, One Market
Source: Ankura analysis.
Both columns describe operators facing identical reimbursement, demographics, and labor markets. The difference is entirely in how the work is organized and measured.
What the Gap Is Actually Worth
Until recently, the honest answer to what good management is worth in this sector was a shrug. That changed with CliftonLarsonAllen’s (CLA’s) most recent skilled nursing cost comparison, which put median operating margin at 1.8% in 2024 and, far more usefully, found that operating margin rises steadily with CMS star rating: 0.4% at one star, 2.6% at five. Star ratings are substantially a staffing and turnover story. That gradient is therefore the clearest published measurement we have of what workforce performance is worth on the bottom line.
So, apply it. Take a 12-facility operator running 1,200 beds. At the revenue per bed implied by CLA’s cost report work, that operator turns roughly $125 million a year. Operating at the one-star margin, it earns about $500,000. Operating at the five-star margin, on exactly the same revenue, it earns about $3.25 million. The difference is $2.75 million a year, and the ratio is six and a half to one. Nothing in that calculation requires an additional admission, a better payer mix, or a friendlier rate environment. It is the same buildings, the same census, and the same reimbursement, run differently. For an owner, that is the entire argument.
Exhibit 2. What the Performance Gap Is Worth
Margin gradient and revenue per bed from CliftonLarsonAllen, 40th SNF Cost Comparison and Industry Trends Report. Applied by Ankura to a hypothetical twelve-facility operator. Illustrative, not a forecast.
The assumptions are on the page, and the direction is corroborated from the opposite end. Health Affairs put median nursing turnover at 135.3% in one-star facilities against 76.7% in five-star facilities. Priced at LeadingAge’s $4,500 to replace a direct-care worker, that turnover gap alone is worth roughly $2.7 million a year to the same 12-facility operator, arrived at independently and landing within a rounding error of the margin gap. These are not two savings to be added together. They are one mechanism observed from two directions, which is exactly why the number deserves to be taken seriously.
Consolidation Is Picking the Winners for You
Capital has already reached this conclusion. Senior’s housing and care recorded 871 transactions worth $30.5 billion in 2025, the highest annual total in more than a decade, and skilled nursing volume accelerated further into 2026. Analysts describe the wave of closures as consolidation that has largely benefited larger, more resilient operators. Private equity and REIT capital is concentrating assets in the hands of platforms that believe they can operate them better, and roughly 16% of hospice patients are now cared for by hospices owned by private equity or publicly traded corporations.
Scale is not automatically an advantage, which is the part acquirers underestimate. Scale is only an advantage when the platform can actually standardize. An operator running 11 facilities on four payroll systems with no common definition of a worked hour does not have scale. It has 11 independent businesses and a consolidated balance sheet. The economies exist on paper and cannot be harvested, which is precisely why some of the sector’s largest names appear on the bankruptcy list rather than the buyer list.
The Risks That End Operators, in Order
- Labor cost you cannot see in time to act on it. Monthly labor reporting in a business where the decision that creates the overtime is made on a Tuesday afternoon is not a control. It is a postmortem.
- Agency dependence that has quietly become structural. Usage has fallen roughly 44% from its 2022 peak sector-wide, and the operators who did not participate in that decline are now carrying a permanent premium their competitors have shed.
- Compliance exposure priced at zero. Wage-and-hour litigation in long-term care is accelerating, with recent settlements including $2.4 million at a single New York facility, and timekeeping accuracy now carries Payroll-Based Journal consequences on top of the payroll ones.
- Medicaid concentration without a plan. With 62% of nursing home residents on Medicaid and hundreds of billions in program reductions enacted, payer mix is a strategic variable, not a fact of life.
- Integration debt carried across deals. Every acquisition closed without harmonizing workforce systems adds a fixed drag that compounds, and it is the reason acquisitive operators so often underperform their own models.
Where the Opportunity Actually Is
The optimistic reading of all this is that the winning levers are operational rather than political. You cannot legislate your reimbursement, and you cannot manufacture caregivers. You can decide how hours are scheduled, how overtime is authorized, how open shifts are filled, how continuity is built into teams, and how quickly a labor variance reaches someone who can act on it. Those decisions are worth several points of margin in a business where several points are the difference between acquiring and being acquired.
They also require infrastructure. A single workforce management platform, spanning payroll, time and attendance, and scheduling across every entity, is the enabling layer for all of it. Nothing on the winning side of the comparison above is achievable through spreadsheets, paper grids, and monthly reporting, and no amount of operator talent substitutes for seeing your own labor in real time.
And the platform alone will not do it. We say this as people with no product to protect. The most common situation we encounter in post-acute is an operator who already owns capable technology and is not getting value from it, because the scheduling logic gets overridden every Friday, because self-scheduling was never enabled, because the regional team was never brought along, or because adoption was treated as end-of-project training rather than as the work itself. Selecting a platform is a procurement decision. Changing how a building runs is a change management decision, and only the second one shows up in the margin.
A Conversation Before a Decision
Ankura is not a systems integrator and does not sell workforce management software. That independence is the point. It lets us tell an operator that the sequencing is wrong, that the constraint is a regional leader rather than a product, or that the money is better spent on scheduling design than on licenses. Our work in post-acute is labor strategy and adoption: building the staffing model the economics demand, then making it real in the buildings. If you are trying to work out which side of that comparison your organization is on, start with 30 minutes with one of our post-acute experts. No product, no deck, no obligation. If the answer is that you need a modern workforce management platform underneath the strategy, we will say so plainly, and our post-acute team can take the technology conversation from there. Reach out to Christine Ishak.
Sources
PHI, citing U.S. Census Bureau projections (2025); NIC MAP senior housing occupancy (4Q 2025); CliftonLarsonAllen, 39th SNF Cost Comparison and Industry Trends Report; AHCA/NCAL, State of the Sector (2024) and Long-Term Care Workforce Report (2026); MedPAC, skilled nursing facility services recommendation (March 2025); CMS, FY2023 SNF PPS Final Rule and HH PPS CY2026 Rate Update; KFF, Medicaid and direct care workforce analysis (2026); HHS, minimum staffing standards rule announcement (December 2025); LevinPro LTC seniors housing and care M&A data (2025, Q1 2026); Bowblis and Grabowski et al., Innovation in Aging (2023); Pradhan et al., Healthcare (2025); Gandhi, Yu and Grabowski, Health Affairs (2021); Shen, McGarry and Gandhi, JAMA Internal Medicine (2023); JAMA Health Forum, hospice ownership analysis; Skilled Nursing News and Becker’s, operator bankruptcy reporting (2024); McKnight’s Long-Term Care News, wage and hour coverage (2026).
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC, its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
