Guide to Selling a Skilled Nursing Facilities (SNFs) Practice in Sacramento, CA

Selling your Skilled Nursing Facility (SNF) in Sacramento presents a significant opportunity. The market shows strong activity with major transactions closing, but navigating the process requires careful planning. This guide covers the key market dynamics, regulatory hurdles, and valuation principles you need to understand. Proper preparation is the first step toward realizing the full value of your work and legacy.

A Look at the Sacramento SNF Market

The market for Skilled Nursing Facilities in California is a significant part of the healthcare economy. Understanding the bigger picture helps you position your Sacramento facility correctly. Buyers are actively looking for well-run operations in this stable and growing sector.

A Robust Financial Landscape

The numbers paint a clear picture. California’s nursing care facility sector is projected to generate $12.4 billion in revenue, part of a US market growing at over 3.4% annually. While reported net profit margins can seem slim, a deeper look often reveals stronger performance. After normalizing for certain accounting items like depreciation, underlying profitability can be closer to 8.84%. Sophisticated buyers understand this. They look past the surface-level numbers to find the true cash flow.

The Power of Positive Ratings

In a state where over 27% of nursing homes have low one or two-star ratings, a high-quality facility stands out. Buyers are increasingly cautious due to public concerns about care quality. A strong track record with high patient satisfaction and positive survey outcomes is not just a point of pride. It is a significant financial asset that can directly increase your facility’s valuation and attract premium buyers.

3 Factors That Will Define Your Sale

When preparing to sell your Sacramento SNF, success depends on managing a few critical areas. These factors are often where deals either succeed or face unexpected delays.

1. Navigating State Regulations. The sale process is heavily regulated by the California Department of Public Health (CDPH). The Change of Ownership (CHOW) application is a detailed process. More importantly, under the AB 1502 reform, you must submit this application at least 120 days before the transaction closes. This is a hard deadline that dictates the timeline of your entire sale.

2. Addressing Operational Realities. Buyers will perform deep due diligence on your facility’s day-to-day operations. Be prepared to answer tough questions about staffing levels, patient demographics, and payer mix. Proactively addressing any challenges in these areas, rather than waiting for a buyer to find them, builds trust and maintains valuation momentum.

3. Preparing for Buyer Scrutiny. Every potential buyer will investigate your facility’s compliance history, including past complaints and citations. They are also wary of facilities that are heavily reliant on a single owner’s presence to run smoothly. Having clean records and demonstrating a stable management structure are key to assuring buyers of a smooth transition.

Sacramento’s M&A Market Is Active

The theoretical value of a facility means little without evidence of actual sales. The good news is that the Sacramento market has seen significant and recent transaction activity. These deals show that private and corporate buyers are confident in the region’s long-term value.

The most notable recent deal was Eskaton’s sale of three skilled nursing facilities in the area. This transaction, which required review and conditional approval from the California Attorney General, demonstrates the scale of capital being deployed.

Here is a look at recent local activity:

These sales are not hypotheticals. They are tangible proof that a well-positioned SNF in Sacramento is a highly sought-after asset. The key is running a process that attracts the right buyers and prepares you for the high level of scrutiny involved.

What the Sale Process Involves

Selling a medical facility is not like selling a typical business. It follows a structured path designed to handle complex financial, operational, and regulatory details. While every deal is unique, the journey generally follows three main phases.

1. Preparation and Valuation. This is the most important phase. It happens long before your facility is on the market. It involves a deep financial review to calculate your true earnings (Adjusted EBITDA), organizing all legal and operational documents, and working with an advisor to determine an accurate market value. This is where you build the foundation for a successful outcome.

2. Marketing and Negotiation. Once prepared, a confidential process begins to identify and approach a pre-vetted list of qualified buyers. This is not a public listing. It is a strategic outreach to generate competitive interest. This phase involves managing buyer inquiries, facilitating site visits, and negotiating the principal terms of a letter of intent (LOI).

3. Due Diligence and Closing. After an LOI is signed, the buyer conducts formal due diligence, verifying all financial and operational information. Simultaneously, you will work with your team to manage the Change of Ownership (CHOW) application with the CDPH and any other required regulatory filings. This phase concludes with the signing of the final purchase agreement and the transfer of funds.

How Your SNF is Valued

Understanding what your facility is worth is the first step in any sale consideration. Buyers do not value a practice based on revenue. They value it based on its demonstrated, sustainable profitability. The formula is straightforward, but the details are what matter.

The Core Metric: Adjusted EBITDA

The key number in any valuation is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). We start with your net income and add back non-cash expenses like depreciation. Then, we “normalize” it by adjusting for any one-time or owner-specific expenses, like a vehicle leased through the business or a salary well above the market rate. The result is a clear picture of the cash flow the business generates for a new owner.

The Multiplier Effect

The Adjusted EBITDA is then multiplied by a number that reflects your facility’s quality and risk profile. Buyers will pay a higher multiple for facilities that have:
* A strong history of profitability and growth.
* High ratings from the CDPH and positive patient reviews.
* A diverse payer mix not overly reliant on one source.
* A strong management team that can operate without the owner.

A practice with under $1M in EBITDA might see a 4-6x multiple, while a larger, more attractive facility could command 7x or more in the current market. Getting this number right is the foundation of a successful negotiation.

Planning for Life After the Sale

The moment a deal closes is not the end of the story. A successful transition is one where you have a clear plan for your proceeds, your legacy, and your future. Thinking about these things early in the process is critical.

1. Protecting Your Legacy and Your Team. For many owners, the facility is more than an asset. It is a legacy. The right buyer will respect that. You can negotiate terms that protect your staff’s future and ensure the standard of care you established continues. This is often a key point in selecting the right partner over the highest bidder.

2. Structuring for After-Tax Proceeds. The headline price is not what you take home. The structure of your sale has major tax implications. Working with an advisor to plan a tax-efficient sale structure can dramatically change your net outcome. This planning needs to happen well before you have an offer on the table.

3. Defining Your New Role. A sale does not always mean walking away completely. Many deals with private equity or larger strategic buyers involve an “equity rollover,” where you retain a minority stake in the new, larger company. This gives you a “second bite at the apple” when that new company is eventually sold, and it can keep you involved in a strategic role if you wish. This is how you can sell your practice without completely losing control.