The One Big Beautiful Bill Act's Potential Impacts on Skilled Nursing Facilities

and Jane Elizabeth Feist

The One Big Beautiful Bill Act (OBBB), signed into law by President Donald Trump on July 4, 2025, is expected to impact skilled nursing facilities (SNFs) and the post-acute industry – though by how much remains to be seen. For SNF owners, operators and lenders, understanding the potential effects of the OBBB is key for strategic planning and financial stability in the coming years.

Impact No. 1: Medicaid Changes

The OBBB makes significant changes to Medicaid, Medicare and the Affordable Care Act (ACA). The nonpartisan Congressional Budget Office (CBO) estimated that a previous iteration of the bill would result in cuts of nearly $1 trillion from Medicaid spending over the next 10 years and that 11.8 million Americans are projected to lose coverage by 2034 as new requirements take effect. Though the actual impact remains to be seen and will vary from state to state, to compensate for the changes, states may cut Medicaid services, tighten eligibility and redetermination requirements, and/or reduce Medicaid provider payments.

Though senior living (independent living, assisted living) runs on a mostly private-pay model, SNFs rely largely on Medicare and Medicaid. Post-acute and long-term care services are expensive because of the high level of medical care provided – the national median cost of SNF care in 2024 was more than $111,000 per year for a shared room and nearly $128,000 per year for a private room. Private long-term care insurance averages more than $2,200 per month, and preexisting conditions can be an obstacle to qualifying.

Medicare (the federal health insurance for people ages 65 and older) is not designed as a long-term care program. Medicare Part A covers up to 100 days of SNF care, but only after a qualifying hospital stay of at least three days. The first 20 days are covered at 100 percent, and days 20 to 100 require a coinsurance cost – the amount is $209.50 per day, or $16,760 for the full 80 days, in 2025.

Medicaid (a joint state and federal program for low-income and disabled Americans) covers 100 percent of SNF care, including costs associated with room and board, meals, skilled nursing care, medications and rehabilitation services. Medicaid eligibility requirements vary by state but include financial (income and asset) limits, as well as medical need guidelines.

Researchers from a Brown University School of Public Health study identified 579 U.S. nursing homes at high risk of closure in light of the OBBB's changes. Most high-risk facilities were concentrated in urban areas and states such as Illinois (93 high-risk facilities), Texas (66), Ohio (41), Missouri (39) and Georgia (37).

Impact No. 2: Rural Hospital Closures

Rural hospitals, many of which also rely on Medicaid, may also be at risk of closure as a result of the OBBB's changes. Prior to passage of the OBBB, rural hospitals were already experiencing challenges caused by a number of economic factors, including low margins, staffing challenges and high populations of uninsured and underinsured patients, leading to more than 100 U.S. hospital closures in the past decade. Some project that the OBBB's changes will add to an already precarious financial situation for many rural hospitals and result in more closures.

When a hospital closes, SNFs may receive patients with more complex needs, potentially affecting staffing and resource allocation within a facility. It can also increase travel distances for SNF patients needing emergency or other specialized care, delaying or hindering access to necessary services that can be critical in life-threatening situations. Rural hospital closures are associated with decreased local labor force and staffing strain. Finally, SNFs are often connected to hospitals – sometimes directly, sometimes through formal preferred provider networks and others through informal referral networks – and the closure of a hospital may result in fewer referrals to a local SNF.

Impact No. 3: Staffing Mandate Moratorium

The Centers for Medicare & Medicaid Services (CMS), under the previous administration, promulgated a rule (89 Fed. Reg. 40876) that established minimum staffing standards for long-term care facilities participating in Medicare or Medicaid. The rule, which was slated for implementation starting in 2026 for nonrural facilities and 2027 for rural facilities, garnered criticism because of concerns about exacerbating staffing shortages and labor costs, among others.

The OBBB delays implementation of the rule until 2034.

How to Prepare for an Uncertain Future

The OBBB is one of the most consequential pieces of legislation in recent congressional history. Though many in the SNF industry are relieved over the 10-year moratorium on the staffing mandate, the bill may mean financial challenges ahead for SNF owners, operators and lenders, particularly for facilities dependent on Medicaid reimbursement.

To prepare for what's to come, SNF owners and operators should:

reassess portfolio valuations, particularly for facilities with high Medicaid census

develop financial models for various potential outcomes, particularly focused on changes in Medicaid reimbursement

consider direct or indirect dependence on a nearby rural hospital and strategize to mitigate the effects of a closure

consider opportunities to diversify payer sources and reduce Medicaid dependence

monitor state-specific changes to Medicaid and consider impact on SNFs in those states

evaluate geographic diversification in facility acquisition and disposition strategies

focus on operational excellence and invest in specialized clinical programs to maximize reimbursement rates

explore artificial intelligence (AI) technologies to aid with predictive analytics, streamline operations and track and analyze compliance data

SNF lenders should:

update underwriting criteria to account for the new Medicaid financing realities, including increased scrutiny of borrowers' payer mix

consider stricter financial covenants for facilities heavily dependent on Medicaid

track state-by-state Medicaid environments to determine which may be higher risk for sustained economic performance

The skilled nursing industry has demonstrated remarkable resilience through numerous policy shifts over decades. Facilities that proactively prepare for potential changes while maintaining their focus on quality patient care will be best positioned to navigate the evolving landscape.

Abbey Ruby and Jane Feist are partners in Holland & Knight's Nashville, Tennessee, office.