A nurse in blue scrubs gently helps an elderly woman with a puzzle in a sunny modern nursing home lounge.

Nursing Home Startup Decisions New Owners Should Know

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A nursing home — also called a skilled nursing facility, or SNF — is a licensed, 24-hour residential care facility where licensed medical professionals deliver skilled nursing services, rehabilitation, and ongoing personal care to residents who can no longer manage safely at home.

Residents are typically elderly individuals recovering from a serious hospitalization — a stroke, a hip fracture, a cardiac event — or people with chronic or progressive conditions that require continuous nursing supervision.

You are not managing appointments or customer flow in the traditional sense. You are managing an around-the-clock clinical operation inside a regulated building, with a resident population that depends on your staff every hour of every day.

That distinction shapes every decision you’ll make before you open.

Is This Business Right for You?

Before anything else, be direct with yourself about your background.

Opening a nursing home without healthcare administration experience — or without a licensed, experienced operator leading your clinical and operational team — is not a realistic path.

Federal and state law require every nursing home to be operated by a licensed nursing home administrator (LNHA or NHA). This license requires an accredited degree, supervised practical experience, and passing the national NAB exam, plus often a state exam.

If you don’t hold that license, you’ll need to hire someone who does before you can open your doors.

Beyond licensing, ask yourself harder questions. Do you have experience in healthcare administration or long-term care operations?

Do you understand how Medicare and Medicaid reimbursement works? Can your household financially sustain you through a project timeline that spans years before a single resident is admitted?

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Nursing home projects are capital-intensive. The development, entitlement, licensing, and certification process takes significant time.

You’ll be spending money — on architects, attorneys, lenders, and staff — long before you earn any revenue.

Talk to people who run nursing homes in markets where you won’t compete. Ask what the first year of operations actually looked like. Ask what they would have done differently.

Their experience won’t be identical to yours, but there’s no substitute for firsthand insight from people who have navigated the same regulatory environment.

Think honestly about your risk tolerance and capital access. If your financing falls short, or your state blocks the development through regulatory barriers, the project stops — and you may have already committed significant resources.

Three realistic paths exist for entering this business:

  • Build a new facility from scratch (most complex, longest timeline, highest capital requirement)
  • Acquire an existing licensed and certified nursing home (often the more practical path for first-time entrants)
  • Enter as an operator or management company for a property you don’t own (separates real estate from operations)

Don’t choose your path until you’ve completed a market study and financial feasibility analysis — covered in Step 4.

Red Flags Before You Start

Some issues are worth identifying before you invest any significant time or money.

Stop and reconsider if any of these apply:

  • You have no licensed nursing home administrator committed to the project and no clear path to hiring one.
  • You can’t access the level of capital required — small business loans won’t fund a nursing home.
  • Your target state has a construction moratorium on new nursing home beds, or Certificate of Need analysis suggests your application would be denied.
  • Your target market has Medicaid reimbursement rates that fall substantially below operating costs, and private-pay demand is weak.
  • The healthcare workforce in your target market is severely depleted, making around-the-clock staffing realistically unachievable without expensive temporary agency staff.
  • Your operating capital reserves are insufficient to sustain the facility through the fill-up period, when full staffing costs run ahead of resident revenue.

Even with a strong team and sufficient capital, understand the structural realities of this industry.

Nursing home operating margins are structurally thin. Government reimbursement — primarily Medicaid — funds the majority of resident care in most facilities, and Medicaid rates in many states don’t cover full operating costs.

Large regional and national chains have scale advantages in purchasing, staffing programs, and technology that independent operators can’t easily match.

Regulatory scrutiny is intense and ongoing. Unannounced surveys can result in citations, financial penalties, or restrictions on admissions.

None of these facts should automatically end your consideration — but they should enter your planning from the very beginning.

Step 1: Assess Your Qualifications and Learn the Industry

Before you can evaluate a site, arrange financing, or hire a team, honestly assess whether you have the knowledge and qualifications this business requires.

A nursing home must be operated by a licensed nursing home administrator. This is not a role you can fill without the proper credentials.

If you plan to serve as your own administrator, research the NHA licensing requirements for your state through the National Association of Long-Term Care Administrator Boards (NAB) and your state’s licensing board.

If you plan to hire an administrator, secure that hire before you open — and ideally, involve that person in your planning process well before opening day.

Spend time gaining a working understanding of the federal Conditions of Participation (CoPs) that govern all Medicare- and Medicaid-certified nursing homes. These are found in 42 CFR Part 483, Subpart B, and cover everything from resident rights to staffing to physical environment to emergency preparedness.

Talk to licensed nursing home administrators and people who operate skilled nursing facilities in non-competing markets. Ask what the startup process looked like. Ask what the biggest operational surprises were.

This industry knowledge isn’t optional background reading — it’s the foundation of every decision you’ll make in the steps that follow.

Step 2: Choose Your Entry Path

Once you understand the industry, decide how you’ll enter it before committing resources to any specific plan.

Building a new facility is the most complex path. It requires state regulatory approval to add new licensed beds in many markets, a specialized design and construction process, large-scale financing, and a lengthy period before any residents can be admitted.

Acquiring an existing nursing home is often the more practical first path. An existing facility comes with a state license, CMS certification, an established resident census, and an existing staff team — all of which take years to build from scratch.

A change of ownership still requires regulatory notifications and re-enrollment with Medicare and Medicaid, but it avoids many of the barriers that can block new construction.

A third option is entering as an operator or management company for a property you don’t own. This separates real estate from operations and can reduce the capital you need to control personally.

Don’t lock into a path until you’ve completed a market study and financial feasibility analysis.

Step 3: Research Certificate of Need Requirements in Your State

Before you design a facility, sign a lease, or apply for financing, understand whether your state requires regulatory approval just to enter the nursing home market.

Many states maintain Certificate of Need (CON) programs. In a CON state, you must apply to a state health planning agency and demonstrate that the market needs additional nursing home beds before you can build a new facility or add beds to an existing one.

Some states also have construction moratoria — restrictions that can block new nursing home development in specific markets regardless of investor interest.

Contact your state’s department of health or health planning agency early. If a CON is required, the application process can take many months — and approval is not guaranteed.

If CON analysis suggests new development is blocked in your target market, acquiring an existing facility may be the only viable path.

One more practical note: if you plan to use HUD Section 232 financing for new construction, the CON must be obtained before you can file a pre-application with HUD.

Step 4: Commission a Market Study and Financial Feasibility Analysis

Before you commit to a location, sign any agreements, or arrange financing, you need third-party verification that your target market can support a facility — and that the financial model is realistic.

Lenders — including HUD/FHA and conventional healthcare lenders — require these analyses as part of the financing application. Don’t wait until you’re asked for them.

The market study should answer:

  • What is the competitive landscape of existing nursing homes in your primary service area?
  • What is the local bed surplus or shortage?
  • What are the demographics and demand drivers for nursing home care in this market?
  • What payer mix is realistic — what proportion of residents will be Medicare, Medicaid, private pay, or managed care?

After the market study, commission a financial feasibility analysis. This models projected revenue by payer type, expected operating expenses, debt service, and the capital needed to sustain operations through the fill-up period.

The fill-up period is the time after opening when the facility is building its census toward target occupancy. During this period, you must maintain around-the-clock staffing and full operations with little offsetting revenue.

This is where many facilities run into cash problems. Plan for it from the start.

The financial feasibility analysis should also help you understand break-even occupancy — the bed count, payer mix, and per-diem rate structure at which the facility can cover its fixed costs.

Nursing home margins are structurally thin. Payer mix matters enormously: Medicare short-stay post-acute residents generate the highest per-diem revenue.

Medicaid long-stay residents generate lower rates, and in some states, Medicaid reimbursement doesn’t cover full operating costs.

Don’t commit to construction, acquisition, or major financing until both analyses are complete and reviewed by your advisory team.

Step 5: Assemble Your Professional Advisory Team

Before you can move into financing, design, or entitlement, you need a professional team — and every member of that team must have direct long-term care experience.

Generic commercial real estate advisors, general architects, and standard business attorneys will slow your project and increase risk in a highly specialized regulatory environment.

Your core team typically includes:

  • A healthcare architect experienced in nursing home design and familiar with NFPA 101, state design codes, and CMS physical environment requirements
  • A general contractor with documented skilled nursing facility construction experience
  • A healthcare attorney experienced in long-term care regulatory law and transactions
  • A healthcare lender or financing consultant familiar with HUD 232, conventional healthcare loans, or applicable government financing programs
  • A nursing home operator or operations consultant — essential if you don’t have direct operational experience
  • An accountant or financial consultant with long-term care experience

Your licensed nursing home administrator should be identified and involved early, well before opening day.

Step 6: Form Your Business Entity and Register the Business

Before you can enter contracts, apply for financing, or begin the licensure process, you need a properly formed legal entity.

Consult a healthcare attorney before deciding on your structure. Many nursing home projects separate the real estate entity from the operating entity — the operating company holds the license and runs operations while a separate entity holds or leases the building.

The operating entity must have a governing body that is legally responsible for establishing and implementing facility policies, as required under federal CoPs.

Some states impose ownership restrictions on nursing homes. Verify with your healthcare attorney whether your state limits for-profit ownership or has similar requirements in your target market.

You’ll need an Employer Identification Number (EIN) from the IRS for banking, payroll, and enrollment applications. Register your business name with the appropriate state agency, and file a DBA if you’ll operate under a name different from your registered entity name.

Your attorney will advise you on the right business structure given the complexity of this type of project.

Step 7: Secure Financing

A nursing home project — whether new construction, acquisition, or substantial renovation — requires institutional-scale financing. Small business loans won’t provide the capital you need.

Engage specialized healthcare lenders early, because financing approval, underwriting, and closing take significant time.

The primary financing options for nursing homes include:

  • HUD Section 232 program: FHA-insured financing specifically for skilled nursing facilities with 20 or more beds. Offers long-term fixed rates, non-recourse structure, and competitive loan-to-value ratios. A CON must be in hand in applicable states before filing the HUD pre-application. HUD requires an operating deficit escrow on new construction to fund expenses during fill-up.
  • Conventional healthcare lenders: Banks and healthcare-specialized lenders that fund nursing home projects with their own products, typically requiring a substantial equity contribution from the borrower.
  • USDA Community Facilities program: May apply for facilities in rural markets.
  • Bridge financing: Short-term financing between construction completion and census stabilization.

Every lender will require your market study, financial feasibility analysis, documentation of the operator’s experience, and personal financial statements.

Be prepared to contribute personal assets as equity. Lenders in this space expect meaningful skin in the game from the borrower.

Don’t commit to a site, execute design contracts, or begin construction without financing confirmed or substantively pre-qualified.

Step 8: Select a Site and Design the Facility

Before you select a site, confirm it is appropriately zoned for a nursing home or healthcare institutional use.

Nursing homes are typically classified as healthcare or institutional uses and may not be permitted in standard commercial or residential zones. Confirm this with your local planning or zoning authority before signing any purchase or lease agreement.

Your site should align with your market study’s primary service area — with attention to proximity to hospital referral sources, accessibility for families, and access to a healthcare workforce.

Once you have a qualifying site, work with your healthcare architect from the start. Nursing home design is a specialized process that differs significantly from standard commercial construction.

New facilities must comply with:

  • NFPA 101 Life Safety Code (2012 edition as required by CMS) — covering fire-rated construction, sprinkler systems, smoke compartments, corridor widths (minimum 8 feet in health care occupancies), emergency lighting, and egress requirements
  • NFPA 99 Health Care Facilities Code — for medical equipment and electrical safety
  • State-specific nursing facility design standards, which may be more stringent than federal minimums
  • ADA accessibility requirements
  • CMS physical environment requirements under 42 CFR § 483.90

All nursing homes must be fully sprinklered. This is a federal requirement with no exception for certified facilities.

In many states, architectural plans must be reviewed and approved by the state health agency before construction begins — an additional entitlement step unique to healthcare facilities.

If your project uses government financing, prevailing wage requirements under the Davis-Bacon Act may apply. Factor this into your value engineering before you commit to construction costs.

Step 9: Obtain State Licensure

Before you can admit a single resident or apply for federal certification, you must hold a state nursing home license.

The license is issued by your state’s department of health or equivalent agency. Contact the licensing division early to understand the full application requirements, timeline, fees, and required documentation.

Licensure typically requires a completed application, proof of site control, proof that a licensed nursing home administrator is in place, evidence of required staffing, and confirmation that the building meets fire and safety codes.

If you’re offering specialty care — such as a dementia special care unit — verify whether additional state licensing is required for that service type.

For an acquisition, a change of ownership process is required. The new owner must notify the state agency and typically must reapply for licensure under the new entity.

You can’t request the federal certification survey until your state license is issued and your local certificate of occupancy is in hand.

Step 10: Apply for Medicare and Medicaid Certification

Virtually every nursing home depends on Medicare and Medicaid reimbursement to operate. Before you can receive that reimbursement, you must be certified by the Centers for Medicare & Medicaid Services (CMS) and your state Medicaid agency.

This certification process has a specific sequence. Work through it in order, because each step gates the next.

The federal certification process works as follows:

  1. Obtain a National Provider Identifier (NPI) through the NPPES system.
  2. Complete the Medicare enrollment application (Form CMS-855A) and submit it to your Medicare Administrative Contractor (MAC) — the regional private insurer that processes Medicare claims for your area.
  3. The MAC reviews your application and forwards it to your state survey agency.
  4. Execute a written transfer agreement with a Medicare/Medicaid-approved hospital — this is a federal requirement before certification can be granted.
  5. Sign the Health Insurance Benefit Agreement (CMS-1561).
  6. Obtain your certificate of occupancy from the local building authority and your state license from the state health agency.
  7. Notify your state Bureau of Survey and Certification that the facility is ready for its initial survey. The facility must be fully operational — residents admitted, all services running — when surveyors arrive. Surveys are unannounced.

The state survey agency will conduct at minimum a Life Safety Code survey, a Standard Health Survey, and an Emergency Preparedness Survey. All three must be completed before certification is granted.

After successful certification, CMS issues a CMS Certification Number (CCN) — your facility’s identifier for Medicare billing and regulatory tracking.

For Medicaid certification, your state Medicaid agency enrolls the facility separately. A dually certified facility holds both Medicare (SNF) and Medicaid (NF) certification.

Step 11: Hire Key Leadership Early

Before you can hire clinical staff, train employees, or set up operational workflows, you need the people at the top of your organization in place.

Plan to hire your licensed nursing home administrator four to six months before your anticipated opening. The administrator needs time to build the operational infrastructure before residents arrive.

The Director of Nursing (DON) is your second critical early hire. Under federal requirements, the DON must be a registered nurse serving in a full-time capacity. Hire the DON alongside the administrator — these two roles work closely together on staffing plans, care policies, and compliance readiness.

Department heads are typically brought on two to three months before opening.

These include the Director of Dietary Services, Social Services Director, Activities Director, and Director of Maintenance/Environmental Services.

All of these roles need to be filled and trained before you begin broader staff hiring. The department heads are the ones building and implementing the systems your direct care staff will operate within.

Step 12: Hire and Train All Staff

A nursing home requires around-the-clock staffing, seven days a week. Before you can admit the first resident, every shift must be covered.

Direct care staff roles that must be in place before opening include:

  • Registered Nurses (RNs) — an RN must be on duty at least eight consecutive hours a day, seven days a week; the Director of Nursing must be a full-time RN
  • Licensed Practical Nurses (LPNs) or Licensed Vocational Nurses (LVNs)
  • Certified Nursing Assistants (CNAs) — must complete a state-approved nurse aide training and competency evaluation program and be listed on the state nurse aide registry before providing care
  • Physical therapists, occupational therapists, and speech-language pathologists (provided directly or through a contracted therapy provider)
  • Dietary staff, social worker, activities staff, maintenance, housekeeping, and billing/administrative staff

Before a CNA can be assigned to any resident, their training must be verified, their name must appear on the state nurse aide registry, and a background check must be completed.

This isn’t a paperwork formality — it’s a federal requirement tied to your certification. Don’t allow anyone to provide care before these verifications are complete.

Be realistic about the hiring timeline. Healthcare staffing is deeply competitive in most markets, and CNAs and RNs are in short supply in many areas. Start recruiting early, and build in time for multiple rounds of interviews and background checks.

Facilities that rely heavily on temporary agency staff face serious margin pressure. Plan to minimize agency utilization through direct hiring wherever possible.

Step 13: Set Up Vendor and Supplier Agreements

Before the first resident is admitted, several critical vendor relationships must be in place and fully operational.

The most important is your long-term care pharmacy agreement. Your pharmacy partner handles medication delivery, electronic medication administration records (eMARs), pharmacist consultant services, and medication review. Without this agreement, you can’t safely administer medications to residents on day one.

Additional agreements that must be active before opening:

  • Medical supply vendor (wound care, incontinence products, PPE, gloves)
  • Food and dietary supplier
  • Laboratory and radiology services
  • Durable medical equipment supplier (hospital beds, wheelchairs, patient lifts)
  • Medical waste disposal service
  • Linen and laundry service (if not handled in-house)
  • Physical, occupational, and speech therapy providers (if not employed directly)

Your long-term care Electronic Health Record (EHR) system also falls into this category. The EHR manages Minimum Data Set (MDS) assessments, care planning, clinical documentation, medication records, billing submissions, and CMS reporting requirements. Implementation and staff training take time — start this process early.

Step 14: Build Referral Relationships Before Opening

Residents don’t walk in off the street. They come through referrals — and the primary source for most nursing homes is hospital discharge planners, case managers, and social workers.

When a patient is medically cleared from a hospital but not ready to go home, the discharge planning team determines what post-acute care they need. If your facility isn’t on their radar, it won’t be on their referral list.

Your admissions coordinator or administrator should be building relationships with hospital discharge planning departments in your primary service area several months before opening.

For long-term care placements, families are key decision-makers. Geographic proximity to the resident’s family is frequently cited as the most important factor in choosing a facility.

Physicians, community-based social service agencies, and other nursing facilities are also referral sources. The goal before opening is to be known, trusted, and on the call list when a need arises.

Step 15: Secure Insurance Coverage

Before you admit the first resident, every required insurance coverage must be in place. A nursing home carries significant liability exposure — this is not the place to cut corners.

Workers’ compensation insurance is required by law in most states for facilities with employees. Commercial property insurance is also required; standard policies typically exclude the operation of a nursing facility.

Beyond legally required coverages, the following are effectively essential for any nursing home:

  • Professional liability (malpractice) insurance — covers claims of negligence, medication errors, falls, and inadequate care
  • General liability insurance — covers bodily injury and property damage
  • Directors and officers (D&O) liability insurance
  • Employment practices liability insurance
  • Physical and sexual abuse/molestation coverage — particularly important given the vulnerable resident population
  • Cyber liability insurance — required by the realities of HIPAA and resident health data

The long-term care insurance market has become more expensive and more selective. Engage a broker who specializes in nursing home and long-term care insurance well in advance — not in the weeks before opening.

Learn more about the general principles of business insurance as part of your broader planning.

Step 16: Implement Required Records, Compliance Programs, and IT Systems

Federal regulations require specific policies, programs, and documentation to be in place before you begin providing care. This is not setup you can complete after opening.

Required operational systems and documents include:

  • Written abuse, neglect, and exploitation prevention policies, with mandatory reporting procedures
  • Resident rights policies and grievance procedures
  • Emergency preparedness plan (required under 42 CFR § 483.73, subject to its own survey)
  • Infection control program, including isolation protocols and PPE stockpile
  • Quality Assessment and Assurance (QAA) committee established and meeting schedule set
  • Facility assessment completed and documented (required under 42 CFR § 483.71)
  • HIPAA-compliant policies and procedures for protecting resident health information

Your EHR system must be configured and tested before residents arrive. It handles MDS submissions to CMS — which drive Medicare payment under the Patient-Driven Payment Model — along with care plans, clinical notes, and billing.

You also need to set up the Payroll-Based Journal (PBJ) staffing reporting system, which requires quarterly electronic submission of staffing data to CMS. PBJ data feeds directly into your facility’s CMS Five-Star quality rating — a public metric that referral sources and families use to evaluate facilities.

Set up your business banking account and keep it completely separate from any personal accounts. Establish your payroll system and accounts payable process well before the first payroll run.

Step 17: Prepare the Facility and Confirm Launch Readiness

Before you can request the initial certification survey, every operational system must be functioning, every required staff member must be in place, and the building must have cleared all required inspections.

Confirm that all of the following are complete:

  • Certificate of occupancy issued by the local building authority
  • State nursing home license issued
  • All building systems tested: sprinklers, fire alarm, emergency generator, nurse call system, door access and wander prevention
  • All staff hired, background checked, registry verified, and trained — including abuse prevention, infection control, fire safety, emergency procedures, HIPAA, and resident rights
  • Fire drills and evacuation drills completed and documented
  • EHR system live, billing system tested, pharmacy agreement operational
  • All vendor agreements active
  • Required signage posted: resident rights notices, ombudsman contact information, emergency evacuation maps, no-smoking signage
  • Admission agreements and all required intake documents prepared

Once the facility is fully operational with residents admitted and all services running, submit your readiness notification to the state Bureau of Survey and Certification.

The certification survey will arrive unannounced. When surveyors walk in, you must be in full compliance with all federal Conditions of Participation — not nearly compliant, not compliant except for one area. Full compliance.

Business Plan

A nursing home startup requires a formal, detailed business plan — not as a document to check off a list, but because your lenders, your CON reviewers, and your own financial survival depend on it.

Your plan must reflect the full scope of what this project requires, starting with the market study and financial feasibility analysis that establish whether the project should move forward at all.

On the revenue side, model your projected payer mix carefully. Medicare residents generate the highest per-diem reimbursement. Medicaid residents dominate most facilities’ census, but Medicaid rates vary widely by state and often fall below full operating costs. Private pay and managed care fill the remainder.

Your break-even occupancy is a central planning variable. Determine the bed count, payer mix, and per-diem structure at which the facility can cover its fixed costs — and identify how long it will realistically take to reach that point after opening.

The fill-up period is where most facilities face their most serious cash pressure. Your plan must include sufficient operating capital to sustain full staffing and operations through fill-up.

If you’re using HUD Section 232 financing for new construction, HUD requires an operating deficit escrow funded at loan closing for exactly this purpose.

On the cost side, work with your healthcare attorney, architect, contractor, and operator to develop startup cost estimates across every category: land, construction, medical equipment, IT systems, licensing and regulatory fees, legal and professional fees, pre-opening staffing, insurance, pharmacy setup, dietary and clinical supplies, and operating capital reserve.

Your plan should also account for the ongoing capital demands of a certified nursing home: survey readiness, insurance renewals, staff retention programs, EHR system maintenance, and equipment replacement over time.

Keep the plan connected to the core principles of a sound business plan while making it specific to the realities of long-term care operations, reimbursement, and regulatory compliance.

Opening-Day Red Flags

Even if your project has cleared every regulatory hurdle and the certificate of occupancy is in hand, certain conditions should stop you from accepting residents until they’re resolved.

Don’t open if any of the following remain unresolved:

  • The licensed nursing home administrator is not in place with a current state license.
  • The Director of Nursing position is vacant or filled by someone who is not a registered nurse.
  • Any direct care staff member has not completed the required background check, nurse aide registry verification, and mandatory training.
  • The long-term care EHR system is not operational — you can’t document care, submit MDS assessments, or bill Medicare or Medicaid without it.
  • The pharmacy agreement is not active and medications are not accessible.
  • The emergency generator has not been tested under full load.
  • The automatic fire sprinkler system, fire alarm, nurse call system, or wander prevention system has not been tested and confirmed operational.
  • The infection control program, HIPAA policies, abuse prevention policies, and emergency preparedness plan are not documented and trained to staff.
  • Required signage has not been posted — resident rights notices and ombudsman contact information are federally required to be conspicuously displayed.
  • Your professional liability, workers’ compensation, and property insurance are not confirmed bound.

The certification survey is unannounced. Surveyors may arrive the same week you admit your first residents. Everything must be in place and operational — not scheduled or nearly complete.

Frequently Asked Questions

Do I need to be a licensed nursing home administrator to open a nursing home?

You don’t have to hold the license yourself, but a licensed nursing home administrator must be in place and responsible for operations. This is a federal and state requirement that can’t be waived.

The NHA license requires an accredited degree, supervised administrative experience, and passing the national NAB exam — plus any state-specific exam. If you plan to serve as the administrator yourself, build that licensing timeline into your project from the start.

Do I need to participate in Medicare and Medicaid, or can I operate private-pay only?

You can operate without Medicare and Medicaid certification, but this limits your market almost entirely to private-pay residents — a small fraction of the people who typically need nursing home care.

Without certification, you forgo the dominant payer sources, making it extremely difficult to achieve and sustain viable occupancy. Most lenders and investors in nursing home projects assume full Medicare and Medicaid participation.

What is the difference between a skilled nursing facility and an assisted living facility?

A skilled nursing facility provides medically necessary skilled nursing and rehabilitation services around the clock, under federal Medicare/Medicaid Conditions of Participation. It is certified and surveyed by CMS and state survey agencies.

An assisted living facility is regulated primarily by state law, serves residents with lower medical acuity, and is not subject to federal certification requirements. These are entirely different regulatory environments, staffing structures, and compliance obligations.

What is a Certificate of Need, and how does it affect me?

A Certificate of Need (CON) is a state regulatory approval required in many states before a new nursing home can be built or beds can be added. You must apply to a state health planning agency and demonstrate that the market needs additional nursing home capacity.

Check with your state’s health planning agency very early. In CON states, approval is required before filing a pre-application for HUD Section 232 financing.

How are nursing home residents admitted?

Most residents arrive through referrals from hospital discharge planners, case managers, and social workers — the primary pipeline for Medicare short-stay post-acute care. Physicians, community-based agencies, and families also refer residents.

For long-stay placements, geographic proximity to the resident’s family is often the top selection factor. Building relationships with hospital discharge planning departments in your primary service area before opening is essential to filling your facility after you open.

What is the fill-up period, and why does it matter financially?

The fill-up period is the time after opening when the facility is building its census toward target occupancy. During this period, you must maintain full around-the-clock staffing and all operations — before resident revenue is sufficient to cover those costs.

This creates a significant cash drain. Your financial plan must include adequate operating capital reserves for fill-up. For HUD Section 232 new construction projects, HUD requires an operating deficit escrow funded at loan closing for exactly this purpose.

What are the ongoing compliance obligations after opening?

After certification, ongoing federal requirements include quarterly Payroll-Based Journal (PBJ) staffing data submissions to CMS, ongoing MDS assessments and submissions for all Medicare and Medicaid residents, and at least annual unannounced state health and Life Safety Code surveys.

You’ll also need quarterly Quality Assessment and Assurance (QAA) committee meetings, annual emergency preparedness exercises, and continuous HIPAA and resident rights compliance. Your CMS Five-Star quality rating is updated on an ongoing basis based on survey results, PBJ staffing data, and quality measures reported to CMS.

Can I acquire an existing nursing home instead of building one?

Yes — and it’s often the more practical first path. Acquiring an existing facility avoids new-bed CON requirements in most states, eliminates construction timelines, and gives you an established census, existing staff, and active licensure and certification.

A change of ownership requires notification to the state survey agency and re-enrollment with Medicare and Medicaid. Before any acquisition, conduct thorough due diligence on the facility’s survey history, financial statements, payer mix, staffing levels, outstanding regulatory issues, and existing contracts. Work with a healthcare attorney and an experienced operations consultant throughout the process.

Expert Advice From People in the Nursing Home Business

These interviews share practical lessons from nursing home administrators, care home managers, care home operators, and senior care leaders. They focus on staffing, quality of care, regulation, infection control, leadership, resident safety, and the daily pressure of running a care facility.

Readers can use these interviews to understand what the business feels like before starting. The advice can help them plan around licensing, staffing, care standards, inspections, operating systems, and the responsibility of serving vulnerable residents.

Interview With Tony Stein – CEO of Care Home Operator Healthcare Management Solutions

This podcast interview features Tony Stein, CEO and owner of a care home operator that runs a large portfolio of care homes. He discusses values, leadership, quality care, and the operating model behind his care home business.

This is useful for someone starting a nursing home because it shows how experienced operators think about standards, culture, and long-term care leadership before focusing only on buildings, beds, or revenue.

Registered Care Home Manager Interview

This written interview features a registered care home manager responsible for residents, staff, meetings, care planning, and day-to-day decisions in a home for elderly people and people with dementia.

This is useful for someone starting a nursing home because it gives a realistic view of management responsibility, staff coordination, resident needs, and how quickly plans can change in a care setting.

‘It Takes a Team. A Family’: How a Baltimore Nursing Home Has Kept Out the Coronavirus

This audio interview features Johana Walburn, administrator of Maryland Baptist Aged Home, discussing infection control, resident engagement, teamwork, and how the nursing home protected residents during the pandemic.

This is useful for someone starting a nursing home because it shows how leadership, staffing discipline, communication, and daily operating habits affect resident safety during high-risk situations.

VIUM Episode | Mark Parkinson

This podcast interview features AHCA/NCAL President and CEO Mark Parkinson discussing skilled nursing opportunities, workforce challenges, census recovery, regulation, and the state of the long-term care sector.

This is useful for someone starting a nursing home because it gives a broader industry view of the pressures new operators must understand before committing capital, hiring staff, or entering a regulated care market.

 

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