At the beginning of this week, Welltower, a real estate investment trust and the biggest owner of nursing homes in the U.S., announced it is splitting from Genesis Healthcare, the largest operator of nursing homes across the county. Genesis also announced it is delisting from the New York Stock Exchange.

In addition to ending the leases for multiple Genesis properties across the country, Welltower is looking for regional operators to take over managing the nursing homes. Welltower is also making changes to facilities it manages with another joint venture, ProMedia. Ultimately, Welltower is taking these steps to reduce the risk of its portfolio and switch its focus to post-acute care facilities rather than nursing homes.

Last year, Genesis experienced struggles because of the pandemic and warned investors it was at risk of going out of business. Now, the company is now going through structural changes.

The for-profit nursing home model is becoming obsolete due to lower payments from Medicare for post-acute rehab and already low Medicaid payments for long-term care services. Plus, the pandemic did not help. On top of all the deaths of nursing home residents and staff, costs for labor, equipment, and other necessities have also increased.

Industry observers believe several nursing homes across the country are in danger of failing if they do not make major changes to their business model. Although the Genesis-Welltower split does not inevitably signal the end of for-profit nursing homes, it does suggest the industry is in distress.

Read the full article from Forbes.