Mom's sister is leaving SNF soon, but Mom can't go back home.

Thank you for your comments and support. I will try these suggestions. Blessings to you all! :)

Geaton and Alva both make valid points. She is bound to be sad about not being able to go home. That is a devastating loss in her life.

She isn’t able to think rationally about her current situation, yet she does realize that these changes in her life make her incredibly sad.

She may or may not accept her situation in the future, so do whatever you can to comfort her now in the best way possible. Continue to reassure her that she is where she needs to be at this point in her life.

Of course she gets upset. This is dreadful news for her and she cannot completely understand it. But it is a fact of her life that you will have to be consistent and repetitive in repeating. When her sister was there the living arrangements seemed OK for Mom and in fact she likely loved having sis as her "roomie". That is changed now and it is sad, but there's nothing to be done about it but mourn it. It's worth the mourning.

You tell your Mom a therapeutic fib: she needs to demonstrate her ADLs to her doctor before s/he will approve her to return home. Then the doc is the badguy and not you or Auntie.

Dementia robs people of their reason and logic and empathy, so there is no point in trying to explain, and reexplain things to her. Give her whatever explanation will keep her calm in the moment.