A growing body of research shows that health outcomes in private equity-owned facilities are worse than in those under other ownership. A February 2021 study from the National Bureau of Economic Research found that going to a facility owned by a private equity firm increased the chance that a resident would die by 10%, compared with living in another type of facility. That study was conducted from 2005 to 2017.
A November 2021 Cornell University study found that residents of private equity-owned nursing homes were more likely to have emergency room visits or be hospitalized than residents of other for-profit homes. Both studies found that Medicare’s costs per resident were higher, meaning more taxpayer dollars were being spent in private equity facilities.
Industry trade associations dismissed these findings, saying the studies don’t show the whole picture of how care at private equity-owned homes might differ from that at other facilities.
“The focus on private equity ownership of nursing homes is a red herring,” said Mark Parkinson, president and CEO of the industry group the American Health Care Association/National Center for Assisted Living. In his statement, he added that these investor groups have moved on to other, “more lucrative” healthcare sectors. There is evidence that private equity is increasing investments in home healthcare and hospices, as more older Americans choose to age in place.
“If policymakers want to talk about private equity, then this is a conversation for the entire healthcare system, not just nursing homes,” Parkinson said.
The American Investment Council, an advocacy group for the private equity industry, countered these research findings with other studies. One showed that private equity-owned nursing homes fared better under COVID, and another found that living in private equity-backed homes didn’t affect residents’ quality of care (though this study used old data and had a limited sample size).
Still, it’s undisputed that private equity firms are buying nursing homes because they’re likely to be profitable, said Robert Tyler Braun, an assistant professor of population health sciences at Cornell University who was an author of the November 2021 study.
“The main appealing thing is the margins are low and they’re getting valuable real estate with the purchase,” Braun said. “Plus, the way these deals are structured, it allows you to bring in parties that private equity firms might own, such as maid services [and] clinician services,” and charge higher rates than the market indicates.
Profits can also be maximized by reducing staff levels or hours, affecting residents’ care, said Eileen O’Grady, research and campaign manager for the Private Equity Stakeholder Project, a private equity watchdog group.
The Biden administration is trying to improve nursing home quality — for example, by directing Medicare to set higher standards for the facilities and instructing the Department of Health and Human Services to examine private equity ownership. But some initiatives will require the assistance of Congress, which so far has been slow to move on oversight. Efforts have remained in the data-gathering phase.