“The exponential growth in these private equity investments in recent years ‘has been associated with a host of trends that are negatively impacting the American people’ — including an increase in nursing home mortality rates….”
In his State of the Union address last month, President Joe Biden focused attention on how private equity ownership of nursing homes can affect residents’ health.
“As Wall Street firms take over more nursing homes, quality in those homes has gone down and costs have gone up. That ends on my watch,” Biden said.
Those comments dovetail with growing interest from Congress.
The Government Accountability Office, for instance, is investigating the ownership of nursing homes, including by private equity firms, and expects to issue a report in the fall, said Chuck Young, the GAO’s managing director of public affairs. “The full scope of what we will cover has not been set yet, however the work will likely be focused on the information [the Centers for Medicare & Medicaid Services] has about nursing home ownership and how the agency uses that information,” Young wrote in an email.
The investigation comes in response to a pre-pandemic request from House Ways and Means Committee Chairman Richard Neal (D-Mass.). Yet the pandemic has also underscored the importance of oversight of nursing homes, in light of the lives lost to covid-19.
Rep. Bill Pascrell (D-N.J.) submitted a second request to the GAO in 2021 regarding private equity investments in health care. It’s in GAO’s queue, but work on it hasn’t started, Young said.
The exponential growth in these private equity investments in recent years “has been associated with a host of trends that are negatively impacting the American people” — including an increase in nursing home mortality rates, wrote Pascrell, who chairs the Ways and Means Oversight Subcommittee. He noted the need to “better understand” the consequences of private equity’s involvement in health care and “the far-reaching impact” of “bankruptcies or closures following PE buyouts.”
Pascrell said in a statement to KHN that the data the GAO could compile would be valuable in assessing the reach and impact of such investments: “It is my hope GAO will shed more light and provide more information on Wall Street’s dangerous growing control over nursing homes and long-term care facilities.”
That Neal and Pascrell had to ask the GAO for information underscores the dearth of data on nursing home ownership. A June 2021 report by the Medicare Payment Advisory Commission found that information about the effect of private equity ownership on nursing home finances and quality of care was dated and the results of studies were mixed.
Democratic House staffers told KHN that because private equity has stepped up its interest in this industry, it’s even more crucial to understand how residents’ health outcomes and staff working conditions compare with those in facilities not owned by private equity companies.
From 2010 to 2019, there was a large increase in private equity companies buying up nursing homes, along with other investments in health care. An exact figure is elusive because private purchases are difficult to track, but it’s estimated that such groups own anywhere from 5% to 11% of nursing homes nationwide.
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” health care sectors. There is evidence that private equity is increasing investments in home health care 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 health care 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.
The last GAO report about private equity ownership of nursing homes, released in 2011 — more than 10 years ago — found some differences in care and financial performance between for-profit facilities and those with nonprofit ownership. Meanwhile, the National Academies of Sciences, Engineering, and Medicine has released a much-publicized 600-page report calling for more data transparency on nursing home performance and finances to understand how ownership affects care, among other recommendations for improving the nursing home system overall.
Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.
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