Recent Study Concludes Private Equity-Owned Nursing Homes Put Profits Over People

A study entitled “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes” posted on March 9, 2020 concluded: “our evidence thus far shows that after PE [private equity] buyouts nursing homes experience operational efficiency improvements, with higher volume and lower staffing. This comes at the cost of declines in the quality of care … The increase in higher-paid RN availability is insufficient to outweigh the decline in availability of frontline nursing staff … we interpret these results as indicating economically and statistically significant declines across multiple dimensions of quality at nursing homes following PE buyouts.”

“To explore whether the decline in staff availability causes the observed decline in quality, we examine whether the PE-owned nursing homes that experienced particularly large staff declines are also those that saw their Five Star Ratings decline the most … Overall the patterns are consistent across rating types and suggest that cuts to nursing staff maybe an important channel to explain the quality declines.”

“The increase in patient volume at PE-owned nursing homes may have inadvertently led to changes in patient composition. Alternatively, PE firms may have targeted certain types of patients or payers in order to increase profitability … Assuming that the increase in patient volume leads to a commensurate 8 percent increase in patient revenue, together with a percent decline in salary cost, implies an increase of about $770,000 in surplus per year for the average facility with 110 beds.”

“The results so far have found robust and economically meaningful changes in nursing homes after PE buyouts: more patients, decline in staff availability in absolute and per-patient terms, and in quality of care as well.”

“[W]e find that PE buyouts are associated with two strategies likely to increase profits or firm value: more efficient resource utilization and lower labor cost. Following buyouts, we observe higher patient volume on the extensive and intensive margins, leading to an increase in bed utilization. We also find a robust decline in nursing staff, leading to greater decline in per-patient nursing staff availability. We estimate these changes added nearly three quarters of a million dollars to the operating surplus for the average acquired nursing home.”

“The fact that the source of revenue is not the patient – unlike many markets where the consumer pays for his own goods – may create incentives to reduce costs in ways that negatively affect the quality of care. Indeed, we observe significant declines in many outcomes associated with quality of care, such as staff per-patient, readmission rates, and ultimately in Five Star ratings awarded by the federal government. We also find that PE-owned nursing homes responded more aggressively to the expansion of Medicaid by adding Medicaid patients and reducing staff per patient.”


If you or a loved one suffered injuries (or worse) while a resident of a nursing home in the United States due to nursing home neglect, nursing home negligence, nursing home abuse, nursing home understaffing, nursing home resident-on-resident attack, nursing home sexual abuse, nursing home rape, or the nursing home failing to properly care for a vulnerable adult, you should promptly find a nursing home claim lawyer in your state who may investigate your nursing home claim for you and file a nursing home claim on your behalf or behalf of your loved one, if appropriate.

Click here to visit our website to be connected with medical malpractice attorneys (nursing home claim attorneys) in your U.S. state who may assist you with your nursing home claim, or call us toll-free in the United States at 800-295-3959.

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This entry was posted on Wednesday, May 13th, 2020 at 5:28 am. Both comments and pings are currently closed.


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