A study published on November 19, 2021 in JAMA Health Forum analyzed 9,864 nursing homes in the United States, including 9,632 residents in 302 nursing homes acquired by private equity firms and 249, 771 residents in 9,562 other for-profit nursing homes without private equity ownership and found that “private equity acquisition of nursing homes was associated with higher costs and increases in emergency department visits and hospitalizations for ambulatory sensitive conditions.”
In adjusted differences-in-differences comparisons, PE firm acquisition was associated with an 11.1% relative increase in ED, an 8.7% relative increase in hospitalizations, and a 3.9% relative increase in total quarterly costs.
The study’s researchers set out to answer the question whether private equity acquisition of nursing homes is associated with the quality or cost of care for long-stay nursing home residents and concluded: “This study suggests that more stringent oversight and reporting on private equity ownership of nursing homes may be warranted.”
An estimated 5% of nursing homes in the United States are owned by private equity firms. For-profit companies are the predominant operators of nursing homes for which studies have shown for-profit ownership of nursing homes is associated with lower-quality long-term care compared with nonprofit ownership of nursing homes. Private equity (PE) investment in U.S. health care reached $750 billion in deals from 2010 to 2019.
More than half of older adults in the United States will eventually stay in a nursing home for post-acute or long-term care. There are 1.3 million long-stay nursing home residents in the United States, of which 90% are 65 or older. Annual Medicaid expenditures on long-term care total $57 billion and include the cost of nursing home care for 60% of residents nationally. There are high rates of emergency department (ED) visits and hospitalization among nursing home residents who are 65 or older, and such ED visits and hospitalizations are associated with a disproportionate share of Medicare spending on the 65 and older population.
The study’s authors stated: “Private equity firms seek high annual returns of 20% or more. The pressure to generate high short-term profits could lead to PE firm–owned nursing homes reducing staffing, services, supplies, or equipment, which may have an adverse association with quality of care, whereas non-PE for-profit nursing homes may have business strategies with longer time horizons. Nursing homes purchased by PE firms may be responsible for the debt used by the PE firm as part of a leveraged buyout to acquire the facilities, thereby reducing their financial resources. Opponents of PE ownership are also concerned that PE firms may not be experienced in nursing home care, or that they will focus more attention on postacute care and less on long-term care because Medicare reimbursements for patients receiving postacute care are much higher compared with Medicaid payments for long-stay residents.”
Proponents of PE owership of U.S. nursing homes argue the PE acquisitions of nursing homes may lead to higher-quality care through better management and improvements in health information technology capabilities, and that PE firms may also provide financial and legal resources to improve regulatory compliance.
The study used a national sample of long-stay nursing home residents from 2012 through 2018 to compare changes in the quality and cost of care for those in PE firm–acquired nursing homes with residents in for-profit nursing homes without PE investment.
The study found that after acquisition, PE firm–owned nursing homes had a 1.5% higher mean occupancy rate and 6.4% more facilities affiliated with chains compared with non-PE firm–owned homes. The mean number of beds of PE firm–owned nursing homes was 11.9 beds lower after acquisition. Following acquisition, PE firm–owned nursing homes had a 7.6% decrease in the lowest tercile for the percentage of residents covered by Medicaid and a 7.3% increase in the highest tercile for the percentage of residents covered by Medicaid.
A recent study during the COVID-19 pandemic found that PE firm–owned facilities performed similarly to those with other types of ownership in the number of COVID-19 cases and deaths, but PE firm–owned nursing homes had lower supplies of personal protective equipment.
The study’s authors concluded: “This cohort study suggests that PE firm–owned nursing homes provided somewhat lower-quality long-term care than other for-profit homes based on 2 widely used quality measures and were associated with higher total per-beneficiary Medicare costs.”
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 understaffing, nursing home neglect, nursing home negligence, nursing home abuse, 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.
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