Private Equity Nursing Homes Linked to Lower Quality, Higher Costs

According to a JAMA Health Forum study, nursing homes acquired by private equity firms have been associated with lower quality long-term care and higher Medicare costs in comparison to for-profit nursing homes. In addition, the findings showed an increase in emergency room visits and hospitalizations. 

Private equity firms have been acquiring homes at an increasing rate. There were $750 billion in healthcare deals between 2010 and 2019. Researchers state that private equity firms own an estimated 5 percent of all US nursing homes. 

"Our findings indicate that private equity firm-owned facilities offer lower quality long-term care. These residents are among the most vulnerable in our health care system, and a lack of transparency in ownership makes it difficult to identify facilities with private equity ownership, which consumers may be interested in knowing,” Mark Unruh, PhD, an associate professor of population health science at Weill Cornell Medicine, said in a press release.

Researchers used a proprietary national database to study 302 nursing homes acquired by private equity firms between 2013 and 2017. The nursing homes cared for 9,632 long-term residents during the period. Resident health outcomes in private equity nursing homes were compared to health outcomes at 9,562 for-profit homes, with a total of 249,771 long-term residents. 

This study examined the quality of care between facilities by looking at ambulatory care sensitive (ACS) visits to the emergency room and hospitalizations.

“Private equity firm-owned nursing homes may operate differently than other for-profit homes, potentially improving or worsening the quality of care. Private equity firms seek high annual returns of 20 [percent] or more,” the research team explained in the study. 

“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.”

The results showed that residents at private equity-owned facilities were 11.1 percent more likely to have an ACS emergency room visit. In addition, residents at privately owned facilities were 8.7 percent more likely to be hospitalized. 

They also had higher Medicare costs of 3.9 percent, approximately $1,080 more annually per patient than residents at for-profit nursing homes.

The researchers did not find a difference in the likelihood of residents receiving antipsychotics, developing a pressure ulcer, or experiencing severe pain.

“The majority of revenue that pays for care in nursing facilities comes from public sources,” Unruh said. “After private equity acquisition, quality of care declines and Medicare spending goes up for residents, and that should be a concern for policymakers.”