Finding a good long-term care facility for a loved one has always been a difficult process. A new National Bureau of Economic Research working paper suggests that families should also be paying attention to who owns the facility, finding a significant increase in mortality in nursing homes owned by private equity investors.
Examining Medicare data from over 18,000 nursing homes, 1,674 of which were owned by private equity (PE) firms, researchers found that PE ownership increased Medicare patient mortality by 10 percent—translating to a possible 20,150 additional lives lost. PE-owned facilities were also 11 percent more expensive.
Counterintuitively, lower-acuity patients had the greatest increase in mortality. Researchers found staffing decreased by 1.4 percent in PE-owned facilities, suggesting that shorter-staffed facilities may be forced to shift attention to sicker patients, leading to greater adverse effects on patients requiring less care.
Antipsychotic use, which carries a higher risk in the elderly, was also a whopping 50 percent higher.
Nursing homes are low-margin businesses, with profits of just 1-2 percent per year—and PE ownership did not improve financial performance.
Researchers found private equity profited from three strategies: “monitoring fees” paid to services also owned by the PE firm, lease payments after real estate sales, and tax benefits from increased interest payments, concluding that PE is shifting operating costs away from patient care in order to increase return on investment. Private equity investment in care delivery assets has skyrocketed over the past decade.
This study draws the most direct correlation between PE investment and an adverse impact on patient outcomes that we’ve seen so far, highlighting the need for increased regulatory scrutiny to ensure that patient safety isn’t sacrificed for investor returns.