Alex Spanko at Skilled Nursing News had a great article about private equity firms ownership of nursing homes. Nursing home experts and consumer advocates have repeatedly expressed concerns about the rise of private equity investment in skilled nursing facilities, citing a lack of transparency and concerns over quality affected by short-staffing. Putting profits over people. Recently released research appears to back up their arguments. Then the coronavirus crisis hit.
A study from researchers at the University of Pennsylvania’s Wharton School, NYU-Stern, and the University of Chicago found that a variety of metrics — from the number of staff hours to overall five-star quality ratings — decline in the immediate wake of a private equity takeover. The Wharton-NYU-UChicago study did reveal negative trends associated with the years immediately following a building’s purchase by a private equity firm.
“Following buyouts, we observe higher patient volume on the extensive and intensive margins, leading to an increase in bed utilization,” the team concluded. “We also find a robust decline in nursing staff, leading to greater decline in per-patient nursing staff availability. “
Private equity firms own about 11% of nursing facilities nationwide, according to the study. Investment in the space has accelerated in recent years, with MarketWatch noting that PE firms have poured $5.3 billion into nursing home deals since 2015 — compared to $1 billion between 2010 and 2014.
For example, the researchers tracked declines in overall star ratings and use of direct caregivers such as licensed practical nurses (LPNs) and certified nurse assistants (CNAs) in the wake of a PE takeover. The researchers noted that the buildings tended to see declines in the staffing domains of their five-star ratings.
Even before the coronavirus crisis, members of Congress had issued loud public warnings to PE owners of nursing homes.
Back in November, a group of Democratic lawmakers that included former presidential candidate Sen. Elizabeth Warren of Massachusetts wrote a letter to private equity firms with holdings in the industry — The Carlyle Group, Formation Capital, Fillmore Capital Partners, and Warburg Pincus LLC — asking for more clarity around their operations.
“We are particularly concerned about your firm’s investment in large for-profit nursing home chains, which research has shown often provide worse care than not-for-profit facilities,” the lawmakers wrote in their letters. “In light of these concerns, we request information about your firm, the portfolio companies in which it has invested, and the performance of those investments.”