Private equity ownership of nursing homes linked to lower quality, higher Medicare costs

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Nursing homes acquired by private equity companies saw an increase in emergency room visits and hospitalizations among long-stay residents and an uptick in Medicare costs, according to a new study from Weill Cornell Medicine investigators. The findings, published Nov. 19 in JAMA Health Forum, suggest that quality of care declined when private equity firms took over the facilities.

Private equity investment in nursing homes has soared in recent years, as part of $750 billion in healthcare deals between 2010 and 2019. An estimated 5% of nursing homes in the U.S. are owned by private equity firms, data showed.

The pressure to generate high, short-term profits could lead private equity-owned nursing homes to reduce staffing, services, supplies or equipment, which may have an adverse association with quality of care, authors said.

WHAT'S THE IMPACT?

Using a proprietary national database, Weill Cornell investigators identified 302 nursing homes acquired by private equity firms between 2013 and 2017, with a total of 9,632 long-stay residents. The investigators compared resident outcomes at private equity-owned facilities with resident outcomes at 9,562 other for-profit nursing homes, which included 249,771 long-stay residents during the period examined. 

For indicators of quality of care, the team looked at ambulatory care sensitive (ACS) visits to the emergency room and hospitalizations. These episodes, such as complications from diabetes or heart failure, can be largely prevented with proper management of the conditions.

Investigators found that residents at private equity-owned facilities were 11% more likely to have an ACS emergency room visit and were 8.7% more likely to be hospitalized. Since Medicare covers ED visits and hospitalizations, they had Medicare costs that were 3.9% higher, or $1,080 more annually, per patient than residents at for-profit nursing homes without private equity ownership.

Public funds from the Medicare and Medicaid programs are the largest sources of nursing home revenue, but lack of transparency in ownership makes it difficult to identify private equity firm acquisitions of nursing homes, and difficult to compare types of homes. 

The Centers for Medicare and Medicaid Services requires that ownership stakes of 5% or more be reported in the Provider Enrollment, Chain, and Ownership System (PECOS). But PECOS is not publicly available, and the information reported in PECOS is not regularly audited. 

Private equity firms frequently use complex corporate structures that make it difficult to identify related third parties, authors said. Tracking the amount of revenue for staffing, services and supplies that goes to multiple related or co-owned entities that appear in PECOS as having ownership stakes in a nursing home is often not possible.

The study warrants more discussion about not only the implications of the growth of private equity firm acquisitions, the team said, but also the importance of making ownership information available that allows the public to compare nursing home providers.

THE LARGER TREND

A working paper published earlier this year found private equity firm ownership to be associated with increased mortality rates and higher costs for post-acute patients, declines in five-star ratings, and slightly lower levels of direct care staffing, with the exception of an increase in registered nurse staffing.

A recent study during the COVID-19 pandemic found that private equity firm–owned facilities performed similarly to those with other types of ownership in the number of COVID-19 cases and deaths, but private equity firm–owned nursing homes had lower supplies of personal protective equipment.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com