Private equity ownership of nursing homes said to be reason behind lower quality of care, higher Medicare costs

Researchers have shown that the decline in quality of care provided by nursing homes and the increased Medicare costs are linked with private equity ownership of nursing homes.

The nursing homes acquired by private companies have a higher incidence of emergency room visits and hospitalizations among long-stay residents and an uptick in Medicare costs. The study that claims to have established this possible link has been published in JAMA Health Forum. Researchers 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 health care deals between 2010 and 2019. An estimated 5 percent of nursing homes in the United States are owned by private equity firms, according to the research team.

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 and to make things more complicated, these firms seek annual returns of 20 percent or more thereby steering attention away from care to profit making.

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 study period.

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 percent more likely to have an ACS emergency room visit and 8.7 percent more likely to be hospitalized. As a result, they had Medicare costs (Medicare covers ED visits and hospitalizations) that were 3.9 percent higher, or $1,080 more annually, per patient than residents at for-profit nursing homes without private equity ownership.

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

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