Beware of Private Equity-Owned Nursing Homes: Study
Nov. 19, 2021 — When you have to help a parent choose a nursing home or you need nursing home care yourself, you can consult a healthcare professional, talk to friends, or look at the Nursing Home Compare website of the Centers for Medicare and Medicaid Services (CMS). The CMS website includes star ratings for each nursing home, both overall and on health inspections, staffing and certain quality measures.
But what you might not know is what financial incentives a particular nursing home might have to provide high-quality care, depending on what kind of entity owns the facility.
A study published Nov. 19 in JAMA Health Forum throws light on at least one aspect of the ownership question: What happens when a private equity (PE) firm acquires a nursing home? According to the study, you can expect a somewhat lower level of quality in a PE-owned nursing home than in other for-profit facilities.
The researchers compared CMS data on 302 nursing homes owned by 79 PE firms to data on 9,562 for-profit facilities not owned by such companies from 2013 to 2017. Among fee-for-service Medicare patients in long-term care, private equity acquisitions of nursing homes were associated with an 11.1% increase in ambulatory-care-sensitive (ACS) visits to the emergency department (ED) and an 8.7% increase in ACS hospitalizations per quarter, compared to the changes that occurred in the non-PE-owned facilities, they found.
What’s more, Medicare costs per beneficiary increased 3.9% more — or about $1,000 a year — in the PE-owned nursing homes than they did in the other cohort during the study period.
And when the acquired nursing homes were compared to the nursing homes prior to their acquisition by PE firms, there were no statistically significant differences in. unadjusted outcomes, the researchers found. That means the two cohorts were broadly comparable.
The researchers adjusted the numbers in their study for various characteristics of the facilities and their residents. For example, the PE-acquired nursing homes were likely to have a higher percentage of patients covered by Medicare and a lower percentage covered by Medicaid than their non-PE counterparts.
The mean percentages of Black residents, female residents and residents aged 85 or older were 12.4%, 65.4% and 36.2%, respectively, for the PE-owned nursing homes and 15.7%, 67.8% and 39%, respectively, for the non-PE-owned facilities.
Less than optimal outcomes
On average, the residents of non-PE-owned nursing homes had better outcomes , than did the patients in the PE-owned facilities. But that doesn’t mean that the average for-profit nursing home had terrific outcomes.
For all the nursing homes in the study, the mean quarterly rate of ACS emergency department visits was 14.1% and the mean quarterly rate of ACS hospitalizations was 17.3%.
“These events should be largely, although not completely, preventable with appropriate care,” the researchers pointed out.
To date, PE firms have invested about $750 billion in U.S. health care, with nursing homes being a major target of these companies, which currently own 5% of skilled nursing facilities, per the study. PE companies seek annual returns of 20% or more, the paper says, and thus feel pressure to generate high short-term profits. That could lead to reduced staffing, services, supplies or equipment in their facilities.
Some nursing homes purchased by PE firms may be responsible for the debt incurred in their own leveraged buyouts, the researchers noted There is also concern that PE firms may focus their properties disproportionately on short-term post-acute care, which is reimbursed at a higher rate than long-term care, the study says.
For all these reasons, some health policy makers are concerned about the long-term impact of private-equity nursing home acquisitions, according to the study.
