Trend: Nursing home investors cut costs to the bone

The nursing home industry has always operated on a narrow margin. However, as private investors buy out nursing home chains, they're hoping to change the picture, in part by cutting nursing rosters and in part by sheltering assets under hard-to-sue corporate umbrellas, according to a new analysis by The New York Times.

Investment firms like Warburg Pincus and Formation Capital, not to mention giant diversified companies like General Electric, have been making big plays in the nursing home industry of late. For example, consider the $1.8 billion buyout of Beverly Enterprises by Fillmore Strategic Investors. The firms are hoping to capitalize on the "graying of America" as baby boomers move into retirement and old age.

To make their investments work, however, the investor chains are cutting nursing staff--with possibly dangerous results. (For example, according to a Times analysis, the homes scored worse than national rates in 12 to 14 measures of care tracked by CMS.) Meanwhile, to protect themselves against legal liability, investors have structured their ownership to include multiple owners and complex corporate structures that impair the ability of plaintiffs to sue, the analysis concluded. Investors, for their part, say that they're saving an otherwise endangered industry by making it financially viable.

To learn more about this trend:
- read this article in The New York Times

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