Private-equity-acquired nursing homes have worse resident outcomes, higher Medicare costs, study finds

Nursing Homes
A recently published national cohort analysis found significant increases in ambulatory care-sensitive outcomes and per-resident Medicare costs, leading researchers to call for policies ensuring greater transparency among nursing home ownership. (Getty/Chinnapong)

Long-stay residents of nursing homes recently acquired by private equity firms are more likely to have ambulatory care-sensitive emergency department visits and hospitalizations compared to those staying at non-private equity for-profit nursing homes, according to a recently published national cohort analysis.

Residents at PE-acquired nursing homes also generate higher Medicare costs, the analysis found.

Across a sample of nearly 10,000 for-profit nursing homes and more than 250,000 residents, Weill Cornell Medical College researchers found mean quarterly rates of ambulatory care sensitive emergency department visits and hospitalizations to be 14.1% and 17.3%, respectively.

However, among those staying at 302 homes acquired by private equity between 2013 and 2017, the researchers saw an 11.1% relative increase in these emergency department visits and an 8.7% relative increase in hospitalizations.

Further, mean quarterly Medicare costs per resident were $8,050 across the full cohort. These also saw a relative increase of 3.9% after a facility was acquired by private equity, the researchers wrote.

“This cohort study suggests that [private equity] firm–owned nursing homes provided somewhat lower-quality long-term care than other for-profit homes based on two widely used quality measures and were associated with higher total per-beneficiary Medicare costs,” the researchers wrote in JAMA Health Forum.

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Secondary analyses comparing antipsychotic use, severe pain and pressure ulcers found no significant differences between the two study groups.

The researchers wrote that previously published studies of nursing home quality and private equity ownership have been “inconsistent,” did not include a national cohort and reviewed different measures of quality.

Of note, one recent study published in 2020 found similar COVID-19 case counts and deaths between private-equity-owned homes and other facilities despite holding smaller supplies of personal protective equipment, they wrote.  

An estimated 5% of U.S. nursing homes are owned by private equity, the researchers wrote, but complex corporate structures often employed by these firms can make it difficult to discern whether they own an interest in these facilities.

These new data, along with the general increased pressure within private equity to secure a short-term return, "suggest that more stringent oversight and reporting of related entities may be warranted,” the researchers wrote. “Policymakers might consider making more detailed ownership information available in outlets that provide consumers with information on nursing home quality, such as Nursing Home Compare.”

RELATED: Private-equity-acquired hospitals quickly buy into profitable service lines, for better or for worse

Weill Cornell Medical College identified private-equity-owned homes using data from three proprietary and federal databases: S&P Capital IQ, Irving Levin Associates Health Care M&A and the Centers for Medicare & Medicaid Services' Nursing Home Compare Ownership. They also collected Medicare fee-for-service claims and Minimum Data Set assessments to build their sample of nursing home residents.

The final cohort included 302 private-equity-owned nursing homes and 9,562 other for-profit homes, with 9,632 residents living in the former and 249,771 residents in the latter.

Assessments of private-equity-owned healthcare facilities’ performances are becoming necessary as these firms take on increasingly large stakes in the industry, the researchers wrote.

Beyond nursing homes, a recent study in Health Affairs found hospitals recently acquired by private equity tend to adopt profitable new services and technologies more quickly than their unacquired counterparts—an approach that could potentially backfire if novel services later reveal themselves to be less effective or more expensive.