Private Equity-Owned Nursing Homes Had Higher COVID-19 Infection, Fatality Rates: Report

New Jersey nursing facilities with private equity ownership or investors had higher rates of COVID-19 infections and deaths, a new report from a financial reform advocacy group determined.

At properties either wholly owned by private equity firms or backed by such companies, the coronavirus fatality rate was 10.2% higher than the statewide average, the Americans for Financial Reform Education Fund determined. The rate of infections at such buildings, meanwhile, was 24.5% greater than the baseline, with 58.8% of residents contracting the novel coronavirus, according to the report.

“Research on the impact of private equity companies on the quality of long-term care is greatly needed and this report makes an important contribution to our understanding of the growing influence and power of private equity investors,” Charlene Harrington, a professor emeritus at the University of California-San Francisco, said in a statement announcing the release of the report last week.

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The analysis also found higher rates of deficiency citations and lower staffing levels among PE-backed properties in the Garden State.

The role of private equity firms in the post-acute and long-term care landscape had come under intense national scrutiny even before the start of the coronavirus crisis. A group of Democratic federal lawmakers — including Sen. Elizabeth Warren of Massachusetts — last fall sent letters to four PE companies with nursing home holdings, demanding detailed information about their properties and revenues from government payers.

“We are particularly concerned about your firm’s investment in large for-profit nursing home chains, which research has shown often provide worse care than not-for-profit facilities,” the lawmakers wrote. “In light of these concerns, we request information about your firm, the portfolio companies in which it has invested, and the performance of those investments.”

Earlier this year, a study from a team of researchers at the University of Pennsylvania, New York University, and the University of Chicago found declines in a variety of quality metrics at nursing homes in the immediate wake of a private equity takeover.

“Following buyouts, we observe higher patient volume on the extensive and intensive margins, leading to an increase in bed utilization,” the team concluded. “We also find a robust decline in nursing staff, leading to greater decline in per-patient nursing staff availability.”

But increased operational challenges caused by COVID-19 — along with media and regulatory scrutiny — could scare PE investors away from the space moving forward, several leaders have predicted.

“We are thinking that maybe private equity is not going to think that this is a great industry in which to invest in the future, and so maybe we will have less competition when this finishes, this crisis is over,” LTC Properties (NYSE: LTC) CEO Wendy Simpson said back in April.

Fellow real estate investment trust (REIT) CEO Rick Matros agreed in a more recent interview with SNN.

“Fortunately, on the skilled side, it’s different than on the senior housing side — because of all the government reimbursement, there’s very little private equity now,” Matros, CEO of Sabra Health Care REIT (Nasdaq: SBRA), said. “There’s almost none left that play in the business, and I don’t think we’re going to see that again.”

And those PE firms that remain will need to demonstrate a true dedication to the space, Blue Moon Capital Partners co-founder and managing director Kathryn Sweeney said in April.

“I think committed private equity will not — knowledgeable, experienced private equity will not,” Sweeney said of investor departures from health care. “But what I absolutely agree with Wendy on is that those private equity ‘tourists,’ who were really looking more opportunistically at the sector, that they will. They did not anticipate how hard something like this could be, and just are not prepared. I think we are going to see an evaporation of that cohort of private equity suppliers.”

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