Private equity acquisition of nursing homes is tied to increases in emergency room visits, hospitalizations and higher Medicare costs, according to a recently published JAMA Health Forum study.
The study found PE firm-owned nursing homes were 11.1% more likely to have an acute coronary syndrome (ACS) emergency department (ED) visit and 8.7% more likely to have an ACS hospitalization, compared to non-PE firm-owned for-profit nursing homes.
Total Medicare costs were 3.9% higher than their counterparts, the study said.
Such firms usually look to achieve annual returns of 20% or more, the study said, and the pressure to generate high short-term profits could lead to reduced staffing, services, supplies or equipment — in turn creating diminished quality of care.
Researchers in the JAMA study did take some time to play devil’s advocate, suggesting PE firm ownership might improve care via better management and health information technology upgrades. Vast financial and legal resources could help nursing homes improve regulatory compliance too, JAMA said, “an area in which many nursing homes persistently underperform.”
PE firms currently own about 5% of U.S. nursing homes, JAMA said, with $750 billion recorded in deals from 2010 to 2019. JAMA used the S&P Capital IQ, Irving Levin Associates Health Care M&A and the Centers for Medicare & Medicaid Services (CMS) Nursing Home Compare Ownership databases for its research.
Available outlets may have impacted JAMA’s results, the study admitted.
“The CMS Nursing Home Ownership file may not always identify the parent company of a platform nursing home,” the study said. “In this case, nursing homes acquired on behalf of a PE firm by these platform nursing homes may appear to be for-profit nursing homes without PE firm ownership.”
JAMA was unable to track PE firm exits from nursing homes too, but added that such firms usually sell acquired organizations within three to seven years, therefore “…there were likely few exits during the 2013-2017 period used for our analyses.”
CMS requires ownership stakes of 5% or more be reported to the Medicare Provider Enrollment, Chain, and Ownership System (PECOS), but that information is not publicly available, even to researchers, JAMA said in its report.
Acquisitions sometimes place debt responsibility on the nursing homes, JAMA said, used as part of a leveraged buyout during dealmaking; the move further reduces financial resources for the nursing home post-transaction.
PE firm asset, management and operating structures concern policy makers, JAMA said, due to an overlying design to avoid financial transparency and patient care accountability.
PE ownership critics point to lack of experience, or prioritize care based on higher reimbursements, the study said. Medicare reimbursements, for example, associated with post-acute, short-term stays, are higher than long-term care tied to Medicaid reimbursements.
JAMA used a cohort of 302 private equity nursing homes acquired between 2013 and 2017, and 9,562 other for-profit nursing homes. For-profit companies are the “predominant” nursing home operators, JAMA researchers said.
“A large body of research has indicated that for-profit ownership of nursing homes is associated with lower-quality long-term care compared with nonprofit ownership of nursing homes, but little is known about differences in the quality of long-term care provided by PE-owned nursing homes compared with other for-profit nursing homes,” the JAMA report stated.
Other studies attempting to break down PE firm ownership and nursing home quality have been “inconsistent,” JAMA said, adding there have been no national studies focused on the association between PE firm ownership and quality as well as cost of care for long-term stay residents.
JAMA noted some past studies didn’t differentiate between post-acute and long-term stay residents, while others were concentrated in specific areas of the country. Another found no association between PE firm ownership and quality of care, but didn’t take into account hospitalizations or costs.
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