Why We Must Beat Back Private Equity's Deadly Hold on Nursing Homes

Unbeknownst to most people with loved ones in nursing homes, it's often nearly impossible to determine if the facility you've entrusted your family member to is owned by a private equity firm–an ownership structure that has been shown to result in worse health outcomes for patients, at greater cost. Within the past two decades, the once-obscure private equity industry has ballooned in size from $1 trillion in 2008 to nearly $4.5 trillion in 2021. Millions of people in the United States have been directly impacted by an industry that was once known mostly to finance insiders like institutional investors and financial journalists.

In February, the Center for Medicare and Medicaid Services (CMS) issued an important rule requiring the disclosure of beneficial ownership of nursing homes that would bring greater transparency to this complex ownership model. This step is critical to preventing further harm by private equity firms and is part of a broader effort to reign in the abuses of the private equity industry in key sectors of our economy.

Whether private equity drove the retail company where you worked into bankruptcy or bought the house you rent, private equity's rapacious business practices are hitting close to home for more people than ever. Whatever industry it enters, a private equity firm's risky business practices often burdens businesses with excessive debt, forces the sale of assets for short-term gain, squeezes workers, and compromises services at the expense of most stakeholders to drive profits to private equity executives.

Evidence of the dangerous role of private equity's takeover of nursing homes has emerged over the last decade, but due in part to the COVID-19 pandemic, its ownership in the industry has faced new scrutiny in the last three years.

The healthcare sector has not been spared from private equity's expansion and extraction. A growing body of evidence shows that the private equity industry is incompatible with providing people with stable, quality, affordable healthcare. In ownership of hospitals, private equity firms have bought and shuttered urban, suburban, and rural facilities, leaving healthcare deserts in those communities. Private equity firms created a business model of surprise medical bills that intentionally billed services out of insurance networks, leaving patients with huge out-of-pocket expenses through no fault of their own. During the COVID-19 pandemic, private equity-owned physician staffing agencies fired physicians in already understaffed emergency rooms who spoke out against the lack of personal protective equipment like masks, and other practices endangering patient safety.

The private equity industry's track record in other areas of the care economy are equally appalling. Stories of the results of private equity ownership in companies caring for vulnerable populations are downright grisly, including deadly neglect and abuse of residential centers for the severely disabled, denying care to medicare and medicaid patients with life-threatening eating disorders, and delaying access to wheelchair repair to bill for more profitable equipment replacement. Another recent study raises alarm over private equity's expansion into hospital at home programs without sufficient guardrails to protect acutely ill patients at home.

Evidence of the dangerous role of private equity's takeover of nursing homes has emerged over the last decade, but due in part to the COVID-19 pandemic, its ownership in the industry has faced new scrutiny in the last three years. At the onset of the crisis, infections and deaths among nursing home workers and residents was an early crisis point before the development of vaccines. As thousands of people died in nursing homes, advocates and policymakers looked for patterns in ownership and management practices of facilities that might shed light on life-saving interventions. Private equity's common business practice of hiding behind layers of ownership and avoiding disclosures became a matter of life and death in the COVID-19 context. Americans for Financial Reform published a study in 2020 uncovering evidence that the nursing home chains in the state of New Jersey that were owned or backed by private equity firms had "higher resident infection and death rates and a larger share of Coronavirus cases and deaths compared to their share of residents relative to for-profit, non-profit, and public facilities."

In 2021, academics at the Becker Institute for Economics at the University of Chicago examined the outcomes of private equity-owned nursing homes over a 12-year period. Their conclusions were unflinching: "Our estimates show that PE ownership increases the short-term mortality of Medicare patients by 10%, implying over 20,000 lives lost due to PE ownership over our twelve-year sample period."

Policymakers must take action to protect patients and their families from private equity greed. President Biden highlighted the need for action in the 2022 State of the Union Address, calling out private equity's role in driving down quality of care while raising prices. The Administration has cited ownership transparency as a critical step to address private equity's now well-documented abuses in healthcare and to implement further safeguards like staff-to-patient ratios. Transparency in the healthcare sector is also the subject of a recent report highlighting opacity in ownership in end of life care, home health, and reproductive health services, among others.

Given the widespread and deadly role private equity firms are playing throughout the healthcare sector, federal protections like CMS's proposed rule, which requires detailed ownership of nursing homes to be made public, are urgently needed–and we can't let them be weakened by industry pressure. You can add your voice by joining AFR's organizational sign-on comment or our individual sign-on. CMS has signaled intentions to issue further safeguards on nurse-to-patient ratios in nursing homes this year. We have to beat back private equity's predatory hold on healthcare companies. We also need fundamental reform with the passage of the Stop Wall Street Looting Act. But the momentum for change starts now, with this measure to protect some of the most vulnerable, our loved ones in nursing homes.