Nurse.org, By Angelina Walker
January 2, 2025
The debate over private equity’s role in healthcare has intensified in recent years, with critics arguing that the profit-driven model of these investment firms is incompatible with high-quality patient care and safety. Recent developments have added fuel to this ongoing discussion as private equity (PE) firms have been increasingly acquiring healthcare services, including nursing homes, hospitals, and physician practices.
Do Nursing Home Acquisitions by PE Firms Decrease Quality and Increase Fines?
PE firms often bring significant capital and management expertise to the healthcare companies they acquire. This influx of resources potentially leads to operational improvements and enhanced efficiency. However, PE’s laser-like focus on profitability has raised concerns about potential compromises in care standards.
Furthermore, the emphasis on cost-cutting and revenue growth may result in reduced staffing levels, the use of less experienced personnel, and other measures that could negatively impact patient care. And although PE acquisitions are subject to FTC scrutiny, the FTC primarily focuses on market competition rather than direct quality of care or fines.
A recent report by KCRG-TV9 found a troubling trend: nursing home fines have been on the rise following private equity buyouts. This increase in regulatory penalties suggests that the quality of care in these facilities may be declining under private equity ownership. The correlation between private equity takeovers and increased fines raises questions about whether the pursuit of profits is coming at the expense of resident well-being and safety.
KCRG-TV9 found that one PE firm, Cascade Capital Group, acquired nearly 30 Iowa nursing homes last year and fines increased substantially. CMS data showed that one facility purchased by Cascade (and its affiliate, Legacy Health Care) named Harmony House Health Care Center had seventeen times more fines than the previous owner.
Several other studies have examined PE ownership of nursing homes and found concerning trends:
- Quality of Care Decline: residents in PE-owned nursing homes are 11% more likely to have emergency room visits, 8.7% more likely to be hospitalized for preventable conditions, and short-term mortality rates increased by 10% during and 90 days after stays in PE-owned facilities. In addition, PE ownership is associated with a 50% higher likelihood of residents being placed on antipsychotic medications, often used to sedate rather than provide proper care.
- Staffing Reductions: PE acquisitions led to an average 1.4% reduction in overall staffing, with frontline caregiver hours (CNAs and LPNs) decreasing 3% compared to industry averages.
- Regulatory Issues: PE-owned nursing homes perform significantly worse in terms of deficiencies compared to other facilities, including a decline in Medicare’s Five Star ratings.
- Financial Implications: Medicare costs per resident increased by 3.9% ($1,080 annually) in PE-owned facilities with overall patient bills more than 10% higher than in other facilities.
Other studies suggest potential improvements in care quality after PE acquisitions, but the majority of evidence points to decreased quality and increased regulatory issues following PE takeovers of nursing homes.
Nursing Home Fines Skyrocket After Private Equity Buyouts, Studies Find