Skilled Nursing News reports that the average price per nursing home bed increased nearly 22% in the first quarter of 2021 over 2020 prices. Vikas Gupta, senior vice president of acquisitions and development at Omega Healthcare Investors, described the market for nursing homes,
“We’ve got headlines about nursing homes being the worst thing in the world, and we’re seeing the per bed price the highest they’ve ever been. So it’s a beyond-weird world.”
Who’s paying these high prices? The answer, often, is private equity (PE) firms. Nursing facility purchases by PE firms reflect what appears to be an accelerating consolidation of ownership in the nursing home industry. Of great concern is that PE-owned and operated facilities often have poor records of care, shifting money from nursing staff and resident care to profits.
Most recently, DAC Acquisition LLC acquired Diversicare, a company with 61 nursing centers with 7,250 beds (among its 397 licensed facilities), agreed to pay $10.10 per share in cash, when the stock was selling for $2.84 per share. DAC Acquisition is a privately held company whose manager, Ephram Lahasky, “has significant affiliations with in excess of 100 owned and/or leased skilled nursing and similar centers in over 20 states.” Laca Wong-Hammond, managing director and head of Mergers and Acquisitions at Lument, described DAC’s acquisition of Diversicare as
“one of many aggressive take-downs by PE because of plentiful equity capital that’s been raised chasing a dearth of deals, historic low cost of debt coupled with high available leverage, attractive yields offered by senior care assets, and the tailwind of demographic drivers. Whether distressed or core opportunities, the oversupply of capital makes this a seller’s market – we’re experiencing this firsthand with the strongest M&A pipeline in recent memory.”
Lahasky, President and CEO of MED Healthcare Partners, “is identified as a stakeholder, partner, or company affiliate of at least 69 long-term care facilities in Pennsylvania.” Lahasky told Bucks County Courier Times in 2020 that he began purchasing nursing facilities about eight years earlier and that he has “between 10 and 12 different sets of business partners.” MED Healthcare Partners operates more than 80 facilities in 16 states, with more than 8,000 certified beds.
Another private equity firm, Portopiccolo, expanded from one nursing home in 2016 to approximately 100 facilities in 2020, operating under a variety of names such as Accordius, Pelican Health, and Orchid Cove. Barron’s reported that 43% of the 75 facilities listing Portopiccolo’s CEO as an owner received one-star (the lowest rating) in the federal government’s five-star quality rating system, compared to 17% of facilities receiving that rating nationwide. The Washington Post similarly reported that Portopiccolo bought nursing facilities during the pandemic, with “scant scrutiny from regulators despite poor safety records at dozens of the company’s other nursing homes, including hefty fines for infection-control lapses and shortages of staff.”
To address these troubling ownership and management issues, the Center for Medicare Advocacy and colleagues have called for better state oversight of nursing home ownership and management and for the adoption of federal regulations governing which providers are eligible for Medicare and Medicaid certification and reimbursement. In addition, we call for rules directing how providers actually spend public reimbursement that is intended for care and limiting the amount that can be spent on overhead and profit.
September 15, 2021 – T. Edelman
 Alex Zorn, “Some REITs Worry Where Hot SNF Market Will Lead,” Skilled Nursing News (Sep. 8, 2021), https://skillednursingnews.com/2021/09/some-reits-worry-where-hot-snf-market-will-lead/?itm_source=parsely-api
 Atul Gupta, Sabrina T. Howell, Constantine Yannelis, and Abhinav Gupta, “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes?” (Feb. 2020) full report available through https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537612; Eleanor Laise, “Private-equity takeover of nursing homes has reduced quality of care at critical moment, research suggests; for-profit ownership and private-equity backing of nursing homes, academic studies show, may weaken facilities’ staffing levels and compliance with federal standards,” MarketWatch (Mar. 14, 2020), https://www.marketwatch.com/story/coronavirus-pandemic-puts-private-equity-ownership-of-nursing-homes-under-microscope-2020-03-14?adobe_mc=MCMID%3D27544074148082056223030259368856516599%7CMCORGID%3DCB68E4BA55144CAA0A4C98A5%2540AdobeOrg%7CTS%3D1596726240; Americans for Financial Reform Education Fund, “The Deadly Combination of Private Equity and Nursing Homes During a Pandemic; New Jersey Case Study of Coronavirus at Private Equity Nursing Homes” (Aug. 2020), https://ourfinancialsecurity.org/wp-content/uploads/2020/08/AFREF-NJ-Private-Equity-Nursing-Homes-Covid.pdf); Laura Alexander and Richard Scheffler, Soaring Private Equity Investment in the Healthcare Sector: Consolidation Accelerated, Competition Undermined, and Patients at Risk, (May 18, 2021), https://www.antitrustinstitute.org/wp-content/uploads/2021/05/Private-Equity-I-Healthcare-Report-FINAL-1.pdf; Eileen O’Grady (Private Equity Stakeholder Project), Pulling Back the Veil on Today’s Private Equity Ownership of Nursing Homes (Jul. 21, 2021), https://pestakeholder.org/wp-content/uploads/2021/07/PESP_Report_NursingHomes_July2021.pdf
 Diversicare, “Diversicare to be Acquired by DAC Acquisition LLC for $10.10 Per Share in Cash; Delivers Significant Cash Premium of Approximately 256% to Diversicare Shareholders” (Aug. 27, 2021), https://www.businesswire.com/news/home/20210827005039/en/Diversicare-to-be-Acquired-by-DAC-Acquisition-LLC-for-10.10-Per-Share-in-Cash
 “Diversicare to be Acquired by DAC Acquisition LLC for $10.10 Per Share in Cash” (Press Release, Aug. 27, 2021), https://www.bloomberg.com/press-releases/2021-08-27/diversicare-to-be-acquired-by-dac-acquisition-llc-for-10-10-per-share-in-cash
 Danielle Brown, “Diversicare acquisition could be an example of what’s to come,” McKnight’s Long-Term Care News (Aug. 30, 2021), https://www.mcknights.com/news/diversicare-acquisition-could-be-an-example-of-whats-to-come/
 Jo Ciavaglia, “New owners of Twining Village have ties to state’s worst COVID-19 nursing home outbreak,” Bucks County Courier Times (Aug. 20, 2020), https://www.buckscountycouriertimes.com/story/news/2020/08/21/twining-village-owners-nursing-homes-covid-19/5617974002/
 Eleanor Laise, “As the Pandemic Struck, a Private-Equity Firm Went on a Nursing-Home Buying Spree,” Barron’s (Aug. 6, 2020), https://www.barrons.com/articles/as-the-pandemic-struck-a-private-equity-firm-went-on-a-nursing-home-buying-spree-51596723053 (subscription needed)
 Rebecca Tan and Rachel Chason, “An investment firm snapped up nursing homes during the pandemic. Employees say care suffered,” The Washington Post (Dec. 21, 2020), https://www.washingtonpost.com/local/portopiccolo-nursing-homes-maryland/2020/12/21/a1ffb2a6-292b-11eb-9b14-ad872157ebc9_story.html
 See Center statement submitted to the National Academy of Sciences (Jan. 13, 2021), https://medicareadvocacy.org/wp-content/uploads/2021/01/nursing-homes-NAS-nursing-home-committee-CMA-comments-01.13.2021.pdf