The Private Equity Stakeholder Project documents the ownership of nursing facilities by private equity companies, tracing the ownership histories of some of the largest private equity firms, by name, and describing their quality of care and COVID-19 case and death rates. Eileen O’Grady (Private Equity Stakeholder Project), Pulling Back the Veil on Today’s Private Equity Ownership of Nursing Homes (Jul. 21, 2021).
The Report describes concerns about private equity’s investment in nursing homes:
Private equity investors’ outsized return expectations over short time horizons may lead to profit-seeking tactics that hurt patient care. High levels of debt left over from leveraged buyouts can leave nursing homes with less capital available for operations as more money is diverted to interest payments. Sale-leaseback transactions, where a company is made to sell its real estate to a third party and lease it back, can leave nursing homes with fewer assets and increased liabilities in the form of rent payments. Management fees and shareholder dividends can further bleed nursing home companies of money that could be invested into patient care. [Report, page 3.]
The complex business structures used by many nursing home companies can obfuscate ownership and make it difficult to track quality and compliance across nursing homes with the same owner. These structures also allow owners to reap excessive profits while limiting financial transparency, primarily through use of related party services.
Nursing home companies often contract with third party entities that have the same owner to provide services and goods, such as management services, staffing, supplies, and lease agreements. These structures legally allow nursing home owners to siphon money out of nursing facilities and hide profits. Nursing home owners can further boost profits by overpaying related parties. [Report, page 4.]
The Report concludes:
Decades-worth of stories and data have revealed the devastating impacts of private equity ownership of nursing homes. Investors’ outsized return expectations over short time horizons can lead to cost-cutting and risk-taking that endanger patients. The firms profiting off of the elderly are often secretive and escape liability for their activities.
In an industry that provides care to some of the most vulnerable communities and receives hundreds of billions of dollars of government money each year, it is critical that private equity cannot be allowed to continue to siphon money out of nursing homes at the expense of patients and health care workers.
The full text of Pulling Back the Veil on Today’s Private Equity Ownership of Nursing Homes is available at https://pestakeholder.org/wp-content/uploads/2021/07/PESP_Report_NursingHomes_July2021.pdf.
August 19, 2021 – T. Edelman