Nov. 19, 2021 — When you have to help a parent choose a nursing home or you need nursing home care yourself, you can consult a healthcare professional, talk to friends, or look at the Nursing Home Compare website of the Centers for Medicare and Medicaid Services (CMS). The CMS website provides star ratings of each nursing home. These ratings include overall quality, staffing, and health inspections. But you may not be aware of the financial incentives that a nursing home might need to provide high-quality care depending on who owns it.
A study published Nov. 19 in JAMA Health Forum throws light on at least one aspect of the ownership question: What happens when a private equity (PE) firm acquires a nursing home? The study found that a PE-owned nursing facility is more likely to be of lower quality than other for-profit facilities.
The researchers compared CMS data on 302 nursing homes owned by 79 PE firms to data on 9,562 for-profit facilities not owned by such companies from 2013 to 2017. Among fee-for-service Medicare patients in long-term care, private equity acquisitions of nursing homes were associated with an 11.1% increase in ambulatory-care-sensitive (ACS) visits to the emergency department (ED) and an 8.7% increase in ACS hospitalizations per quarter, compared to the changes that occurred in the non-PE-owned facilities, they found.
What’s more, Medicare costs per beneficiary increased 3.9% more — or about $1,000 a year — in the PE-owned nursing homes than they did in the other cohort during the study period.
When the acquired nursing homes were compared with the ones that were owned by PE firms before their acquisition, there were no statistically significant changes in. The researchers discovered that unadjusted results were not significant. This means that the outcomes of both cohorts were roughly comparable.
The researchers adjusted the study numbers to account for different characteristics of the facilities as well as their residents. For example, the PE-acquired nursing homes were likely to have a higher percentage of patients covered by Medicare and a lower percentage covered by Medicaid than their non-PE counterparts.
The mean percentages of Black residents, female residents and residents aged 85 or older were 12.4%, 65.4% and 36.2%, respectively, for the PE-owned nursing homes and 15.7%, 67.8% and 39%, respectively, for the non-PE-owned facilities.
Less than optimal outcomes
On average, the residents of non-PE-owned nursing homes had better outcomes , than did the patients in the PE-owned facilities. However, this does not mean that every for-profit nursing home has great outcomes.
For all the nursing homes in the study, the mean quarterly rate of ACS emergency department visits was 14.1% and the mean quarterly rate of ACS hospitalizations was 17.3%. These events should be prevented, but not entirely, with the right care,” researchers stated.
To date, PE firms have invested about $750 billion in U.S. health care, with nursing homes being a major target of these companies, which currently own 5% of skilled nursing facilities, per the study. PE companies seek annual returns of 20% or more, the paper says, and thus feel pressure to generate high short-term profits. This could result in reduced staffing, services and supplies, as well as equipment, at their facilities.
Some PE-owned nursing homes may be responsible for their debts incurred in leveraged buyouts. The researchers also noted that there is concern that PE-owned properties may be disproportionately focused on short-term, post-acute care which is often reimbursed at a higher than long-term care. The study shows that some health policymakers are concerned about the long term impact of private equity nursing home acquisitions.
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