Has private equity’s role in the nursing home industry led to lower quality of care? In an article for Thomson Reuters Westlaw Today, “Is Private Equity Really the Boogeyman in Nursing Home Quality of Care?” attorneys Sarah Hall and Eleanor Chung consider both sides of the issue and look at some possible solutions.

Following is an excerpt (see below to download the full version in PDF format):

On March 1, 2022, President Joe Biden delivered his first State of the Union Address, using the eminent platform to draw attention to concerns that private equity’s role in the nursing home industry has led to lower quality of care. The President called out “Wall Street firms” that are taking over nursing homes, and stated that “quality in those homes has gone down and costs have gone up.” The President then promised: “[t]hat ends on my watch. Medicare is going to set higher standards for nursing homes and make sure your loved ones get the care they deserve and expect.”

Calling private equity (PE) “predatory owners” who put profits over patients, a White House fact sheet released before the State of the Union cited various studies that concluded that PE ownership leads to worse outcomes for residents.

In the fact sheet, the Administration unveiled a slate of reforms aimed at increasing quality of care in nursing homes. The proposals were developed by, and will be implemented by HHS. Part of that package is a planned HHS examination of “the role of private equity, real estate investment trusts (REITs), and other investment ownership in the nursing home sector.”

Improving nursing home quality is a durable political issue

The Biden plan is a continuation of the federal government’s admirable focus in recent years on improving nursing home quality. The recent reforms follow the Trump Administration’s March 2020 rollout of the U.S. Department of Justice — HHS National Nursing Home Initiative, which was set up to pursue civil and criminal remedies against the “worst nursing homes around the country” that provide “grossly substandard care.” Although health care reform in general has proven historically to be a politically divisive issue in American politics, improving substandard nursing homes, and targeting perceived bad actors in that space, has shown to be a durable, non-partisan priority.

Post-state of the union developments

On April 20, 2022, signaling that the Administration is intent on fulfilling the President’s promises, CMS released data on 3,236 skilled nursing facilities that were sold after January 1, 2016, displaying the buyer, seller, and whether they were organizations or individuals. Accompanying the data was an analysis by HHS restating the Administration’s position that academic researchers have found “private equity acquisition of [skilled nursing facilities] is associated with increases in short-term mortality and shifts in resources from patient care toward non-patient care items.” In connection with the data release, CMS Administrator Chiquita Brooks-LaSure stated that CMS is interested in tracking nursing home turnover “at the ownership level.”

As the Administration continues down the path staked out in the State of the Union, the question remains — are the PE investors targeted by the Administration really the boogeyman in nursing home quality of care, or a just convenient political punching bag? Let’s consider both sides of the issue and look at some possible solutions.

Read the full article in PDF format here: PDF: Is Private Equity Really the Boogeyman in Nursing Home Quality of Care?