Private Equity

The Lund Report had an article discussing the negative effect of private equity ownership of nursing homes. It doesn’t take a detective to find a pattern of neglect across several nursing homes. Another common denominator for abuse, though, is facility ownership by private equity firms.

To combat this rising concern within the nursing home industry, Connecticut recently enacted what may be the strongest law in the country designed to increase transparency and accountability for private equity companies that own nursing homes.

Connecticut’s law bans private equity firms from making day to day decisions in nursing homes that they own.

Last year, California, Indiana, Massachusetts, Maine, New Mexico, Oregon and Washington passed legislation putting more guardrails around private equity’s involvement in healthcare.

Currently, Virginia is considering a bill that curbs sale-leaseback arrangements. This is where a private equity-backed firm buys a healthcare company, such as a nursing home chain, and then sells the property to a separate investment trust. This sale creates quick returns for investors, but ends up saddling nursing homes with monthly rent payments, leaving less money available for patient care.

“The big question about private equity is not whether profit belongs in the nursing home; it’s whether public dollars meant for care are being converted into financial returns (for investors) without enough accountability,” said Gregory Orewa, an assistant professor at the University of Texas at San Antonio who researches private equity ownership in U.S. healthcare.

Because the share of Americans over 65 has been steadily rising, nursing homes are an attractive investment for private-equity firms. Profits can arise from corporate consolidations, management and staffing changes, and the real estate deals.

In any sector private equity firms invest in, the goal is to maximize returns in a few years. This creates a conflict of interest with the goal of providing long-term care by paying enough to hire sufficient staff or upgrading facilities.

Private equity ownership has been found to have many negative effects. One large 2023 study found it increases a nursing home’s death rate by 11%. While private equity-owned facilities maintained care quality for sicker patients by adding registered nurses, those gains were offset by staffing cuts to the frontline nursing assistants who handle much of the hands-on care. Other studies have linked private equity involvement to increased emergency room visits and rising Medicare costs.

In addition, private equity firms use often use sneaky maneuvers to prevent their companies from appearing in publicly available data.

For example: The private equity-backed Portopiccolo Group bought more than 100 nursing homes across 9 states and yet didn’t appear in federal data as an owner of those facilities.

This information is important to consumers looking for a safe place for their loved ones, and in Portopiccolo’s case, it may have allowed people to avoid their facilities. A 2023 study by found Portopiccolo had an average fine per facility of more than $80,000, making it a parent company with one of the largest average penalties in the U.S.

All in all, private equity ownership is of great concern for states that must reimburse them with taxpayer dollars, as well as the residents who suffer within them.