“There is concern that REIT ownership of healthcare facilities may divert capital away from investments in clinical care delivery toward generating high returns for investors instead.”
–researcher Joseph Dov Bruch, Ph.D.
REITs owned more than $3.5 trillion in U.S. assets last year, including the health sector. Harvard Medical School’s Department of Health Care Policy found real estate investment trusts (REITs) owned an estimated 12% of all skilled nursing facilities in America. See McKnight’s article. That includes almost 2,000 facilities.
Financial pressures drive REITs to act for profits only. REIT acquisitions affect staffing levels; financial outcomes such as margins, debt and patient charges; and quality metrics. Researchers illustrated how financial decisions on REIT-owned SNFs result in access issues. They used the 2018 shuttering of HCR Manor Care as an example. The company went belly up after selling its massive real estate assets to a REIT. Carlyle Group’s sale of the HCR ManorCare portfolio to a joint venture of nonprofit health system ProMedica and Welltower.
Their self-interest and devotion to investors lead to neglect and negative patient health outcomes. Is that consistent with good health care policy?
“The challenges of monitoring spending are exacerbated by the increasing complexity of nursing home ownership practices, which makes it all but impossible to understand where and how facilities spend their resources, including whether they are paying marked-up services such as rent, management, nursing, or therapy by contracting with related-party organizations.”
“Research has shown nursing home buyouts are linked with higher patient-to-nurse ratios, lower quality care, declines in patient outcomes, weaker inspection performances, and increased mortality rates.”
–U.S. Rep. Bill Pascrell of New Jersey
The private equity model puts profits before people. The Government Accountability Office will release a report in the fall detailing its ongoing investigation into nursing home ownership. A prior 2007 GAO report found that the Centers for Medicare & Medicaid Services (CMS) system for ownership and chain data “provided a confusing picture of the complex ownership structures and chain affiliations of the six [private investment]-owned nursing home chains GAO reviewed.”
Lenders in the skilled nursing space utilized HUD funding throughout 2021. Interest rates are going up which means there will be less money for clinical care and staffing. One especially controversial practice: Contracting a wide range of services, such as pharmacy and supplies, to related party businesses.