“Systemic Neglect”

Transparency

Market Watch had an interesting discussion with Professor Nina Kohn at the Syracuse University College of Law.  A report by the Roosevelt Institute argue that private-equity firms siphon funds to the detriment of patient care.  The researchers found that private-equity ownership of nursing homes increased the short-term mortality of Medicare patients by 10%. At least 20,000 lives lost over the 12-year sample period — while increasing taxpayer spending per patient episode by 11%.

However, private-equity investment firms that control nursing-home owners, operators and related parties remain in the shadows. Nursing-home ownership structures are complex with sham shell companies hiding the true decision-makers. CMS refuses to enforce parts of the Affordable Care Act requiring nursing homes to disclose certain ownership details.

The solution is establishing safe staffing levels per resident day and requiring that facilities spend a threshold percentage of federal funds on staffing, training, and resident care.

With those changes, “you’re not simply limiting your focus to private equity,” Kohn says. “You’re really trying to get at the underlying problem, which is that nursing-home owners can make a profit — substantial profit — by deliberately deciding to engage in systemic neglect.”

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About 70% of nursing homes have for-profit ownership. Private equity carve up the business into separate operating and property companies to hide the parent companies from regulatory oversight and accountability. They divert funds when their facilities buy services from related parties away from direct patient care and other essentials.

Private-equity investment in U.S. healthcare exceeded more than $100 billion in 2019, up from less than $5 billion in 2000.  Medicare and Medicaid spent nearly $90 billion on nursing-facility care in 2019, an amount that’s projected to grow to more than $150 billion by 2028, according to CMS.

CMS should require reporting of all property, management and related companies. Nursing homes should file annual financial reports including data from all entities under common ownership or control. This is required in Home Office Cost Reports but not enforced.