| Purpose: Private equity has acquired multiple large nursing home chains within the last few years; by 2007, it owned six of the 10 largest chains. Critics have alleged that private equity nursing homes compromise on quality of care in pursuit of profits and have called for greater congressional and regulatory oversight. Quality of care in nursing homes is an area of important public concern because it concerns the well-being of some of the nation's most vulnerable citizens; in addition, as the principal payer of nursing home care, government has a strong interest in nursing home performance. However, the empirical evidence on the purported impact of private equity on nursing home performance remains limited and often contradictory; ergo this study.;Methodology: Secondary data from the Medicare Cost Reports, Minimum Data Set (MDS), the On-line Survey Certification of Automated Records (OSCAR) file, Area Resource File (ARF), and Brown University's Long-term Care Focus dataset are combined to construct a longitudinal dataset for the study period 2000-2007. The initial population comprised of over 6000 observations with an average of approximately 760 nursing homes for each year of the study period. Of those 760 nursing homes, approximately 200 are not-for-profit, 300 non-chain based while 40 are hospital based. All these observations are eliminated resulting in a final sample consisting of 2822 observations. Dependent quality variables consist of structure (RN, LPN, CNA staffing ratios, skill mix, and RNs and LPNs contract), process (restraints, catheters, pressure ulcer prevention, and restorative ambulation) and outcomes (ADL worsening, pressure sores, bowel continence decline, deficiencies, and actual harm citation). Dependent financial variables consist of operating and non-operating revenues, operating and non-operating costs, operating and total margins, payer mix (census Medicare, census Medicaid, census other), and acuity index. Independent variables primarily reflect private equity ownership. The study was analyzed using ordinary least squares (OLS), gamma distribution with log link, logit with binomial family link, negative binomial regression, and logistic regression.;Results: Private equity nursing homes have significantly worse RN staffing while they report higher CNA and LPN staffing than the control group. Skill mix is poorer in private equity nursing homes. There is no difference in process or outcome variables between private equity nursing homes and the control group except in case of deficiencies where they perform significantly worse and pressure sore prevention, where they report slightly better results. Private equity nursing homes have higher operating margin as well as the total margin; they also have higher operating revenues and costs.;Conclusions: Overall it appears that there isn't necessarily a tradeoff between quality and financial performance; private equity homes are able to deliver significantly better financial performance than the control group while quality is largely similar. However, causes for concern remains particularly due significant lowering of RN staffing in private equity nursing homes and their significantly higher deficiencies. Greater transparency should be ensured in private equity nursing home deals, and accountability should be fixed via an expanded and strengthened regulatory framework. |
