Research Highlights

Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes

Overview: In “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes,” NYU Stern Professor Sabrina Howell and co-authors Abhinav Gupta (NYU Stern PhD candidate), Atul Gupta (University of Pennsylvania) and Constantine Yannelis (University of Chicago) study the effects of private equity (PE) ownership on patient welfare at nursing homes.

Why study this now: PE investments in U.S. healthcare have increased more than 1900% over the past two decades: from less than $5 billion in 2000 to more than $100 billion in 2018. This raises the question of whether high-powered, for-profit incentives in the sector misalign with the social goal of affordable, quality care.

What the researchers found:
  • Going to a PE-owned facility increased short-term mortality by 10% during and for 90 days after the patient stay, while taxpayer spending over the same time period increased by 11%
  • Nurse availability per patient and compliance with Medicare standards of care declined
  • There are increased operating costs in PE-owned facilities (e.g. lease payments, monitoring fees, interest), which tend to drive profits for PE funds
What does this change: Regulatory actions might be beneficial in the nursing home industry. The research findings suggest that PE owners may breach implicit contracts with stakeholders to maximize profits, and while large PE deals didn’t stifle competition, they may have hurt consumers.

Final takeaways: Covid-19 has shown cracks in the existing regulation and financing of long-term care facilities; the findings from this study show just how urgent the situation is. “Our results raise concerns about the effectiveness of the elaborate state and federal oversight infrastructure in place to ensure nursing home quality,” said the researchers.