No Harm Found in Equity Ownership

Abstract

Quality of care does not decline when private equity firms buy up nursing home chains and individual nursing homes, according to an analysis of federal data by researchers at Harvard Medical School, Boston. David Stevenson, PhD, and David Grabowski, PhD, identified 1,554 U.S. nursing homes purchased by private equity firms from 2000 to 2007, all but 82 of which were part of whole-chain deals (Health Affairs 2008;27:1399–408). They defined private equity ownership as investments not tradable on public markets. For quality of care data, the team combed the Centers for Medicare & Medicaid Services' Online Survey, Certification, and Reporting (OSCAR) system and Minimum Data Set (MDS) Quality Indicator/Quality Measure (QI/QM) system. OSCAR offered broad measures of homes' staffing, resident characteristics, and inspection outcomes. The MDS QI/QM data provided quarterly measures of residents' health status. That status included numbers on facilities' catheter use, urinary tract infections, excessive weight loss, time in bed or a chair, deficits in activities of daily living, range of motion decline, physical restraints, and pressure sores. Although numbers of registered nurses declined, nurse aide staffing increased after the sales. The analysis also linked equity ownership to reduced numbers of Medicaid beneficiaries in facilities. Although the unadjusted data showed that facilities acquired by private equity interests performed worse on most measures than most for-profit homes, adjusting for trends starting before ownership changes of the facilities, Dr. Stevenson and Dr. Grabowski found improvements with private equity ownership in catheter use, urinary tract infections, weight loss, and pressure ulcers. “We found little evidence to suggest that nursing home quality worsens significantly following purchase by private equity companies,” they wrote. “Although our findings suggest troubling declines in RN staffing, this decline was part of a larger trend that predated the facilities' purchase by private equity companies,” wrote the researchers. Yet the researchers raised cautions about private equity ownership. Their reservations included: ▸ Private investors may have limited experience in providing nursing home care. ▸ The complex ownership and liability structures often set up can limit accountability for quality. ▸ The large debts incurred by firms, especially in purchases of nursing home chains, could at some point limit operating funds. ▸ Private equity companies are more concerned with short-term financial performance of nursing homes—in hopes of lucrative resale of these assets—than long-term operations. In an interview, Dr. Stevenson said that the study doesn't prove that private equity ownership of nursing homes is beneficial or even harmless. The phenomenon of private equity ownership is still too young to show its effects definitively, he said. Now, the economy's ongoing credit crunch is slowing down deals, with none having occurred since The Carlyle Group purchased the HCR ManorCare chain of homes a year ago, he added. Dr. Stevenson admitted that OSCAR data provide only a proxy for quality of care, and that many professionals object to its underlying survey process. On the other hand, he said that MDS QI/QO data “have been shown to be pretty reliable on functional status and quality.” He explained that he and Dr. Grabowski adjusted the data to reflect quality and case-mix trends already occurring at the nursing homes before purchase and so, if they remained on the same trajectory, these trends couldn't be attributable to ownership change. Dr. Stevenson said that neither he nor Dr. Grabowski had any conflict of interest regarding the study. Keith Haglund is publication editor of Caring for the Ages.