Report: The Deadly Combination Of Private Equity And Nursing Homes During A Pandemic

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The Deadly Combination Of Private Equity And Nursing Homes During A Pandemic

New Jersey Case Study of Coronavirus at Private Equity Nursing Homes

Executive summary

Coronavirus has ripped through U.S. nursing homes, leaving a path of infection and death that has killed more than 50,000 residents. The pandemic has proved especially deadly in facilities owned or backed by private equity firms.

Americans for Financial Reform Education Fund found that private equity owned and backed nursing home chains have higher resident infection and death rates and a larger share of Coronavirus cases and deaths compared to their share of residents relative to for-profit, non-profit, and public facilities in New Jersey.

Nationwide, about 40 percent of all Coronavirus deaths have been at nursing homes. By early July, nearly 30,300 New Jersey nursing home residents and staff have been infected and over 5,500 have died of Coronavirus.

Coronavirus has exposed the long-standing failures of the nursing home industry that cares for the most medically vulnerable people — our parents, grandparents, spouses and siblings. Nursing homes have been chronically understaffed — both as a cost-cutting strategy and because of pitifully low wages and inadequate benefits — and staffing levels are the most critical factor in providing quality care to residents. The industry can often fail to provide basic hygiene and safety to residents; it was entirely unprepared to prevent the spread of a highly infectious and deadly disease.

Coronavirus has hit communities of color especially hard because long-standing racial economic and racial health disparities mean people of color are more likely to become exposed and infected and more likely to have medical conditions that put them at higher risk of death. In New Jersey, the vast majority of workers in nursing homes are women of color, low-paid, essential workers who have been unable to afford to get out of the path of the virus.

Private equity firms have bought up or financed the acquisition of thousands of nursing homes across the country. These Wall Street investment firms slash expenditures that could have provided care and extract value from nursing home chains through fees, dividends, and real estate transfers that imperil the financial stability of the facilities and their capacity to care for the residents.

More than two-thirds of nursing homes are for-profit operations and a sizeable portion are owned or backed by private equity firms with intense profit maximizing incentives that can compromise the care that residents receive. About 70 percent of all U.S. nursing homes were run by for-profit owners, compared to only 18 percent of hospitals. In New Jersey, for-profit firms control three quarters of the nursing homes (74.9 percent) and nearly one-quarter of the for-profit nursing homes are owned, operated or financially backed (including loans or investments) by private equity firms.

Americans for Financial Reform Education Fund’s detailed analysis of nursing home ownership in New Jersey found that private equity firms owned, operated, or backed 9 nursing home chains with 61 facilities (16.9 percent of facilities with 16.4 percent of certified beds and 15.2 percent of residents) in 2020.

Many peer-reviewed academic studies, government reports, and media exposés have demonstrated that private equity owned nursing homes have lower staffing levels, lower quality ratings, more violations, and worse health outcomes for residents. The structure of private equity nursing home deals insulates the firms from responsibility for repaying the often-heavy debt loads, financial mismanagement, or even legal liability for negligence or failing to provide adequate care.

The private equity profiteering, cost-cutting, and lower quality of care appears to have put New Jersey nursing home residents and staff at higher risk of contracting and succumbing to Coronavirus than those at public, non-profit, or other for-profit facilities. This case study utilizes New Jersey’s facility-level Coronavirus case and death data to examine how private equity ownership impacted nursing homes in a state hard-hit by Coronavirus. The analysis also confirms that private equity nursing homes had important shortcomings in key nursing home quality metrics that could have contributed to greater Coronavirus risks for residents and staff. Key findings include:

Residents at private equity nursing homes have higher Coronavirus infection and fatality rates: Nearly three-fifths (58.8 percent) of private equity nursing home residents contracted Coronavirus (based on resident cases and average number of residents). This infection rate was 24.5 percent higher than the statewide nursing home average and 57.0 percent higher than at public facilities. The Coronavirus fatality rate (the number of resident deaths divided by the number of cases) was 10.2 percent higher at private equity facilities than the statewide average and higher than at non-profit and for-profit facilities.

Private equity fatality rates were substantially higher in counties where people of color made up the majority of the population than in overwhelmingly white counties: Staff Coronavirus fatality rates at private equity facilities were seven times higher at facilities in counties where people of color were the majority of the population than in counties where whites made up more than 80 percent of the population (2.1 percent and 0.3 percent, respectively). This is a much larger disparity than at all other, non-private equity facilities where the staff fatality rate was 41 percent higher in counties of color. The resident fatality rate was 9 percent higher at private equity facilities in counties of color than in 80 percent white counties (28.3 percent and 25.9 percent respectively), a resident racial fatality rate gap that is more than triple that of non-private equity facilities.

Private equity nursing homes have a disproportionate number of resident Coronavirus cases and fatalities: Private equity nursing homes accounted for about 15 percent of nursing home residents but about 20 percent of resident Coronavirus cases and deaths. The private equity nursing home share of cases and deaths is significantly higher than the share of residents. The share of private equity resident cases is 25 percent higher than its share of residents and the share of deaths is 33 percent higher.

Private equity nursing homes have a disproportionate share of staff Coronavirus cases and deaths: Although residents at private equity nursing homes make up 15 percent of New Jersey’s nursing home residents, staff working at private equity nursing homes made up about 20 percent of the staff cases and deaths. (Average residents are used as a proxy for nursing home size because there is no facility-level staffing data.)

Private equity nursing homes had lower staffing ratios and more deficiencies: Private equity nursing homes delivered far fewer hours of nursing care per patient per day responding to the medical needs of residents. Private equity nursing homes provided each resident with only 3.59 risk-adjusted total nursing hours per day, less than all other ownership types and about 20 percent less than was provided at non-profit and public facilities. The total number of deficiency violations over the past three years per 100 residents was more than 60 percent higher at private equity nursing homes than public facilities and about 50 percent higher than at non-profit facilities.

As a nation, we have underinvested in the care of our most medically vulnerable family members and neighbors. Coronavirus has exposed the woefully inadequate federal and state oversight of nursing homes that has allowed many for-profit operators — especially private equity firms — to siphon money that should have gone towards caring for residents to profits for Wall Street firms and investors. These private equity firms exploit legal, regulatory, and tax loopholes to extract value from nursing homes while dodging responsibility to the residents, workers, or the financial viability of the facilities. During the Coronavirus pandemic, this private equity profiteering has had disastrous consequences for the medically vulnerable residents and low-paid workers, who are predominantly women of color.

Full report available here.