Sen. Debbie Stabenow of Michigan looks on as Rep. Bill Pascrell of New Jersey, with Ash Wednesday ashes on his forehead, speaks during a 2017 press conference at the Capitol.
Win McNamee/Getty ImagesPrivate-equity owners of nursing homes will be in the spotlight Thursday on Capitol Hill amid mounting scrutiny of the firms’ involvement in the long-term-care industry.
Nursing homes will be a primary focus of a hearing before the House Ways and Means Committee’s oversight subcommittee into private equity’s role in the healthcare system, according to a committee spokesman. Lawmakers plan to examine whether private-equity practices contributed to the pandemic’s disproportionate toll on nursing-home residents, the spokesman said, as well as broader healthcare industry issues such as how the firms’ profit-seeking goals may conflict with patient care.
The hearing will also tackle opaque ownership structures that can stymie effective oversight, according to the prepared remarks of Rep. Bill Pascrell, the New Jersey Democrat who chairs the subcommittee. “Understanding the web of transactions is like Russian nesting dolls,” Pascrell’s statement, reviewed by MarketWatch, reads. “The lack of transparency in private-equity ownership makes proper oversight by regulators nearly impossible.”
Recent studies have linked private-equity ownership of nursing homes with higher patient mortality rates, taxpayer spending per patient and patient-to-nurse ratios, as well as weaker performance on inspections. Low facility staffing levels and other cost-cutting measures have come under increased scrutiny during the pandemic. More than 130,000 nursing-home residents and staff members have died of COVID-19, according to the Centers for Medicare and Medicaid Services.
A woman socially distances as she visits her husband at a long-term-care facility in Washington state last summer. It was the second time they had seen each other in person since the advent of the coronavirus pandemic.
Karen Ducey/Getty ImagesSen. Elizabeth Warren is also planning to probe nursing-home ownership, the Massachusetts Democrat said last week. “I’ll be opening an investigation into for-profit nursing homes, including those run by private-equity firms,” Warren said at a Senate Finance Committee hearing on March 17. “And the next time there’s a pandemic, seniors shouldn’t be stuck in subpar institutions run by greedy CEOs and vulture firms in order to make a quick buck.”
“The private-equity industry is having an overwhelmingly positive impact on health care across America,” Drew Maloney, CEO of the private-equity trade group American Investment Council, said in a statement. The congressional committee’s members, he said, “represent constituents who have benefited from private-equity investments that lower costs, improve access, fund cures, and deliver more effective treatments.”
According to the long-term-care industry, questions about nursing-home ownership are misplaced. “The COVID-19 pandemic affected 95% of nursing homes, regardless [of whether] they were nonprofit, for-profit or owned by private-equity firms,” Mark Parkinson, CEO of American Health Care Association/National Center for Assisted Living, said in a statement. The pandemic has worsened the industry’s financial challenges, he said, and “for a small number of providers, private-equity firms have been the only viable solution to prevent them from permanently closing their doors.”
See: As the pandemic struck, a private-equity firm went on a nursing-home buying spree
Early this month, nursing-home giant Genesis HealthCare announced a restructuring that involves a private-equity-backed capital infusion and voluntarily delisting its stock GEN from the New York Stock Exchange. The restructuring will significantly improve the company’s financial and operational stability, Robert Fish, then the CEO of Genesis, said in a statement announcing the plan.
One witness scheduled to appear at Thursday’s hearing is Sabrina Howell, an assistant professor of finance at New York University’s Stern School of Business and co-author of a recent study finding that private-equity ownership of nursing homes increased the short-term mortality of Medicare patients by 10% over a 12-year sample period and boosted taxpayer spending per patient episode by 11%. Factors behind the increased mortality may include greater use of antipsychotic drugs and lower levels of nursing staff in private-equity-owned facilities, says Atul Gupta, an assistant professor of healthcare management at the University of Pennsylvania’s Wharton School and co-author of the study.
Ernest Tosh, a Dallas attorney who handles nursing-home abuse and neglect cases and another witness at Thursday’s hearing, says he plans to highlight what he sees as a lack of transparency in for-profit nursing-home chains’ use of taxpayer funds. Nursing homes often purchase services from entities owned by the facilities’ parent company, and “profits are being siphoned out through related parties,” Tosh says. “We really have no idea what the financial position of these facilities is. They can be made to look bankrupt but in fact may be making millions and millions of dollars each.” One solution, he says, is to require nursing-home operators to file consolidated financial statements for entire chains, not just individual facilities.
“Skilled-nursing operators don’t make a lot of money, whether they do all the services, some of the services or none of the services,” says Ron Silva, CEO of private-equity firm Fillmore Capital Partners and chairman of the board of nursing-home chain Golden Living Centers. The government caps reimbursement rates for services, he says, and the key question is not who owns the service provider but “whether the service is being provided well.”
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