Summary: Private equity sees large financial returns in the nursing home business, and is willing to maximize that profit by cutting services at the expense of resident well-being. The result is a leaner and riskier existence, with higher death rates. Private equity is degrading care for our aged and infirm.
When Private Equity Takes Over a Nursing Home, The Daily Newsletter of The New Yorker, August 25, 2022, by Jessie Li
After an investment firm bought St. Joseph’s Home for the Aged, in Richmond, Virginia, the company reduced staff, removed amenities, and set the stage for a deadly outbreak of COVID-19.
St. Joseph’s Home for the Aged was once a beloved nursing home with a family-oriented ambiance, where nuns lived with residents and the waiting list for a room was three years long. There were manicured gardens, a lively aviary and an aquarium, and warm common areas with “a china cabinet here, an upright piano there,” as Yasmin Rafiei writes. Then, in June last year, the home was sold to a private-equity firm called the Portopiccolo Group. The situation is not uncommon: since the turn of the millennium, there’s been a trend toward private-equity investment in nursing homes. Researchers at the University of Pennsylvania found that, “when private-equity firms acquired nursing homes, deaths among residents increased by an average of ten per cent,” as Rafiei writes. At St. Joseph’s, which was renamed Karolwood Gardens, residents began eating meals alone in their rooms, nursing staff plummeted, and the home experienced a string of COVID-19 infections and deaths. Rafiei delves into the question of why deaths skyrocket in private-equity-owned homes, and tells a deeply reported story of St. Joseph’s devastating transformation.
Financial and Quality Metrics of A Large, Publicly Traded U.S. Nursing Home Chain in the Age of Covid-19, International Journal of Health Services, February 4, 2022, by David E. Kingsley and Charlene Harrington
This descriptive case study examined the structure, operations, strategies, care outcomes, and owners of the Ensign Group Inc. the second largest U.S. for-profit chain, between 2007 and 2021. Ensign, as a holding company, has a complex organizational structure that uses more than 430 corporate entities to manage its 228 nursing homes and senior living facilities. Ensign’s small board, executives, and institutional investors protected and enhanced shareholders interests rather than ensuring that its nursing homes met professional standards and regulatory requirements.
The financial power that institutional investors bring to corporate governance reinforces the agency theory of management and a philosophy that shareholder interests are the sole mission of corporations, while their nursing homes provide mediocre care at best and deadly care at worst. By protecting and enhancing shareholder interests as the summum bonum of management, excess capital is accumulating and driving governance to benefit investors rather than ensuring that NHs meet professional standards and regulatory requirements.
Comment:
By Don McCanne, M.D.
What are the two words that communicate this despicable transformation that is taking place throughout our health care system? Private equity!
What could exemplify this more than a beloved nursing home where patients are cared for as if they are family members being taken over by an entity that changes its mission to enhancing its profits by reducing as much as possible the services rendered to its patients, regardless of the deterioration in the quality of care that the patients receive? The full New Yorker article by Yasmin Rafiei provides detail on Portopiccolo Group’s takeover of St. Joseph’s Home for the Aged and related research.
The Kingsley and Harrington study provides an academic description of corporate strategies in the nursing home industry, strategies that clearly favor investors over patients.
Private equity. Whatever happened to patient service? Everywhere you turn now, it’s private equity. And it’s not as if it’s filling some unmet need. Much of our health care dollars are now being directed to shareholders, including millionaires and billionaires, when tens of millions of people remain without adequate care because of being uninsured or underinsured.
We really need to dump private equity in health care and replace those two words with the two words that we know will work for all of us: Single payer!
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