A new working paper published by National Bureau of Economic Research (NBER) and covered by Quartz found that the likelihood of dying in a nursing home within the first 90 days of being admitted—a measure that’s a proxy for the overall performance of the facility—was 10% higher when the nursing home was owned by private equity.
In the nursing home industry, margins aren’t very high, ranging from 1% to 2% per year. So, in order to hit target returns, cost cutting measures have become a norm among PE-owned companies.
…a reform on the protocols for reimbursement and tying them to better outcome seems overdue.
The result is that nurses spend 3% less time with patients in PE-backed companies vs. other forms of for-profit nursing homes.
The issue is mostly because of misalignment of incentives: a majority of nursing home patients are covered by Medicare and nursing homes are getting reimbursed for their services pretty much independent of quality of care.
Private equity already still has a perception issue among general public and news like this are definitely not helping. Proactive improvements such as adoption of new technologies like remote patient monitoring that can reduce costs but also improve outcomes can be key components of a viable solution.
On the Medicare side, a reform on the protocols for reimbursement and tying them to better outcome seems overdue.
