NCPA - National Center for Policy Analysis


September 25, 2007

For years, large investors have shunned nursing home companies as the industry was battered by bankruptcies, expensive lawsuits and regulatory investigations.  But in recent years, large private investment groups have begun to wade back in, says the New York Times.


  • Six of the nation's 10 largest nursing home chains, containing over 141,000 beds, or 9 percent of the nation's total, are owned by investment groups.
  • Private investment groups own at least another 60,000 beds at smaller chains and are expected to acquire many more companies as firms come under shareholder pressure to sell.
  • The typical large chain owned by an investment company in 2005 earned $1,700 a resident, and on average, were 41 percent more profitable than the average facility.

But cutting costs to ensure profit has become an issue at homes owned by large investment groups.  According to a New York Times analysis of records collected by the Centers for Medicare and Medicaid Services:

  • At 60 percent of homes bought by large private equity groups from 2000 to 2006, managers have cut the number of clinical registered nurses, sometimes far below levels required by law.
  • At 19 percent of those homes, staffing has remained relatively constant, though often below national averages.
  • At 21 percent, staffing rose significantly, though even those homes were typically below national averages.
  • During that period, staffing at many of the nation's other homes has fallen much less or grown.

To combat the diminishing quality of care, one popular idea is requiring the company that owns a home's most valuable assets, its land and building, to manage it.  That would put owners at risk if care declines.  But owners say that tying a home's property to its operation would make it impossible to operate in leased facilities, and exacerbate a growing nationwide nursing home shortage.

Source: Charles Duhigg, "At Many Homes, More Profit and Less Nursing," New York Times, September 23, 2007.

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