Congress Investigates Equity Firms' Control of Nursing Homes

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A number of witnesses at hearings of the House Ways and Means Subcommittee on Health and the Senate Special Committee on Aging on Thursday testified that the growing trend of private equity firms purchasing nursing home chains is lowering quality and making it more difficult for state and federal regulators to hold the firms accountable for substandard care, CQ HealthBeat reports.

Arvid Muller, assistant director of research for the Service Employees International Union, testified at the House hearing that the "private equity business model seeks to make extreme profit at the expense of nursing home residents, their families, caregivers and taxpayers," adding, "Private equity firms restructure nursing homes to maximize profit but in the end create a maze of control and ownership that makes it difficult to hold nursing homes and private equity companies accountable for providing quality care."

Charlene Harrington, a professor at the University of California-San Francisco School of Nursing, testified at the House hearing that private equity firms "do not have the expertise or the experience" to properly manage nursing homes and "appear likely to cut staffing to increase their profits," which can have serious repercussions for nursing home residents.

However, subcommittee ranking member Dave Camp (R-Mich.) said that a recent report by the Florida Agency for Health Care Administration found "no evidence to support that the quality of nursing home care suffers when a facility is owned by a private equity firm or an investment entity" and concluded that other factors, such as percentage of Medicaid patients and age and location of the home, were more likely to impact care quality (Carey, CQ HealthBeat, 11/15). The study, which was limited to Florida facilities, noted that the agency was unable to determine which of the state's nursing homes "were connected with any known private equity firms." That fact raises "questions over how the agency reached its conclusions," according to the New York Times (Duhigg, New York Times, 11/16).

Subcommittee Chair Pete Stark (D-Calif.) said that federal oversight of nursing homes is necessary because Medicare and Medicaid pay for 60% of nursing home spending annually and at any given point in time, close to 80% of nursing home residents are supported with public funds (CQ HealthBeat, 11/15). Stark said, "This industry operates largely on the government's dime," adding, "Nursing home chains should be striving to improve care, not increasing profits by cutting corners at the expense of seniors and people with disabilities" (New York Times, 11/16).

Senate Testimony

David Zimmerman, director of the University of Wisconsin-Madison Center for Health Systems Research and Analysis, said in Senate testimony that Congress should require complete transparency of nursing home ownership and staffing, as well as greater analysis of nursing home companies and networks. With full transparency, "we know who is and should be accountable," Zimmerman said (CQ HealthBeat, 11/15).

Acting CMS Administrator Kerry Weems offered suggestions to improve oversight of nursing homes, including publicly releasing the special focus facility list, which indicates the worst nursing homes in the nation. The list is set to be released Dec. 1. Weems also said that the agency is developing a system for identifying any person or company that owns more than 5% in a nursing home.

However, the Times reports that "similar systems in some state[s] have been easily sidestepped by investment companies hoping to obscure ownership through complicated corporate structures" (New York Times, 11/16). The ownership database, which also will ensure that only eligible providers and suppliers are enrolled in Medicare, is expected to be 70% ready by the second quarter of 2008 and fully operational by 2009, Weems said. In addition, CMS will launch a program to help poor-quality nursing homes improve their care, he said (CQ HealthBeat, 11/15).

Steve Biondi of the American Health Care Association, which represents nursing homes, said that some information should remain confidential and noted that companies are committed to providing quality care. Biondi said, "Nursing home providers are transparent in the disclosure of quality data, but there are those who take the information and use it against us," adding, "We concur with all here today that there is far more to accomplish. But we must do so together."

According to the Times, both House and Senate lawmakers "indicated that they expect further hearings and bills" on the effect of private equity ownership of nursing homes. Sen. Ron Wyden (D-Ore.) said, "Something is out of whack in this country when it's a lot easier to find information about a washing machine than to find information about long-term care facilities," adding, "The issue with these chains is hidden ownership" (New York Times, 11/16).


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