Go to any investment conference, and you are likely to hear about the many benefits private equity brings to long-term care.
Proponents like to highlight the fostering of innovation, financial stability and better care quality.
Private equity investors do inject substantial capital into nursing homes, which can enable upgrades to facilities, technology and equipment.
In addition, they often bring sophisticated management practices and operational efficiencies to the party. This results in more streamlined care delivery.
Moreover, private equity investment often breeds strategic partnerships and mergers, creating networks of nursing facilities that can share resources and best practices.
If only that were the whole story.
For a counterpoint, please allow me to direct your attention to a recent editorial appearing in the Pittsburgh Post-Gazette. Its headline probably tells you all you need to know about how the paper’s editorial board really feels: “Private equity and nursing homes are a match made in hell.”
Ouch!
Their editorial alleges that continuing mismanagement by private equity is behind the bankruptcy filings of nearly two dozen facilities in less than a month.
The authors take special aim at sales-leaseback arrangements that the new owners regularly put in place. These essentially sell the land out from facilities, requiring nursing homes to pay management fees for land they formally owned.
The piece goes on to endorse a rule being pushed by the Biden administration that would take effect later this year. It would mandate that long-term care operators receiving funds via Medicaid or Medicare – which is to say nearly all of them – would need to disclose their ownership.
At this point, it’s anyone’s guess whether the rule will or will not take effect.
But either way, private equity has a bigger problem on its hands.
With each passing day, more fingers of blame are being pointed at private equity investors. Whether such criticism is fair or not is not up to me to determine. But I am willing to state this: To imagine this rising torrent of criticism will subside anytime soon is wishful thinking at best.
John O’Connor is editorial director for McKnight’s.
Opinions expressed in McKnight’s Long-Term Care News columns are not necessarily those of McKnight’s.
