Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes
65 Pages Posted: 9 Mar 2020 Last revised: 16 Nov 2020
There are 3 versions of this paper
Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes
Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes
Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes
Date Written: November 12, 2020
Abstract
The past two decades have seen a dramatic increase in private equity investment in healthcare, a sector in which intensive government subsidy and market frictions could lead high-powered for-profit incentives to be misaligned with the social goals of quality care at a reasonable cost. This paper studies the effects of private equity ownership on patient welfare and spending at nursing homes. With administrative patient-level data, we use a within-facility instrumental variables strategy to address both non-random targeting of facilities and non-random matching of patients into nursing homes. The estimates show that private equity ownership increases short-term mortality by 10%, which implies about 21,000 lives lost due to private equity ownership over our sample period. Private equity ownership also increases spending by 19%, the vast majority of which is billed to taxpayers. We observe several channels that help explain the increase in mortality: declines in patient-level health measures, such as worsening mobility and elevated use of anti-psychotic medications; declines in nurse availability per patient; and declines in compliance with federal and state standards of care.
Suggested Citation: Suggested Citation