Private Equity and Nursing Homes: What Families Need to Know

In recent years, private equity (PE) firms have been buying more nursing homes and companies that own nursing homes. What seems at first like a simple shift in ownership can have significant consequences for residents, staff, and families trying to find safe, compassionate care. According to a Private Equity Stakeholder Project report, some nursing homes have been driven to bankruptcy, which has led to quality care issues and closures.

Why Private Equity Firms Are Buying Nursing Homes

Private equity investors are attracted to nursing homes because they can generate steady cash flow, largely backed by Medicare and Medicaid reimbursements. PE firms sometimes purchase nursing homes through leveraged buyouts, meaning the nursing homes carry the debt from the purchase. Once acquired, PE firms typically aim to cut costs, increase revenue, and sell the homes at a profit within a few years.

The Effects on Residents and Care Quality

Research and reporting have shown mixed outcomes, but many studies suggest troubling patterns when private equity enters the nursing home sector.

Staffing Cuts

To reduce expenses, PE-owned facilities are more inclined to reduce staff levels and hire less experienced workers. Since nursing home care is labor-intensive, fewer staff members can mean longer response times, reduced attention, and greater risks for residents.

Reduced Services and Supplies

Cost-cutting measures sometimes extend to medical supplies, food quality, or therapy services — directly affecting residents’ health and well-being.

Financial Engineering Over Care

Facilities owned by PE firms may increase debt burdens, shift property ownership to separate entities then lease it back to the nursing home, or use other strategies to boost short-term profits that leave less money for resident care.

Efficiency vs. Care

Supporters of PE ownership contend that these firms bring much-needed capital, modern management practices, and the ability to rescue struggling facilities. Critics counter that profit-maximization in a vulnerable sector like elder care often comes at the expense of residents’ dignity and safety. Unlike many other industries, the risks here are not just financial — they are deeply human.

What Families and Potential Residents Can Do

Choosing a nursing home is never easy, and the ownership structure is just one of many factors to consider. Future residents and their families should take proactive steps to make informed decisions. Some things you can do include:

• Research ownership: Use Medicare’s Care Compare website or state licensing agencies to see who owns the facility. If it’s part of a private equity firm or a large chain network, dig further into its reputation.
• Check the facility’s staffing levels: Consistently low staffing is a red flag. Ask about staff-to-resident ratios and staff turnover rates.
• Review inspection reports: Every facility undergoes inspections. Read recent reports for violations or patterns of deficiencies.
• Visit in person: Observe cleanliness, resident-staff interactions, and overall atmosphere. Talk to current residents and their families if possible.
• Ask probing questions: Ask how funds are allocated and how quality of care is monitored. Ask about recent changes in management or ownership.
• Compare nonprofit and community-based options: Nonprofit homes and those tied to religious or community organizations may have different priorities than investor-owned facilities.

In some cases, home-based support services may allow an older adult to live safely and in their own home for a bit longer. Home- and community-based service options include home health care, adult day programs, and in-home care that assists an individual with nonmedical care and activities of daily living. In addition, an older adult may be able to age in place safely with a few modifications to their home, which may be supported by Medicaid waivers.

Looking Ahead

Some sources say PE firms have largely moved on from the nursing home industry, but others say they are still active in the area. Given the aging U.S. population and the demand for long-term care, there is a good chance that the trend of private equity firms buying nursing homes is likely to continue. Lawmakers are beginning to scrutinize these deals, and some advocates are pushing for greater transparency in ownership and spending.

For now, families must remain vigilant. Ownership matters, but so do culture, staff, and day-to-day practices. By asking questions and researching carefully, families can better ensure that their loved ones live in environments that prioritize resident care over short-term profits.

Contact a certified elder law attorney(*), such as Linda Strohschein and her team at Strohschein Law Group for assistance. To set up an appointment, contact Strohschein Law Group at 630-300-0627.