The Villain in the Deadliest Nursing Home Scandal Is Wall Street, Not Andrew Cuomo

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Did Wall Street kill grandpa? Going to a private-equity-owned facility significantly "increases the probability of death during the stay and the following 90 days" as compared to nursing homes with a different ownership structure. THOMAS KIENZLE/AFP via Getty Images

This story is co-published with The Daily Poster

As governors in New York and Florida face political crises over their handling of the pandemic, the scandals have spotlighted how a disproportionate amount of COVID casualties have occurred in the nation's nursing homes. The situation is a cautionary tale not only about political corruption, but about the consequences of a nursing home infrastructure being run by for-profit corporations—and now a study documents some of the body count.

The analysis found that between 2004 and 2016, more than 20,000 Americans perished as a consequence of living in nursing homes run by private equity firms. The data showed that going to a private-equity-owned nursing home significantly "increases the probability of death during the stay and the following 90 days" as compared to nursing homes with a different ownership structure.

Researchers from the University of Pennsylvania, University of Chicago and New York University evaluated data from 15,000 nursing homes across the United States, alongside Medicare patient data, to assess the impact of private equity ownership on patient outcomes. In all, the researchers found that the deaths accounted for "about 160,000 lost life-years."

Private equity firms typically take over existing corporations with borrowed or investor money and then impose cost-cutting measures to maximize revenues—often in preparation for selling off the newly stripped down firms at a profit. In the health care sector, private equity buyouts have been associated with lower staffing levels, more frequent citations for health and safety violations, shortages of supplies like ventilators that are crucial for COVID patients, and other failings tied to the constant imperative to cut costs.

In all, 70 percent of nursing homes currently operate as for-profit businesses, far more than other healthcare facilities. Only about one quarter of hospitals, for example, are for profit.

Less staffing, more deaths

The new study—which updates the researchers' previous findings—offers clues about why private equity ownership of nursing homes has resulted in higher casualty counts. As the paper noted, private equity-owned nursing homes have lower staffing levels than their counterparts, which is directly correlated with patient outcomes.

"We find that [private equity] ownership leads to a 3 percent decline in hours per patient-day supplied by the frontline nursing assistants who provide the vast majority of caregiving hours and perform crucial well-being services such as mobility assistance, personal interaction, and cleaning to minimize infection risk and ensure sanitary conditions," reported the study's authors.

In total, the researchers found that staffing levels in private equity-owned nursing homes were 1.4 percent lower than staff levels in other facilities. The staff reduction mostly affected patients who were older but less sick, concluded the researchers, because "there may be less scope to reduce the costs of care for the sicker patients, as they have explicit medical needs."

These were the same type of patients, however, that the researchers discovered experienced higher mortality rates in private equity-owned facilities. In other words, the reduced staffing levels at private equity-owned nursing homes could help explain the facilities' higher death rates.

The new data echoes a Government Accountability Office report from a decade ago, which found that investor-owned nursing homes "had more total deficiencies than nonprofit homes both before and after acquisition."

Deadly consequences

The current nursing home scandal in New York underscores the potentially deadly consequences when for-profit nursing home companies are shielded from consequences for their corporate decisions. Critics argue that Governor Andrew Cuomo's law shielding nursing home executives from lawsuits removed a deterrent to corporations cutting corners in ways that jeopardized lives.

In October, a study published in the Journal of the American Medical Association found that during the COVID-19 pandemic, private equity-owned nursing homes had lower supplies of personal protective equipment for their workers when compared to all other types of nursing homes.

A separate report by Americans for Financial Reform found that in New Jersey, the state with the highest nursing home death rates during the pandemic, private equity-owned nursing homes had COVID infection rates that were 24.5 percent higher than the statewide nursing home average, and COVID death rates that were more than 10.2 percent higher.

Meanwhile, the New York Times' own analysis last year found that "for-profit nursing homes—roughly 70 percent of the country's 15,400 nursing homes and often owned by private investors—disproportionately lag behind their nonprofit counterparts across a broad array of measures for quality [and] are cited for violations at a higher rate than nonprofit facilities."

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New York Governor Andrew Cuomo at a news conference on September 08, 2020 in New York City. Nursing homes owned by private equity are associated with lower staffing, fewer ventilators and less PPE: all factors in the COVID-19 death toll for elderly residents. Spencer Platt/ Getty Images

Private equity could face congressional scrutiny

The relationship between private equity and the health care industry took center stage in Congress during last year's debate over surprise billing.

Private equity firms Blackstone and KKR have acquired hospital staffing firms in recent years, which have been associated with high levels of "surprise billing"—a euphemism for the practice of sending people huge medical bills after they visit hospitals that are part of their insurance networks and are treated by doctors or staff who are out of network.

In 2019, a dark money group funded by hospital staffing companies owned by Blackstone and KKR spent $75 million on an advocacy campaign opposing legislation to end surprise billing. Later that year, after a bipartisan deal had been reached on the bill, the legislation was killed by Rep. Richie Neal, a lawmaker who received sizable campaign donations from Blackstone.

Lawmakers passed a new provision to end surprise billing in December's budget bill, but the final version was watered down by lobbying from private equity-owned staffing firms, and is expected to drive up health care costs.

Last week, congressional Democrats introduced legislation designed to close tax loopholes and make private equity investing less lucrative. That followed Democratic lawmakers in 2019 requesting information from private equity giants about their nursing home business practices.

In 2009, Democrats who had just won control of Congress held hearings about the role of private equity in the nursing home industry. Democrats who have now regained power in Congress have the power to launch another investigation into the matter.

It remains to be seen whether Democratic lawmakers will launch another review of the industry: donors from private equity and investment firms have more than doubled their campaign contributions to Democrats.