Dear readers,
It has been a brutal 12 months for the US nursing home industry. Senior living centres have been ground zero for the coronavirus pandemic, with roughly one-third of overall deaths occurring in care homes. The headlines continue to be bleak, even as vaccinations are rolled out.
This is a good moment to look at the business models behind the homes. A group of researchers from top US universities — Penn, New York and Chicago — have examined the role of private equity in patient outcomes in the nursing home industry. The conclusions of their working paper for the National Bureau of Economic Research are damning: PE management led to an increase in short-term mortality of Medicare patients by 10 per cent. This is an implied 20,000 lives over the 12-year sample period. Moreover, taxpayer spending per patient went up even as expenditures shifted away from residents towards monitoring fees, interest expense and lease payments.