Aging in America News

| Allison Cook

Experts in the field of aging are increasingly concerned by a new trend – private equity’s growth in a number of sectors involved in delivering services to older adults. What does this mean and what does it look like? 

Private equity is when investors purchase ownership or a share of a private company (not one that is publicly traded on the stock market). The goal of the private equity firm is to generate profit from the company and sell it, seeking to get out within about five to seven years, as mentioned in a recent New York Times article (that highlights that there’s a reason why “two recent books about private equity’s track record contain ‘plunder’ in their titles”). A recent report by the Americans for Financial Reform Education Fund explains four ways these private equity firms threaten aging services:

1. By saddling providers with large amounts of debt and then selling them off, private equity threatens providers’ long-term sustainability.
2. Since private equity firms often earn profits by cutting investments in care (including staffing, wages, quality controls, and more), care quality and job quality suffer – harming workers and clients.
3. Private equity has taken over and consolidated the number of providers in the field – limiting care options for older adults and their families and crowding out community-based providers.
4. Since private equity is focused on generating large profits quickly, resources are dedicated to corporate profits rather than care. 

We’ve known for years that private equity in the care sector harms patients. For example, private equity in hospitals is associated with increased likelihood of falls, infections, or other harmful occurrences. We’re now seeing private equity’s harm in aging services, too. Most research in this sector has been conducted on nursing homes. “We found that [nursing homes taken over by private equity firms] have higher hospitalization rates, higher rates of emergency department visits, higher Medicare spending on residents,” Mark Unruh, professor of population health sciences at Weill Cornell Medical College, shared with Marketplace. Another study found private equity in nursing homes associated with a more than 10% increase in deaths. Researchers are beginning to tease out the impacts on other aging services sectors, like durable medical equipment, home care, and hospice. 

In short, private equity tends to extract money from the aging services system, resulting in poorer quality care and less choice – hurting older adults, families, and workers. And, since Medicare and Medicaid are the largest payers for many of these services, this tendency means higher costs to taxpayers, states, and the federal government.  

It’s not too late to fix this problem, argue the experts at Americans for Financial Reform. More modest profits can still be generated without harming older adults and the people who care for them. State and federal governments need to step in to better regulate the industry – fixing loopholes and improving oversight to prevent private equity from removing money from an already struggling system. Thoughtful stakeholder engagement, smart rule-making, and consistent enforcement can protect older adults and ensure taxpayer dollars are used for their intended purpose of providing quality aging services. 

Allison Cook is the founder of Better Aging and Policy Consulting.