Congress is renewing its scrutiny of the nursing home industry, arguing there is a lack of transparency around the ownership and finances of chains, especially those owned by private equity.
About 40% of COVID-19 deaths in the U.S. occurred in nursing homes, partly due to the nature of congregate settings that make it hard to control the spread of infections. But Democrats want more information about the roles private equity and chain ownership of nursing homes plays in patient outcomes, pointing to studies that show more deaths and worse care in facilities owned by investors.
"We need better information about nursing home ownership and strong enforcement of nursing home quality standards," Sen. Elizabeth Warren (D-Mass.), a critic of private equity, told Modern Healthcare. "This is why I intend to re-open my investigation of private equity-owned nursing homes so we can make progress on these issues."
The scrutiny of private equity investment in nursing homes is not new but little has changed since Congress investigated the issue 10 years ago.
A paper published in February by the National Bureau of Economic Research, which hasn't been peer reviewed, found Medicare patients were 10% more likely to die at private equity-owned nursing homes in the first 90 days, due to lower staffing levels, higher use of antipsychotic drugs and other reasons.
Experts hope the COVID-19 pandemic and its effect on residents will drive Congress to address the issue, but they say it's hard to hold people accountable without more information about who owns nursing homes and how profitable they actually are, two things some experts say private equity owners and chains can hide under the current laws.
A proposal by House Ways & Means Committee Chairman Richard Neal (D-Mass.), which will be reintroduced this year, would significantly increase the amount of information investors in the healthcare industry have to report to the IRS.
With nursing homes in particular—an already fragmented sector of the healthcare industry—complex ownership structures make it hard for policymakers and families to know which facilities are owned by private equity investors or how profitable they are.
"Examining the role of private equity in the healthcare system remains a top priority for the committee, especially in light of the last year, and we are actively accessing options for action here," said a Ways & Means aide.
A version of the Neal bill introduced last year would require private equity firms with controlling interests in medical services providers file annual information returns with the IRS detailing real estate and payments to related parties, debts, acquisitions and more, and for that information to be made public.
"I think one of the biggest problems with private equity investment in healthcare is it's impossible to measure the impact," said Eileen O'Grady, research and campaign coordinator at the Private Equity Stakeholder Project, which receives funding from unions and other not-for-profits. "All we have are these anecdotal stories. It's very much the tip of the iceberg. What increased transparency does is allow regulators and lawmakers to have a more accurate picture of the landscape and help design policy that ensures these predatory practices can't continue."
While nursing homes have caught the attention of Congress, private equity investments in healthcare have also spread to home health, behavioral health, urgent care and other industry sectors.
All would be effected by the Neal bill, which would discourage investment in healthcare, opponents argue.
"This legislation includes burdensome regulations that would chill private sector investment, innovation, and growth in the healthcare space and ultimately threaten access to quality care," said a spokesperson for the American Investment Council.
There are more than 15,000 nursing homes in the U.S., about 70% of which are for-profit.
About 10% are owned by private equity investors, according to the American Health Care Association, a trade group representing nursing homes, but other experts say that number doesn't tell the full story.
Skilled-nursing facilities only have to report direct or indirect ownership down to 5% to the Medicare Provider Enrollment, Chain and Ownership System (PECOS) database.
"They could own 4.5% but still have a lot of control over the administration over the home," said one senior Democratic aide. "It's kind of staggering how much we don't know."
The information that is filed with PECOS is not audited by CMS for accuracy or completeness, or made available to the public, according to a Health Affairs brief published in February.
President Joe Biden on the campaign trail vowed to require HHS' Office of Inspector General to audit nursing home cost reports and PECOS ownership data. Experts have recommended HHS work with CMS, the Justice Department and the Centers for Disease Control and Prevention to analyze PECOS data for accuracy and completeness.
"The monetary and enforcement authorities are pretty robust at the federal levels between DOJ, HHS and CMS but they don't tend to work together. They tend work in silos," said Anne Montgomery, director of eldercare improvement at Altarum and co-author of the Health Affairs article.
The data could then be used to determine the impacts of ownership on patient care and discipline bad actors with a history of problems.
CMS didn't respond to a request for comment. HHS Secretary Xavier Becerra told Warren in February, in response to written questions about private equity ownership of nursing homes, "nursing homes' first obligation should be to their patients, no matter what kind of ownership arrangements they have."
Organizations that receive Medicare or Medicaid reimbursements are also required to file annual cost reports, but those also don't present a full picture on whether a nursing home or chain is profitable, experts say.
Nursing home operators have to report revenue and expenses during a particular time period, but experts say profits can be "hidden" in related third parties to make it appear that a facility is losing money.
Experts say for-profit chains—sometimes owned by private equity firms—can pull out profits from a nursing home by contracting with a related party it also owns, like a staffing agency. Sometimes those related parties charge the nursing facilities inflated rates, "siphoning" profits from the facility, an expert told the Ways & Means Committee last month. While charges to related parties must be provided in cost reports, those parties don't have to file reports with CMS.
Lawmakers and experts have questioned private equity's strategy of buying nursing homes in an apparent attempt to profit off its real estate by selling it to related third parties and leasing it back to the operators at high rents.
"They're able to pull so much money out of nursing homes through related party organizations and they don't have to report on those," said Charlene Harrington, a professor emeritus of social behavioral sciences at the University of California at San Francisco who studies nursing homes and co-authored the Health Affairs brief.
The brief recommends cost report requirements be amended to require nursing homes provide consolidated financial reports including data from operating entities and all organizations and entities related by common ownership or control.
As nursing homes beg Congress for more money, and claim Medicaid and Medicare reimbursement rates are too low to cover the cost of the services they provide, experts say these complex ownership structures make it impossible to know how profitable some of these facilities actually are.
"We really don't know whether rates are too low because without transparency, we have no idea where the money is going. We just know it's not going for the care," Harrington said.
