Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes

65 Pages Posted: 9 Mar 2020 Last revised: 16 Nov 2020

See all articles by Atul Gupta

Atul Gupta

University of Pennsylvania - Health Care Management

Sabrina T Howell

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Constantine Yannelis

University of Chicago

Abhinav Gupta

New York University (NYU) - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: November 12, 2020

Abstract

The past two decades have seen a dramatic increase in private equity investment in healthcare, a sector in which intensive government subsidy and market frictions could lead high-powered for-profit incentives to be misaligned with the social goals of quality care at a reasonable cost. This paper studies the effects of private equity ownership on patient welfare and spending at nursing homes. With administrative patient-level data, we use a within-facility instrumental variables strategy to address both non-random targeting of facilities and non-random matching of patients into nursing homes. The estimates show that private equity ownership increases short-term mortality by 10%, which implies about 21,000 lives lost due to private equity ownership over our sample period. Private equity ownership also increases spending by 19%, the vast majority of which is billed to taxpayers. We observe several channels that help explain the increase in mortality: declines in patient-level health measures, such as worsening mobility and elevated use of anti-psychotic medications; declines in nurse availability per patient; and declines in compliance with federal and state standards of care.

Suggested Citation

Gupta, Atul and Howell, Sabrina T and Yannelis, Constantine and Gupta, Abhinav, Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes (November 12, 2020). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3537612 or http://dx.doi.org/10.2139/ssrn.3537612

Atul Gupta

University of Pennsylvania - Health Care Management ( email )

204 Colonial Penn Center
3641 Locust Walk
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Sabrina T Howell (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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Suite 9-160
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212-998-0913 (Phone)

HOME PAGE: http://www.sabrina-howell.com

National Bureau of Economic Research (NBER) ( email )

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Constantine Yannelis

University of Chicago ( email )

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Chicago, IL 60637
United States

Abhinav Gupta

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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