Private Equity, Consumers, and Competition: Evidence from the Nursing Home Industry

70 Pages Posted: 19 Jun 2020 Last revised: 12 Feb 2021

See all articles by Ashvin Gandhi

Ashvin Gandhi

University of California, Los Angeles (UCLA) - Anderson School of Management

YoungJun Song

Duke University - Fuqua School of Business

Prabhava Upadrashta

Duke University - Fuqua School of Business

Date Written: June 12, 2020

Abstract

This paper studies how product market competition can shape how private equity (PE) acquisitions impact consumers. We examine PE acquisitions in the nursing home industry and find that PE-owned facilities exhibit greater "competitive sensitivity:" they compete more aggressively when competitive incentives are strong and exploit market power more aggressively when competitive incentives are weak. Our study leverages variation in competitive incentives deriving both from geographic differences in local market concentration, as well as from a pro-competitive policy that helped consumers better compare nursing homes. Our findings suggest that policymakers and regulators concerned about the impact of PE ownership on consumers should pay careful attention to the concentration of markets where PE acquisitions occur and consider pro-competitive policies as a tool to influence PE, mitigating or even reversing its potentially adverse consequences.

Keywords: Private equity, Buyouts, Competition, Health care, Nursing homes, Product quality, Disclosure, Ratings

JEL Classification: G34, I11, I18, L11, L13, L15

Suggested Citation

Gandhi, Ashvin and Song, YoungJun and Upadrashta, Prabhava, Private Equity, Consumers, and Competition: Evidence from the Nursing Home Industry (June 12, 2020). Available at SSRN: https://ssrn.com/abstract=3626558 or http://dx.doi.org/10.2139/ssrn.3626558

Ashvin Gandhi (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.ashvingandhi.com

YoungJun Song

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Prabhava Upadrashta

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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