Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes

Abstract

Amid an aging population and a growing role for private equity (PE) in elder care, this paper studies how PE ownership affects U.S. nursing homes using patient-level Medicare data. We show that PE ownership leads to lower-risk patients and increases mortality. After instrumenting for the patient-nursing home match, we recover a local average treatment effect on mortality of 11%. Declines in measures of patient well-being, nurse staffing, and compliance with care standards help to explain the mortality effect. Overall, we conclude that PE has nuanced effects, with adverse outcomes for a subset of patients.