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

78 Pages Posted: 22 Feb 2021 Last revised: 18 Nov 2021

See all articles by Atul Gupta

Atul Gupta

University of Pennsylvania - Health Care Management

Sabrina T. Howell

New York University (NYU) - New York University

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: February 2021

Abstract

The past two decades have seen a rapid increase in Private Equity (PE) 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 goal of affordable, quality care. This paper studies the effects of PE ownership on patient welfare at nursing homes. With administrative patient-level data, we use a within-facility differences-in-differences design to address non-random targeting of facilities. We use an instrumental variables strategy to control for the selection of patients into nursing homes. Our estimates show that PE ownership increases the short-term mortality of Medicare patients by 10%, implying 20,150 lives lost due to PE ownership over our twelve-year sample period. This is accompanied by declines in other measures of patient well-being, such as lower mobility, while taxpayer spending per patient episode increases by 11%. We observe operational changes that help to explain these effects, including declines in nursing staff and compliance with standards. Finally, we document a systematic shift in operating costs post-acquisition toward non-patient care items such as monitoring fees, interest, and lease payments.

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Suggested Citation

Gupta, Atul and T. Howell, Sabrina and Yannelis, Constantine and Gupta, Abhinav, Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes (February 2021). Available at SSRN: https://ssrn.com/abstract=3790212 or http://dx.doi.org/10.2139/ssrn.3790212

Atul Gupta (Contact Author)

University of Pennsylvania - Health Care Management ( email )

204 Colonial Penn Center
3641 Locust Walk
Philadelphia, 19104-6218
United States

Sabrina T. Howell

New York University (NYU) - New York University

Constantine Yannelis

University of Chicago ( email )

1101 East 58th Street
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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