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Private equity companies purchase nursing homes, but care does not suffer
Date:9/9/2008

BOSTON, Mass. (Sep. 10, 2008)In recent years, private equity investors have increasingly targeted nursing homes as investment opportunities. Spurred by investigative reports and anecdotal evidence that these deals led to worsened quality of care, many companies have found themselves under increased federal scrutiny.

But according to a new study, such conclusions may be premature. Private equity purchases of nursing homesmany of which result in administrative and corporate restructuringhave not caused quality of care to decline significantly to date. In fact, in some aspects, the quality of care has improved.

"This is an early look at what happens after these purchases," says Harvard Medical School assistant professor David Stevenson, who co-authored the paper with associate professor David Grabowski. "Many of the transactions we looked at were just a few years old, so it's hard to draw definitive conclusions about these types of deals. However, our results paint a more positive picture than had emerged previously."

These findings appear in the September/October issue of the journal Health Affairs.

Starting around 2000, a number of private equity groups began purchasing nursing home chains, mostly in states like Florida and Texas, where litigation was more common than in other states. As a result of these transactions, and to buffer themselves against costly litigation expenses, many of the nursing homes were divided into sub-companies, decentralizing ownership so that, for example, the same "company" didn't own both the property and operations. As a result, if a patient were to sue for medical negligence, it would be more difficult to pursue property assets.

Investigative reporting, such as a 2007 front page article in the New York Times, looked at patient care in these homes both before and after these corporate purchases. It concluded that such restructuring had weakened patient care, which in tu
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Contact: David Cameron
david_cameron@hms.harvard.edu
617-432-0441
Harvard Medical School
Source:Eurekalert

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