Research / BFI Working PaperFeb 13, 2021

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

Atul Gupta, Sabrina T. Howell, Constantine Yannelis, Abhinav Gupta

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.

More Research From These Scholars

BFI Working Paper Mar 31, 2020

How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic

Scott R. Baker, R.A. Farrokhnia, Steffen Meyer, Michaela Pagel, Constantine Yannelis
Topics:  COVID-19
BFI Working Paper Sep 15, 2020

Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments

Scott R. Baker, R.A. Farrokhnia, Steffen Meyer, Michaela Pagel, Constantine Yannelis
Topics:  COVID-19
BFI Working Paper Aug 23, 2021

Competition and Selection in Credit Markets

Constantine Yannelis, Anthony Lee Zhang
Topics:  Financial Markets