Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes
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.
We are grateful to Abby Alpert, Pierre Azoulay, Zack Cooper, Liran Einav, Paul Eliason, Arpit Gupta, Jarrad Harford, Steve Kaplan, Holger Mueller, Aviv Nevo, Adam Sacarny, Albert Sheen, Arthur Robin Williams, numerous seminar participants, and two anonymous referees for their comments and suggestions. Jun Wong, Mei-Lynn Hua, and Sarah Schutz provided excellent research assistance. A previous version of this paper was titled “Does Private Equity Investment in Healthcare Benefit Patients: Evidence from Nursing Homes." Funding from the Wharton Mack Institute and the Laura and John Arnold foundation (Gupta, Yannelis), the Kauﬀman Foundation (Howell), and the Fama Miller Center at the University of Chicago (Yannelis) is greatly appreciated. We gratefully acknowledge funding through National Institute of Aging pilot grant P01AG005842-31. All remaining errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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