A “worrisome trend” of private equity investment in nursing homes should be scrutinized and halted altogether within five years, asserts a left-leaning think tank in an issue brief released Friday.

Lawmakers should force all private equity firms to get out of any investments they have in nursing homes, according to the Roosevelt Institute report. Until then, all nursing home transactions should be screened by the Securities and Exchange Commission to prevent private equity and similar investors from buying in, report author Melea Atkins wrote.

Melea Atkins

The goal is to improve care outcomes, which Roosevelt researchers say have suffered when PE has been involved. Atkins noted an overall rise in private equity investments during the pandemic, with record levels in healthcare in particular, of which eldercare was the second-most popular. She cited examples of groups buying facilities and profiting while seeing them flail.

“As private equity investment in nursing homes continues to soar, studies showing higher mortality rates and lower quality of care in private equity-owned nursing homes … have renewed concerns that the tens of billions of taxpayer dollars spent each year on nursing care may, in fact, be lining the pockets of rich private equity investors at the expense of vulnerable seniors,” Atkins wrote

“A powder keg of private equity cash will only accelerate this worrisome trend of private equity investment in nursing homes,” she added.

PE ownership increased the likelihood of death by about 10% in a nursing home, alleged one witness at a House Ways and Means subcommittee hearing in March that excoriated such investments. They also faced criticism in the Senate earlier this year.

Advocates have countered that less than 10% of all nursing homes fall under private-equity ownership — a figure that has been contested —  and that it is counterintuitive to not pursue best business practices.

Nursing-home lobbyists also say the focus should be on Medicaid funding, which is needed for about two-thirds of their patients but they say is chronically underfunded, rather than ownership structures.

Roosevelt author Atkins contends, however, that profits have been prioritized over patients, thanks to “common private equity practices” such as ownership restructuring, debt refinancing and leveraged asset sales, and vertical integration or the formation of complementary business to ensure the flow of mostly taxpayer dollars to company coffers.

“We must recognize that the unique attributes of the nursing home industry require decisive action to prevent further private equity ownership,” Atkins wrote. “Without swift action, we will see a significant increase in private equity ownership of nursing homes and a corresponding decline in the quality of care.”

The solution is more ownership transparency, enforced by the SEC, the brief asserts. Private equity and investment funds also should have to register with both the SEC and the Centers for Medicare & Medicaid Services, with the goal of getting them out of such investments.