Senators Brown, Warren and Rep. Pocan Investigate Role of Private Equity in Quality of Nursing Home Care

WASHINGTON, Nov. 19 -- Sen. Sherrod Brown, D-Ohio, issued the following news release:

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- Research Shows Facilities Owned by Private Equity Firms Provide Worse Care

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United States Senators Sherrod Brown (D-OH), Elizabeth Warren (D-MA), along with Representative Mark Pocan (D-WI), sent letters to four private equity firms - Carlyle Group, Formation Capital, Fillmore Capital Partners and Warburg Pincus - that currently invest, or have recently invested, in companies providing nursing home care and other long-term care services. The lawmakers' letters cited reports that show private equity investment has played a role in the declining quality of care in nursing homes and requested information about the firms' management of the nursing home and long-term care facilities they own.

Nursing homes provide a wide range of important medical and personal care services to a growing and vulnerable elderly population, with 1.3 million residents in the United States currently receiving care in over 15,000 facilities. The majority of nursing facilities - almost 70% - are for-profit, and over half are chain-affiliated. Two decades of research has shown that for-profit and chain-affiliated companies often provide a lower quality of care and experience more serious health and safety deficiencies than non-profit facilities.

"We have concerns about the rapid spread and effect of private equity investment in many sectors of the economy, especially industries that affect vulnerable populations and rely primarily on taxpayer-funded programs such as Medicare and Medicaid, like the nursing home industry," the lawmakers wrote in their letters. "We are particularly concerned about your firm's investment in large for-profit nursing home chains, which research has shown often provide worse care than not-for-profit facilities."

Private equity investment in the nursing home sector has increased over the last few decades and appears to exacerbate the problems faced at chain-affiliated, for-profit nursing homes. Studies show that private equity-owned facilities generally "deliver poorer quality of care" than other chain-affiliated, for-profit facilities; are likely to try to reduce costs by "substituting expensive but skilled RNs with cheaper and less-skilled nurses"; and "report [a] significantly higher number of deficiencies" that increases with more years of private equity ownership.

Moreover, while the quality of care in private equity-owned nursing homes declines, the complicated ownership and operating structure of these investments "limit legal remedies available to aggrieved residents." Shifting funds to other affiliated entities, or to the private equity firm itself to immunize itself from liability for judgments against a target company, is a widespread practice in the private equity industry.

In July, Senators Brown, Warren, and Representative Pocan, along with a number of Democratic colleagues, introduced the Stop Wall Street Looting Act, a comprehensive bill to bring greater responsibility to the private equity industry by holding private equity firms responsible for the liabilities of companies under their control and requiring greater transparency in private equity firms' practices.

In their latest letters, the lawmakers asked the private equity firms to provide the disclosure documents and information required under the Stop Wall Street Looting Act, and to explain their role in the serious deficiencies found in nursing homes across the country. The lawmakers asked the firms to respond by no later than November 27, 2019.

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-Text of Letters (PDF)(https://www.brown.senate.gov/download/letters-to-private-equity-111919)