Marketization: ownership, financing, and quality in the five largest US for-profit nursing home chains
Charlene Charington | University of California San Francisco
Over the past two decades, the number of beds owned and managed by large nursing home chains in the US has grown steadily. Of the total 15,600 U.S. nursing homes, almost 70 percent are for-profit and 56 percent are owned by chains with two or more facilities. Of the 1.4 million residents in U.S. nursing homes, 15 percent were under age 65 and 65 percent had cognitive impairment.
Objective: This study was designed to examine the ownership and financing of the 5 largest for-profit U.S. nursing homes chains in 2014 and to compare selected quality measures for those chains with those of other nursing home ownership groups for the period of 2010-2014.
Data and methods: Descriptive data on ownership, revenues, expenses, profits, and litigation were collected for the 5 largest for-profit nursing home chains from annual reports and other documents. Statistical data from government sources on (1) nursing staffing levels and (2) quality measured by violations of regulatory requirements were compared for the 5 largest nursing home chains with other ownership groups.
Results: The 5 largest for-profit chains each have between 24,000 and 55,000 beds in 200 to 453 facilities and they owned 9 percent of total nursing homes and 10 percent of total beds in the U.S. in 2014. The largest U.S. chain merged with the fifth largest chain and two other large chains between 2010-2015. The other four largest chains remained fairly stable in size over the period. Annual revenues in each chain grew rapidly and varied from about $1.3 to $5.6 billion in 2014. These large chains had higher percentages of their revenues from Medicare and private pay than the average nursing home, and some reports showed high profit margins.
All of the 5 largest chains were owned by private companies or private equity firms and one chain also owned a publicly-traded nursing home company. Each chain had complex ownership arrangements with each nursing facility assets owned by separate property companies and separate operating companies. Reporting of ownership and financial data on revenues, expenditures, and profits was very limited by the private companies. In terms of quality measures, the largest for-profit chains had the lowest registered nurse and total nursing staff per resident day compared to other non-profit and government facilities. In addition, the largest chains had more quality problems. They had the highest number of total deficiencies and serious deficiencies per facility compared to non-profit and government facilities, that had the lowest numbers in the 2009-2014 period. Some of the largest chains had litigation actions for fraud filed against them by the federal government.
Policy implications: Overall, the profit-oriented strategies of large chains appear to conflict with goals of providing high staffing and quality of care to residents. Moreover, the ownership and financial transparency of large for-profit chains, especially those owned by private equity companies is very limited.