By Patrick Woodall and Milly Silva
As COVID-19 swept through New Jersey’s nursing homes, residents and workers got sick and died, families struggled to get basic information about their loved ones, and caregivers were rightly terrified that they would bring the virus back to their own families. What few realized is how a secret Wall Street takeover of much of the long-term care industry has amplified the health risks to those who live and work in nursing homes.
This March, U.S. Rep. Bill Pascrell chaired a hearing in the House Ways and Means Oversight Subcommittee to examine this very topic — exploring the expanding and detrimental role private equity plays in our healthcare system, and in nursing homes in particular. As the congressman expressed in his opening statement, “Private equity’s expansion into health care is troubling because private equity’s main focus on profits is often at odds with what is best for patient care. Private equity’s business model involves buying companies, saddling them with mountains of debt and then squeezing them like oranges for every dollar.”
This is a pattern we are seeing play out across New Jersey in the midst of a pandemic that has exacerbated many long-standing problems within nursing homes — issues such as chronic short-staffing and under-investment in supplies, a result of operators’ cost-cutting strategies to maximize profit. With a diminished and ill-prepared workforce, the industry was unable to prevent the spread of a highly infectious and deadly disease and maintain adequate standards of care when a crisis hit.
Americans may be surprised to learn that some of the wealthiest people on Wall Street — private equity barons — invest in or control many nursing homes. The money these private equity firms extract out of institutions, using what are often complex and opaque financial arrangements, shell companies, and related-party transactions, is siphoned away from caring for the most vulnerable.
Last fall, Americans for Financial Reform examined pandemic data for nursing homes in New Jersey and found that residents at private equity-backed or operated nursing homes were more likely to catch COVID-19 and more likely to die than at public, non-profit, or other for-profit facilities. About 59% of private equity nursing home residents contracted COVID-19 — an infection rate 25% higher than the state average and 57% higher than at publicly-operated nursing homes. More infections meant that more residents also died of COVID-19 at private equity nursing homes. The study found that nearly 170 out of every 1,000 private equity nursing home residents died in the pandemic — about a third higher than the statewide average.
There is evidence that private equity contributes to greater racial health disparities: private equity-backed facilities in counties where people of color constitute the majority of the population had higher COVID-19 fatality rates than in overwhelmingly white counties, and this racial disparity was larger than in nursing homes not financed by private equity.
Private equity firms use financial tricks to strip value, profit, and assets out of nursing homes while severely cutting expenditures on care. For example, Wall Street financiers often use leveraged buyouts in the nursing home business, loading a company with debt to finance its own takeover. Academic studies have offered robust evidence that private equity-affiliated homes provide a lower quality of care, have less staff and violate health regulations more often than non-profit and other for-profit nursing homes.
The tragic consequences of the pandemic on nursing home residents and workers have unfortunately not appeared to have slowed the growth of private equity. In fact, having just added several additional nursing homes to its portfolio, the fastest-growing and now single largest operator of skilled nursing facilities in New Jersey is one financed by private equity — Complete Care Management. Complete Care’s profit-seeking has been swift and punishing: On April 1, hundreds of frontline 1199SEIU nursing home workers at five facilities saw their quality health insurance, educational benefits and retirement plans gutted overnight. Is this how our “healthcare heroes” should be treated after all they have gone through over the past year? Is this not detrimental to building a stable and healthy workforce to provide dignified end-of-life care to our aging society?
Over the years, private equity has seeped into every corner of the healthcare system, from birth (fertility clinics) to death (hospice care). The COVID-19 pandemic has exposed the structural problems of a long-term care system that too often prioritizes profit over quality care, contributing to greater disparities in health and wealth in our communities. We applaud Rep. Pascrell for shining a light on this issue and call for lawmakers in Washington and Trenton to urgently seek solutions to shield nursing home residents and their caregivers from private equity maleficence.
Patrick Woodall is a senior researcher at Americans for Financial Reform, a nonpartisan, nonprofit coalition working to lay the foundation for a strong, stable, and ethical financial system.
Milly Silva is executive vice president of 1199SEIU United Healthcare Workers East, the nation’s largest healthcare union.
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