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Private equity ownership and nursing home quality: an instrumental variables approach

Sean Shenghsiu Huang () and John Bowblis
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Sean Shenghsiu Huang: Georgetown University

International Journal of Health Economics and Management, 2019, vol. 19, issue 3, No 2, 273-299

Abstract: Abstract Since the 2000s, private equity (PE) firms have been actively acquiring nursing homes (NH). This has sparked concerns that with stronger profit motive and aggressive use of debt financing, PE ownership may tradeoff quality for higher profits. To empirically address this policy concern, we construct a panel dataset of all for-profit NHs in Ohio from 2005 to 2010 and link it with detailed resident-level data. We compare the quality of care provided to long-stay residents at PE NHs and other for-profit (non-PE) NHs. To account for unobservable resident selection, we use differential distance to the nearest PE NH relative to the nearest non-PE NH in an instrumental variables approach with and without NH fixed effects. In contrast to concerns of the public regarding quality deterioration associated with PE ownership, we find that PE ownership does not lead to lower quality for long-stay NH residents, at least in the medium term.

Keywords: Private equity; Acquisition; Nursing home; Quality; Instrumental variables; Organizational structures; Differential distance (search for similar items in EconPapers)
JEL-codes: G34 I11 L22 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10754-018-9254-z

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