At least 5% of the nation’s nursing homes had private equity ownership in 2022, according to a new report issued by the Government Accountability Office (GAO), which also noted “limitations” in the federal government’s data on nursing home ownership.
The congressional watchdog based its analysis on a review of the Centers for Medicaid & Medicare Services’ (CMS) data on nursing home ownership, supplemented with other sources. Nursing homes that meet certain ownership thresholds are required to report ownership data to CMS. However, GAO said these thresholds might need to be reassessed to give a more accurate picture of nursing home ownership. CMS’s nursing home ownership data do not list all owners and were not designed to identify private equity owners, the GAO report said.
Besides calling out the thresholds and the reporting criteria, GAO also suggested that the available tools used in determining ownership structures needed to be more accessible.
In drawing these conclusions, GAO also reviewed data from other sources, including reviewing documentation and relevant studies, and interviewing CMS officials.
“CMS has recently taken steps to improve the transparency of nursing home ownership by, for example, publicly releasing additional ownership data as of 2022. However, the extent to which CMS’s ownership data can be used to identify private equity ownership is unclear,” GAO’s report stated. “Clarifying any linkages between quality of nursing home care and ownership characteristics, including private equity ownership, is challenging in part because of the complexity and limitations of the transparency of nursing home ownership arrangements.”
Some studies have shown that for-profit ownership is associated with a decline of quality of care and staffing, while the sector at large has taken issue with the definition of “private equity ownership.”
In the report, GAO defined private ownership as follows: “According to Congressional Research Service, private equity is a type of private fund that generally pools money from institutional and individual investors and invests in companies that are often not publicly traded.”
As for the limitations for the latest figures, GAO identified two main reasons when using CMS’s data alone to identify private equity and other ownership of nursing homes. “First, many nursing homes—including those that were private equity-owned and those that were not—did not have all of their owners listed in CMS’s data because the owners may not have met the ownership threshold requiring reporting by the nursing home,” the report said. Moreover, some nursing homes may have chosen not to self-report its eligible owners as required, it also noted. This latter determination was made after GAO checked against other data sources, and identified examples of nursing homes for which not all owners were listed in CMS’s data, including some whose unlisted owner appeared to be eligible for reporting.
“This can be a time- and resource-intensive effort because there is no single, authoritative data source with comprehensive information about nursing home owners,” the report concluded.
The second limitation assessing private equity ownership stems from the user friendliness of CMS’s reporting tools. “[CMS data] do not provide a means of readily identifying private equity firms and were not designed to do so. In February 2023, CMS proposed a regulatory definition of private equity companies for potential future disclosure requirements on the Medicare provider enrollment application. The comment period closed in April 2023.”
The GAO report reviewed CMS data on nursing home ownership for a random sample of 200 of all 14,815 Medicare-enrolled nursing homes as of December 30, 2022. GAO supplemented these data with other sources, such as the Standard & Poor’s (S&P) Capital IQ database. It also reviewed CMS documentation and relevant studies on nursing home ownership in addition to interviewing CMS officials regarding CMS’s nursing home ownership information. This performance audit was conducted between July 2022 through September 2023.
From other data shared in the GAO report, it would appear that PE ownership of nursing homes is up slightly. The report noted a study from 2020, which suggested PE ownership to be at 4.7%.
