New York, New York — A major new report from researchers at New York University paints a troubling picture of what happens when private equity firms take the wheel in nursing home care: higher death rates, fewer nurses, and a dramatically elevated risk of bankruptcy.
The study, released Tuesday by researchers at NYU Stern’s Center for Business and Human Rights, found that private equity-owned nursing homes are linked to an 11% higher mortality rate compared to non-PE facilities. Residents at those homes also face 25% higher rates of in-hospital complications and are 50% more likely to be given antipsychotic medications — a practice researchers tied directly to understaffing.
The financial picture is just as stark. PE ownership increases a nursing home’s likelihood of going bankrupt from 2% to 20% over a decade — a tenfold jump. There were 34 health care bankruptcies in 2023 alone. Two of the most prominent examples cited in the report are Consulate Healthcare and LaVie Care Centers, both backed by the private equity firm Formation Capital.
“Our health care regulators have the power to review these transactions under broad public interest criteria,” said Michael Goldhaber, senior research scholar and lead author of the report. “We’re going to look at affordability, accessibility, and most importantly, quality of care — and we can block these deals on those grounds, or we can attach conditions to them.”
How PE’s model creates problems
The report doesn’t argue that private equity has no place in health care. It does argue that PE’s standard playbook — leveraged buyouts, high debt loads, sale-leaseback arrangements, and dividend payments funded by borrowed money — is fundamentally incompatible with the demands of running a nursing home.
PE-owned facilities typically carry debt-to-cash-flow ratios that regulators themselves consider unsafe. When revenues dip, that debt load triggers financial distress. The natural response is cutting staff and services, which compounds the problem for residents who can’t easily leave or judge quality on their own.
There have been more than $1 trillion in debt-financed health care deals over the past decade, according to the study. The $6 billion acquisition of HCR ManorCare by The Carlyle Group is among the high-profile examples examined in the report.
For nursing home operators watching state regulators slow-walk ownership transactions, the NYU findings could add new ammunition to arguments for tighter deal scrutiny — or fuel concern that blanket restrictions are overreach.
What researchers want policymakers to do
Goldhaber’s team stopped short of calling for a full PE ban. Instead, the report recommends a targeted set of reforms: greater transparency over ownership and finances, caps on debt-to-cash-flow ratios, restrictions on sale-leaseback deals, and stronger state authority to review health care acquisitions.
Several states are already moving in that direction. Massachusetts, Goldhaber noted, has become something of a model — limiting sale-leasebacks, expanding controlling-entity liability for Medicaid and Medicare fraud, and strengthening the review process for major health care transactions.
“We’d like to see a cap put on the debt-to-cash-flow ratio, and an end to closures and cutoffs of essential services unless they can really be justified in emergency circumstances,” Goldhaber said.
For the nursing home sector, the report lands at a moment of intense financial pressure. Staffing mandates, Medicaid reimbursement gaps, and a post-pandemic labor market have already strained operators across the country. Whether PE’s role in that equation ultimately draws federal legislative attention remains to be seen — but researchers are clearly hoping Tuesday’s findings push the conversation forward.
