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Review of Financial Studies Vol. 37 No. 4 2024

Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes

Atul Gupta1; Sabrina T. Howell2; Constantine Yannelis3; Abhinav Gupta4

1 NBER and Wharton School, University of Pennsylvania , USA · 2 NBER and NYU Stern , USA · 3 NBER and Chicago Booth , USA · 4 NBER and UNC Kenan-Flagler Business School , USA

Abstract

Amid an aging population and a growing role for private equity (PE) in the care of older adults, this paper studies how PE ownership affects U.S. nursing homes using patient-level Medicare data. We show that PE ownership leads to a patient cohort with lower health risk. However, after instrumenting for the patient-nursing home match, we find that PE ownership increases mortality by 11%. Declines in measures of patient well-being, nurse staffing, and compliance with care standards help to explain the mortality effect. Overall, we conclude that PE has nuanced effects with adverse outcomes for a subset of patients.

DOI
10.1093/rfs/hhad082
Volume
37
Issue
4
Pages
1029-1077
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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