News

by Cory Bernstein, Staff Attorney

For several years, Disability Rights New Jersey has been concerned with the quality of care in private equity-owned long-term and residential care settings including nursing homes, psychiatric residential treatment facilities, and group homes.  In the past decade, the enactment of parity laws and expanded state level programs, particularly for behavioral health services, incentivized private equity firms to acquire residential care facilities.^[i] Private equity funds make acquisitions through debt-financed purchases, or leveraged buyouts, with the acquisition’s assets placed as collateral for the transaction.^[ii] This way, debts are placed on the facility, rather than the firm.^[iii] This forces the facility to reduce overhead expenses, such as staffing levels and programming so it is not swallowed by its newfound debt.^[iv]Consequently, the private equity firm increases profit at the expense of lower service quality. These practices are consistent across long-term and residential care settings. 

On March 25, 2021, Congressman Bill Pascrell (NJ-09) chaired a House of Representatives Ways and Means Oversight subcommittee hearing on this issue, paying particular attention to New Jersey nursing homes. At the hearing, expert witness testimony detailed how private equity firms obscure and magnify their returns through self-dealing with service providers, such as pharmaceutical suppliers it owns. Milly Silva, a New Jersey United Healthcare workers union leader, explained how private equity’s cost cutting strategies reduces staff support for residents, conversely increasing prescriptions of dangerous antipsychotic medications for elderly populations.^[i]  Research presented at the hearing alsoshowed that private equity owned nursing facility residents are 50% more likely to take antipsychotic medications, are billed 11% more, and have a 10% greater mortality rate than Medicare recipients at nursing homes with other organizational structures.^[ii]

Since COVID-19, conditions at New Jersey’s private equity owned nursing homes have received national attention, and Disability Rights NJ is currently investigating conditions at these facilities.  Disability Rights NJ will continue its work holding service providers accountable for putting profit over the health and safety of residents.  

^[i] Id. at 2; Hearing on Examining Private Equity’s Expanded Role in the U.S. Health Care System: H. Comm. Ways and Means, Subcomm. on Oversight, 117^th Cong. (March 25, 2021) (statement of Milly Silva, Executive Vice President, 1199 SEIU United Healthcare Workers East), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/M.%20Silva%20Testimony.pdf.

^[ii] Hearing on Examining Private Equity’s Expanded Role in the U.S. Health Care System: H. Comm. Ways and Means, Subcomm. on Oversight, 117^th Cong. 2-4, 9 (March 25, 2021) (statement of Sabrina Howell, P.hD., Assistant Professor of Finance, New York University Stern School of Business), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/S.%20Howell%20Testimony.pdf.

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^[i] See e.g. Bain & Company, Global Healthcare Private Equity and Corporate M&A Report 2020, 4-6, 36 (2020) https://www.bain.com/globalassets/noindex/2020/bain_report_global_healthcare_private_equity_and_corporate_ma_report_2020.pdf.

^[ii] Eileen Applebaum & Rosemary Batt, Private Equity: When Wall Street Manages Main Street 24 (2014).

^[iii] Hearing on Examining Private Equity’s Expanded Role in the U.S. Health Care System: H. Comm. Ways and Means, Subcomm. on Oversight, 117^th Cong. 2-4, 9 (March 25, 2021) (statement of Sabrina Howell, P.hD., Assistant Professor of Finance, New York University Stern School of Business), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/S.%20Howell%20Testimony.pdf.

^[iv] Id. See also Eileen Applebaum & Rosemary Batt, Private Equity: When Wall Street Manages Main Street 98 (2014).

On March 25, 2021, Congressman Bill Pascrell (NJ-09) chaired a House of Representatives Ways and Means Oversight subcommittee hearing on this issue, paying particular attention to New Jersey facilities. At the hearing, expert witness testimony detailed how private equity firms obscure and magnify their returns through self-dealing with service providers, such as pharmaceutical suppliers it owns. Milly Silva, a New Jersey United Healthcare workers union leader, explained how private equity’s cost cutting strategies reduces staff support for patients, conversely increasing prescriptions of dangerous antipsychotic medications for elderly populations.[v] Research presented at the hearing also showed that private equity owned nursing facility patients are 50% more likely to take antipsychotic medications, are billed 11% more, and have a 10% greater mortality rate than Medicare recipients at nursing homes with other organizational structures.[vi]

Since COVID-19, conditions at New Jersey’s private equity owned nursing homes have received national attention, and Disability Rights NJ is currently investigating conditions at these facilities. Disability Rights NJ will continue its work holding inpatient service providers accountable for putting profit over patient health and safety.

^[1] See e.g. Bain & Company, Global Healthcare Private Equity and Corporate M&A Report 2020, 4-6, 36 (2020) https://www.bain.com/globalassets/noindex/2020/bain_report_global_healthcare_private_equity_and_corporate_ma_report_2020.pdf.

^[1] Eileen Applebaum & Rosemary Batt, Private Equity: When Wall Street Manages Main Street 24 (2014).

^[1] Hearing on Examining Private Equity’s Expanded Role in the U.S. Health Care System: H. Comm. Ways and Means, Subcomm. on Oversight, 117^th Cong. 2-4, 9 (March 25, 2021) (statement of Sabrina Howell, P.hD., Assistant Professor of Finance, New York University Stern School of Business), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/S.%20Howell%20Testimony.pdf.

^[1] Id. See also Eileen Applebaum & Rosemary Batt, Private Equity: When Wall Street Manages Main Street 98 (2014).

^[1] Id. at 2; Hearing on Examining Private Equity’s Expanded Role in the U.S. Health Care System: H. Comm. Ways and Means, Subcomm. on Oversight, 117^th Cong. (March 25, 2021) (statement of Milly Silva, Executive Vice President, 1199 SEIU United Healthcare Workers East), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/M.%20Silva%20Testimony.pdf.

^[1] Hearing on Examining Private Equity’s Expanded Role in the U.S. Health Care System: H. Comm. Ways and Means, Subcomm. on Oversight, 117^th Cong. 2-4, 9 (March 25, 2021) (statement of Sabrina Howell, P.hD., Assistant Professor of Finance, New York University Stern School of Business), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/S.%20Howell%20Testimony.pdf.