Corporate churning associated with lower nursing home quality

May 2, 2016
Written By:
Laurel Thomas

ANN ARBOR—Over the last two decades, thousands of nursing homes have been bought and sold by corporate chains. A new study has found that these transactions are related to lower quality of care.

Study results suggest chains bought and sold nursing homes that already were having quality problems, and these quality issues persisted after the transaction. In nursing homes that underwent a transaction, the researchers found quality problems were present both before and after the transaction occurred.

“By comparing the quality of care in facilities that undergo a transaction with those that do not, we were able to calculate the quality implications of these transactions,” said Jane Banaszak-Holl, senior author and associate professor of health management and policy at the University of Michigan School of Public Health.

The research, led by David Grabowski, professor of health care policy at Harvard Medical School, measures the implications of corporate ownership changes, which policymakers have long worried negatively impacts nursing home quality of care.

“A large number of mergers, sales and acquisitions have occurred over the past two decades among nursing home chains, and we wanted to see how residents living in these nursing homes were affected by these transactions,” Grabowski said.

According to the study, around 1,200 to 2,000 nursing homes in the U.S. (7 to 13 percent) reported a transaction annually. The most commonly reported were mergers across chains. For the 10 largest chains, which contain 12 percent of all nursing homes, tremendous “churn” occurred during the two decades studied; only two of the 10 chains did not experience any change in corporate ownership.

In spite of all these transactions, the researchers found that the organizational structure of the nursing home industry has remained relatively constant. For example, the proportion of nursing homes owned by a chain is the same today as it was in the late 1990s.

Grabowski, Banaszak-Holl and colleagues at the University of Michigan, University of Rochester and Vanderbilt University studied the quality implications of these transactions.

The researchers found that, on average, nursing homes that underwent a chain-related transaction had more government deficiency citations than nursing homes that did not experience a transaction. Given the presence of low quality prior to these transactions, the authors could not conclude that the chain transactions led to declines in quality. Rather, the results suggest that these transactions are indicators of low quality nursing homes.

This result raises important issues for nursing home policy regarding ownership accountability, oversight and transparency. Going forward, the number of chain-related transactions could be a useful indicator of potential quality to consumers and their advocates, and best practices should include requiring nursing homes to make the notification of an impending sale publicly available.

The authors also suggest that more detailed data on chain ownership and quality is needed for both consumers and regulators. They say policymakers should consider legislation that requires more detailed and comprehensive reporting of ownership for nursing home chains.

The study utilized data gathered using a National Institute on Aging grant awarded to the University of Michigan (R01 AG042418). The findings are published in the May issue of the journal Health Affairs.

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