Private Equity and Nursing Homes: What the Research Actually Found

Private equity and real estate investment trusts have bought a lot of nursing homes over the past two decades, and the peer-reviewed research on those deals has landed on a consistent finding: at the facilities studied, nursing staff went down and resident outcomes got worse. That is a pattern documented across studies, not a verdict on every transaction. Your job as a family member is not to relitigate the academic literature. It is to figure out whether the building your parent might live in is carrying the kind of debt and rent load the studies describe, and to see that before you sign anything.

The good news is that this is checkable. It is not a vibe or a rumor. The federal government publishes the ownership records, and you can pull them yourself.

What the research actually looked at

The studies that get cited in congressional hearings and in the press are not surveys of opinion. They compare facilities that were acquired by a private equity firm or a REIT against comparable facilities that were not, using the same federal data that feeds the star ratings on the CMS Care Compare site. The comparison is the point. If you look at any single nursing home before and after a sale, you cannot tell whether a change in staffing was caused by the sale or by a Medicaid rate cut, a labor shortage, or a change in the resident mix. Pool enough facilities and compare them to a control group, and the noise starts to wash out.

What the research reports, as a pattern, is a reduction in nursing hours per resident per day, and a rise in measures like increased emergency department visits, pressure ulcers, and in some studies, mortality. Different papers look at different outcomes and use different windows, so the details vary. The direction does not.

Two things the research does not say, and you should be suspicious of anyone who claims otherwise. First, it does not say every private equity acquisition produces bad care. Some deals do not come with heavy leverage, some operators run tight ships, and some facilities improve. Second, it does not say that a for-profit chain with no private equity money is automatically better. ElderGrade covers 14,696 Medicare-certified nursing homes, and 10,882 of them are for-profit versus 2,869 non-profit. The for-profit category is enormous and heterogeneous. The specific financial structure, not the profit motive in the abstract, is what the research keeps pointing at.

The structure that makes this hard to see

Here is the thing that trips people up. You look up a nursing home and you find a name. You assume that name owns the building, employs the nurses, provides the therapy, and collects the money. In a lot of facilities, that assumption is wrong. The operation is split across several entities, often under common ownership:

• A property company owns the real estate.
• A separate operating company holds the state license and the Medicare and Medicaid provider agreement.
• A management company runs the day-to-day and charges a management fee.
• A therapy company, frequently affiliated, bills for rehab services.
• A staffing company, sometimes affiliated, supplies nurses at a markup.

Money can leave the operating company through any of those doors. The most common is rent. A private equity buyer acquires the operator, sells the building to a REIT or an affiliated entity, and the operator signs a long-term lease. The operator, which is the entity the state licenses and CMS pays, now owes rent it did not owe before. That rent is a fixed cost. It gets paid before anything discretionary, and nursing hours are discretionary.

Management fees, therapy contracts, and staffing markups work the same way. If the same ultimate owner sits on both sides of the transaction, the operating company can be squeezed while the affiliated entities collect. This is not illegal. It is a capital structure. But it means the financial health of the entity that actually cares for your mother is not the same thing as the financial health of the enterprise that owns it.

Say a facility is bought in a leveraged deal and the building is sold to a REIT. The operator now pays rent every month. Census drops because a hospital system down the road opens a rehab unit. Revenue falls, rent does not. The first line item that can flex is nursing hours. Nobody sends a memo. The schedule just gets thinner, and the weekend shifts get thinnest of all.

How to trace the ownership yourself

CMS publishes an ownership file that lists the individuals and organizations with an ownership or control interest in each Medicare-certified facility, along with the percentage and the role. ElderGrade's database holds 248,794 ownership records pulled from that file. This is the tool the research relies on, and it is open to you.

Start with the facility's page on our nursing home search. Then go to the ownership tracker and look at who is listed. What you are scanning for:

1. Does the same person or entity appear as owner of the operating company and of a property company, a management company, or a therapy company?
2. Is there a REIT or a holding company in the ownership chain that is not obviously a health care operator?
3. Are there layered limited liability companies with generic names that resolve back to a single address or a single registered agent?
4. Is the operator's address different from the building's address, and does the operator appear to lease rather than own?

None of these findings is proof of anything by itself. Plenty of well-run facilities have complex ownership. But if you see a REIT in the chain and the operator is a separate entity, you now know the operator is paying rent, and you can ask about it. That is the whole game: converting a hidden fixed cost into a question you can ask out loud.

Why staffing is the number that matters

If the research finding is "staffing went down," then staffing is where you look for the fingerprint in a facility you are considering. The national averages, from the data ElderGrade holds: total nurse staffing is 3.86 hours per resident per day, registered nurse staffing is 0.69 hours, and weekend nurse staffing drops to 3.42 hours. Turnover averages 46 percent nationally.

Those are averages across every facility, which means half are below them. A facility at or above the average is not automatically good, and one slightly below is not automatically dangerous. What matters is the pattern over time and the shape of the week. A facility that looks fine on a weekday tour can be running on a skeleton crew on Sunday. If your parent will be there on weekends, and they will, the weekend number is the one that describes their actual life.

You can pull the staffing figures for any facility and read them next to the ownership structure. If the operator carries heavy rent and the staffing numbers sit below the national average with high turnover, you have two findings pointing the same direction. That is a different situation from a facility with complex ownership but staffing at or above average and stable.

Our guide on what staffing numbers mean walks through how to read the hours per resident per day figure without over-reading it.

What the inspection record adds

Staffing and outcomes are the research's terrain. Inspection citations are the regulator's. They are related, and you should read them together.

ElderGrade's database holds 419,479 health-inspection citations across the facilities we cover, and 22,914 of those were scored at actual harm or immediate jeopardy, which is scope and severity G or above. That is the top of the scale. A G-or-above citation means a surveyor concluded that a resident was harmed, or was placed in immediate jeopardy of serious harm, by the facility's failure to meet a requirement.

Separately, 1,428 facilities currently carry a CMS abuse icon, and 526 are in or are candidates for the Special Focus Facility programme, which is CMS's designation for the homes with the most persistent problems. Federal fines imposed across the facilities we cover total $456,985,787.

Here is how to use this. A single citation, even a serious one, can reflect a bad week or one resident's unusual clinical course. A facility with repeated G-or-above citations over several inspection cycles, plus below-average staffing, plus a leveraged ownership structure, is a facility where three independent signals agree. You do not need to know which one caused which. You need to know they are all present.

The watchlist of flagged homes collects the facilities with the heaviest regulatory records, and the guide to reading an inspection report explains what the scope and severity letters mean before you try to interpret one.

Sale-and-leaseback, in plain terms

This is the specific transaction the research keeps circling, so it is worth understanding on its own.

A buyer acquires a nursing home operator. The buyer then sells the physical building to a REIT or another real estate entity, and the operator signs a lease to keep operating in the building. The buyer gets cash out of the real estate immediately. The operator, which was previously paying a mortgage it might have owned outright, now pays rent. Rent is generally higher than the mortgage payment was, and it escalates on a schedule written into the lease.

Two consequences follow. First, the operator's fixed costs go up, and fixed costs are paid before staffing. Second, the operator no longer owns an asset it could borrow against or sell if it hits trouble. It has a lease obligation and no real estate. If census drops or a state Medicaid rate stalls, the operator has very little room to maneuver, and the levers left are variable costs. Nursing hours are a variable cost.

This is why the research keeps finding staffing reductions specifically. It is not that private equity owners dislike nurses. It is that the capital structure leaves the operating company with one obvious place to absorb a shortfall.

What a sale-and-leaseback does not automatically mean

A lease is not a death sentence. Some operators run well under lease structures for years. The variables that matter are the size of the rent relative to the operator's revenue, the terms of the lease, and whether the operator has any cushion. A lease that consumes a modest share of revenue is manageable. A lease struck at a high valuation, in a market where Medicaid rates are flat, is a squeeze.

You will not be able to calculate that ratio from the outside. What you can do is see that a lease exists and ask management how the facility's rent compares to its operating revenue, and whether the lease is with an affiliated party or an unaffiliated landlord. An unaffiliated REIT landlord has its own interest in keeping the tenant solvent. An affiliated landlord may not care in the same way, because the money stays inside the same ownership group either way.

What the studies cannot tell you about one building

This is the honest limitation, and it matters more than any single study's headline finding.

The research is about averages across groups of facilities. It cannot tell you what happened at the specific home on the corner. That facility might have been acquired and improved. It might be owned by a regional operator with a single building and no private equity money at all, and it might still be understaffed. The pattern tells you where to look. It does not tell you what you will find.

There is also a timing problem. The ownership file reflects current ownership. If a facility was acquired, squeezed, and then sold to a different operator two years ago, the staffing damage may still show in the inspection record even though the current owner is not the one who caused it. Conversely, a recently acquired facility may not yet show the effects in its inspection history, because surveys lag. The grade calculation is built to blend these sources so a single old citation does not dominate, and the data sources page lists exactly what goes in.

What this means practically: if a facility changed hands recently, ask when, and ask what has changed since. If the answer is "nothing, same administrator, same director of nursing," that is reassuring. If the answer involves a new management company and a new therapy contractor, the facility is in transition, and transitions are when staffing quietly thins.

Questions to ask before you sign anything

Bring these to the administrator or the admissions director. You are entitled to ask. A facility that will not answer questions about its own ownership is telling you something.

1. Who owns the building, and is it the same entity that holds the license?
2. Does the operator lease the building? If so, from whom, and is the landlord related to the operator?
3. Has the facility changed ownership in the last three years? Who was the previous operator?
4. Are any management, therapy, staffing, or pharmacy services provided by an affiliated company?
5. What is the current registered nurse coverage on nights and weekends, and how many residents per nurse aide on the overnight shift?
6. What is the facility's nursing turnover rate, and how does it compare to the national average of 46 percent?
7. Which staff positions are employed by the facility versus contracted through an agency?
8. If the facility has been cited at scope and severity G or above, what changed afterward?

If you get vague answers on ownership and precise answers on staffing, that is a reasonable sign. If you get precise answers on ownership and vague ones on staffing, dig harder. The staffing questions are the ones that describe your parent's daily life.

You can also check whether the facility accepts Medicaid, which matters if your parent's money will run out. 14,156 facilities in our database are certified to accept Medicaid. If the facility you are considering is not among them, the plan needs to account for a move later, and moves get harder as residents decline. Our guide to who pays for care and the Medicaid by state pages cover how the rules differ state to state.

The mistake families make most often

The most common error is treating the CMS star rating as the end of the research rather than the beginning.

Here is what that costs. A family tours three facilities, sees a four-star rating on one, feels reassured, and signs. The star rating is a composite of health inspections, staffing, and quality measures, and it is genuinely useful. But it does not tell you who owns the building or what the operator's fixed costs look like, and a facility can hold a decent rating for a while after an acquisition while the staffing numbers are already drifting down. By the time the rating catches up, your parent is living there and moving is disruptive and expensive.

A second version of the same mistake: checking ownership, finding a private equity firm or a REIT in the chain, and walking away from an otherwise strong facility. That is the mirror error. Complex ownership is a flag to investigate, not a disqualifier. Some of the facilities with the most tangled ownership records have solid staffing and clean inspection histories. The structure tells you what questions to ask. It does not answer them.

The third version, and the one that costs the most, is not checking at all because the search was exhausting and the first facility with a bed available seemed fine. Bed availability is a real constraint, especially after a hospital discharge. But the ownership file takes a few minutes, and the staffing numbers are published. Doing that work before you sign is the difference between choosing with information and choosing under pressure.

If you have to move fast, at minimum pull the staffing figures and the inspection record, and compare two or three facilities side by side using the comparison tool rather than evaluating them from memory a week apart.

Does any of this change what you do?

It should change what you check, not what you conclude.

If you find a facility with a REIT landlord, a separate operating company, below-average staffing, high turnover, and repeated serious citations, you have a coherent picture and you should look elsewhere if you have the option. If you find complex ownership but staffing at or above the national average, stable turnover, and a clean recent inspection record, the ownership structure is a footnote, not a disqualifier.

The middle case is the hard one, and it is the most common. Complex ownership, average staffing, a couple of citations that are not at the serious end. In that situation, the questions you ask during the tour and the answers you get carry more weight than any database field. Ask about weekend coverage. Ask who the director of nursing reports to. Ask what happens when a shift cannot be filled. The answers tell you whether the operator is managing the constraint or passing it to the residents.

One more thing worth knowing: the pattern in the research is about acquisitions, but the mechanism, fixed costs crowding out nursing hours, is not exclusive to private equity. A nonprofit that overbuilt, or a family operator that took on too much debt, can end up in the same squeeze. The ownership structure is a clue about where the money goes. The staffing and inspection data is the evidence about what the residents experience.

Where the limits of this article are

Medicaid eligibility rules, the amount of the state payment rate, and the specifics of lease and licensing law all vary by state, and this article does not state figures for any of them because they change and because they differ. For Medicaid questions, the state Medicaid agency is the authority. For licensing and ownership disclosure requirements, it is the state survey agency. For the federal ownership file itself, it is CMS.

Cost figures vary by facility, by region, and by the level of care, so we do not quote them here. If you are trying to plan financially, start with our what care costs page and then get a written rate sheet from the specific facility, because the published average will not match the number on your invoice.

And if your parent's needs are likely to change, or if the goal is care at home rather than in a facility, the ownership questions mostly stop applying. Our home health and hospice pages cover those settings, which have their own ownership and staffing dynamics and their own data.

The bottom line

The research on private equity and nursing homes is real and it points somewhere specific: leveraged acquisitions paired with sale-and-leasebacks load the operating company with fixed costs, and the variable cost that absorbs the pressure is nursing hours. That is a pattern across facilities, not a prediction about the one you are considering. So use it the way you would use any pattern: as a reason to check, not a reason to conclude. Pull the ownership file, look at the staffing numbers against the national averages, read the inspection history, and ask the administrator who owns the building and who employs the nurses. If the answers are consistent and the staffing holds up, you have done the work and you can decide with a clear head. If they are not, you found out before you signed, which is the only time it is cheap to find out.

Where these figures come from

Every number in this article that describes American nursing homes comes from the CMS Provider Data Catalog, the same public federal files behind Medicare's Care Compare. You can see exactly which datasets we use, and how current they are, on our data sources page. Nothing here is medical, legal or financial advice, rules differ by state and change over time, so verify anything that affects a decision with the facility, your state survey agency, your Long-Term Care Ombudsman, or a qualified professional.