Report calls for federal and state control of private equity-backed nursing home mergers and acquisitions

A recent report published by the Private Equity Stakeholders Project (PESP) highlights the importance of federal and state oversight in approving or denying mergers and acquisitions involving nursing homes. These recommendations are made due to transparency and accountability concerns that arise from private equity investors’ active acquisition of skilled nursing facilities, where they now own between 5% to 13% of such facilities nationwide.

The report, titled “Private equity is continuing to acquire – and bankrupt – nursing homes,” serves as an update to the organization’s 2021 publication, “Pulling back the veil on today’s private equity ownership of nursing homes.” It emphasizes the need for increased transparency, financial reporting requirements, anti-looting measures, joint liability, fee limits, higher wages for direct care workers, and staffing mandates to address the risks associated with private equity ownership.

Michael Fenne, PESP’s Senior Research & Campaign Coordinator for Healthcare, expressed concerns about private equity firms’ profit-seeking strategies potentially endangering nursing home residents. He highlighted the detrimental impact of buyouts, citing unnecessary debt burdens and reduced operating budgets that shift focus away from residents’ well-being. Fenne pinpointed the complexity of ownership structures and the lack of transparency as hindrances in understanding the full extent of the issue.

PESP’s report underscores the difficulty in tracking private equity-backed nursing home deals, with only six identified transactions in the last three years. However, the organization acknowledges that this number likely represents an undercount due to the opacity surrounding these investments.

Recent examples of private equity-backed deals in the skilled nursing sector include acquisitions by Portopiccolo Group, Tryko Partners, Lee Equity Partners, Coastwood Senior Housing Partners, Genesis Healthcare, Tryko Partners’ Marquis Health Services, and Cascade Capital. These acquisitions have highlighted the financial risks associated with private equity ownership in nursing homes, often leading to bankruptcies and decreased care quality.

PESP’s findings also revealed that private equity-backed companies accounted for 88% of healthcare-related bankruptcies valued at over $500 million in liabilities in 2024. The report highlighted three nursing home companies owned by private equity firms that filed for bankruptcy in recent years: LaVie Care Centers/Consulate Health Care (Formation Capital), Goldner Capital Management, and Gulf Coast Health Care (Barrow Street Capital).

In addition to financial risks, PESP emphasized concerns over private equity-affiliated lenders issuing private credit to nursing home owners, further exacerbating care quality risks in the healthcare sector. The lack of transparency, coupled with complex ownership structures, underlines the urgent need for federal and state regulatory oversight to safeguard nursing home residents and ensure accountability in M&A transactions involving private equity investors.