Private equity-owned nursing homes see mortality rates 10% higher and one-star ratings double in 5 years

Private equity firms own between 5-13% of U.S. nursing homes, and the data on what happens after acquisition is grim. A 2021 JAMA Health Forum study found mortality rates were 10% higher in PE-owned facilities compared to non-PE homes. The share of one-star facilities (CMS's lowest quality rating) among PE-owned homes doubled from 10% in 2019 to 21% in 2024, while five-star facilities halved from 28% to 14% over the same period. PE ownership is consistently linked to higher deficiency citations, increased hospitalization rates, and worse clinical outcomes. The mechanism is straightforward: private equity's business model depends on short-term profit extraction over a 3-5 year hold period. Firms acquire facilities, sell the real estate to a separate affiliated entity, then charge the operating company inflated rent. They create management companies, staffing agencies, and supply companies — all related parties — and funnel facility revenue through them at above-market rates. An estimated 40 cents of every dollar paid to related parties is profit extraction. The money flows out of the facility and into the PE firm's returns, while the operating company — now burdened with debt from the leveraged acquisition and paying inflated costs to affiliates — cuts the only variable cost it can: staff. Fewer CNAs per shift, more agency temps who do not know the residents, deferred maintenance on the building. This persists because CMS's ownership transparency requirements have been weak. Until recently, it was difficult to trace the beneficial ownership of nursing facilities through layers of LLCs and holding companies. PE firms structure acquisitions specifically to obscure the ownership chain. Families shopping for a nursing home on Medicare's Care Compare website see the facility's name and star rating but cannot see who actually owns it, what related-party transactions are draining revenue, or whether the facility's debt load makes adequate staffing financially impossible. The 2024 staffing rule included Medicaid institutional payment transparency requirements that would have forced disclosure of ownership and related-party transactions, but the rule was rescinded.