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Healthcare Transparency Act Targeting Private Equity Deflect Bigger Issues, AHCA Leader Says

Analysis  |  By Jasmyne Ray  
   April 10, 2023

Less than 5% of the nation's nursing homes are owned by private equity firms.

A proposed rule requiring skilled nursing facilities todisclose ownership and management information to the Centers for Medicare and Medicaid Services is a distraction from finding solutions to “real issues,” says Mark Parkinson, president and CEO of the American Health Care Association and National Center for Assisted Living.

The proposed rule, issued in February by the U.S. Department of Health and Human Services (HHS), is part of the Biden administration's efforts to ensure safety and improve quality of care in the nation's nursing homes—particularly those owned by private equity firms.

However, as of 2020, only 4.7% of nursing homes are owned by private equity firms. Considering the workforce shortage and growing demand for aging services, along with the recent introduction of the Healthcare Transparency Act, private equity looks to be the least of the sector's problems, according to Parkinson.

"If we truly want to improve America's nursing homes, we need policymakers to prioritize investing in our caregivers and this chronically underfunded healthcare sector," Parkinson said.

A 2021 study by Weill Cornell Medical College found that residents in private-equity-owned nursing homes receive lower quality long-term care and Medicare spending goes up. Researchers found that residents at private equity-owned facilities were 11% more likely to have an emergency room visit and 8.7% more likely to be hospitalized.

As a result, their Medicare costs were 3.9% higher, $1,080 annually, per patient.

Private equity interest in healthcare isn't new, but over the last few years there's been an increase. In the aftermath of the pandemic, low reimbursement rates and rising operating costs have nursing homes across the country struggling financially.

In reviewing the language in the Healthcare Transparency Act, Robert Slavkin and Greg Limoncelli of Akerman LLP law firm, which represents private equity groups interested in healthcare, say revisions will need to be made. Private equity firms go where the equity is wanted, and while there are valid concerns, the bill comes across as a "deflection move," according to Limoncelli, co-chair of the firm's senior living and care sector team and partner in the corporate practice group.

"There are real problems in our healthcare system, and a more concerted effort needs to be taken, but I think this is probably the wrong step," he explained.

Potential revisions should be determined on whether a private equity firm owns all of a facility, a percentage, or is one of multiple entities with an ownership stake, Slavkin notes.

"There is an overriding philosophy at the government level that healthcare is not supposed to be a money-making venture,"  Slavkin said. "The reality is much more nuanced than that. In order to be able to stay in business and provide quality care, there has to be the ability to create the revenue in order to support that."

As attorneys who represent private equity groups, Slavkin and Limoncelli keep them mindful of compliance requirements, policies, trainings, and regulations involved with owning a nursing home or home health agency.

"The private equity firms can't … just say, 'well, we're just going to throw money at things and not have to bear any of the responsibility,’" Slavkin said. "But, on the other hand, the government can't be restricting these sources of cash, equity, and investment from these aspects of the healthcare industry because ultimately it does help if monitored and managed appropriately."

“If we truly want to improve America's nursing homes, we need policy makers to prioritize investing in our caregivers and this chronically underfunded health care sector.”

Jasmyne Ray is the contributing editor for revenue cycle at HealthLeaders. 


KEY TAKEAWAYS

The Healthcare Transparency Act seems to target private equity firms, despite the fact that they own less than 5% of the nation's nursing homes.

The increased scrutiny of private equity firms interest in the nursing home sector distracts from bigger issues like the workforce shortage and rising operating costs.


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