Private Nursing Homes Spend More to Attract Wealthy Residents, But Quality of Care Suffers

Private investment (PI) nursing homes spent more money between 2003 and 2008 compared to other for-profit and nonprofit homes, but the money was spent to target higher-paying Medicare or private pay residents, says a report from the Government Accountability Office (GAO).

After private investment (PI) firms acquired several large nursing home chains, concerns cropped up regarding the quality of care in those facilities, prompting the report, titled “Nursing Homes: Private Investment Homes Sometimes Differed from Others in Deficiencies, Staffing, and Financial Performance.”

The report found that while PI homes experienced increased costs as a result of higher facility expenses, they also enjoyed higher margins.


The GAO said that “homes trying to increase their profitability may staff their homes and renovate their buildings to attract the better-paying Medicare and private insurance residents that will enhance their revenues or profits.”

Facility costs increased more, on average, for private homes, and in 2008, PI homes had higher expenses than other for-profits, but lower costs than nonprofits.

Although PI homes generally had a lower amount of staff than other types of homes, they had a different staffing mix as well.


Staffs generally consist of registered nurses, licensed practical nurses, and certified nursing assistants; registered nurse ratios increased more in PI homes between 2003 and 2009 than in other types of facilities.

As a result of the study’s findings, Rep. Peter Stark (D-CA) and Sen. Max Baucus (D-MT) are encouraging CMS to look into reforming the Medicare reimbursement system, which offers nursing homes an incentive to provide care at a cost below the payment amount allowing them to retain any excess revenue not spent on care.

“Seniors in nursing homes deserve high-quality treatment, regardless of who owns or manages the facility,” said Sen. Baucus in a statement. “Nursing homes specifically targeting wealthier seniors could leave millions of disadvantaged Americans in the breach when they are most vulnerable.  All seniors deserve access to the health care they need—not just the most privileged.”

Even though PI homes often have higher operating margins, along with for-profit nursing homes, they had, on average, more total deficiencies than nonprofit homes.

GAO’s analysis of data from before (2003) and after (2009) acquisitions “did not indicate an increase in the likelihood of serious deficiencies or a decrease in average reported total nurse staffing,” but did reveal mixed performances by the PI homes.

Privately owned and for-profit nursing homes were found to have more total deficiencies than nonprofit homes both before and after acquisition, and PI-acquired homes were more likely to have been cited for a serious deficiency before, but not after, an acquisition, compared to nonprofits, says the report.

View the GAO report here.

Written by Alyssa Gerace