Care sector under scrutiny

Private equity companies and care homes seem curious bedfellows; one is focused on relatively short-term returns the other long-term care. Yet that has not stopped millions of dollars in private investment being pumped into the sector. But does that result in better levels of care for the elderly?
Apparently not. A white paper from the Roosevelt Institute in the US covering private equity ownership of care homes in the US, revealed a shocking disparity between those institutions run by the public sector compared to those in the private. The paper cites evidence from the National Bureau of Economic Research which uncovered that private equity–owned nursing homes provide lower quality of care compared to nursing homes under other ownership structures, particularly during the Cvoid-19 outbreak.
Particularly, patients and staff at the 17% of New Jersey nursing homes backed by private equity were more likely to be infected with and die from Covid-19 than those in non-profit, and other for-profit lower-cost providers.
The institute argues that the private equity model destabilises care homes since not only do their complex legal processes ensure they are never on the hook for poor patient outcomes, but their use of leveraged debt also puts homes in precarious financial positions. The Roosevelt Institute calls on US congress to ban private equity investment in the care sector and that all current backers be forced to divest.
Meanwhile back in the UK the Competition and Markets Authority (CMA) is continuing to chase a number of care home operators, including PE-owned Care UK, for repayments of upfront ‘admin’ fees charged to residents. The CMA has previously said that Care UK was breaking the law by requiring a substantial non-refundable administration fee from residents for which they received no services or products in return.
Whilst there is no likelihood currently that private equity firms will be forced to divest from the care sector it is clear that investors’ ESG expectations of operators are increasing. One to keep an eye on.

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