A comprehensive analysis of California nursing home and assisted living facility data has challenged the prevailing narrative about declining care standards following ownership changes and private-equity (PE) funded mergers & acquisitions.
Our research team examined citation records from the California Department of Social Services (CDSS) database over a five-year period, analyzing every facility that underwent a single ownership change during this time, finding no correlation between facility acquisitions and a decrease in care quality.
Methodology & Key Findings
A total of 1,028 individual assisted living and skilled nursing facilities were identified. We then analyzed the quantity and frequency of citations issued by the CDSS to each of these facilities before and after the ownership change date. To equalize this data, we calculated the average number of citations received per month for each facility, before and after an ownership change.
Each facilities fell into one of five categories:
- Facilities that experienced an increase in citations issued after the change of ownership date: 123
- Facilities that experienced a decrease in citations issued after the change of ownership date: 119
- Facilities that were issued citations before the change of ownership date, but that received no citations post-change: 303
- Facilities that received no citations before the change of ownership date, that were issued citations post-change: 231
- Facilities that received no citations before or after the change of ownership date: 252
Understanding the Data
Our research findings found no correlation between facility acquisitions and a decrease in care quality when aggregating the citations data set.
The number of facilities that experienced an increase in citations after an ownership change (123) was almost identical to the number of facilities that experienced a decrease in citations after an ownership change (119).
What’s more, the data suggests that in more instances than not, an ownership change actually resulted in no further citations being issued to a large number of facilities, therefore leading to an improvement in care quality. There were 303 facilities that received citations before a change in ownership, but that received no citations post-change. While on the other hand, the number of facilities that received no citations before an ownership change, but received citations after the change was just 231.
What Are Citations?
A citation is an official warning from a state’s department of health or social services, which can lead to corrective actions, fines or even license revocations in the most serious cases.
The CDSS issues two types of citations, Type A for the most serious safety breaches and Type B for less serious corrective action required. Here’s a rundown of both as defined by the CDSS:
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What is a Type A Citation? It is for the most serious type of violations in which there is an immediate risk to the health, safety or personal rights of those in care. Examples may include lack of care or supervision, access to open bodies of water, lack of a fire clearance for the building and access to dangerous chemicals. Citations for these violations will always be issued even if the violation is corrected on the spot.
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What is a Type B Citation? A Type B citation is for a violation that, if not corrected, may become an immediate risk to the health, safety or personal rights of clients. Examples include faulty medical record keeping and lack of adequate staff training.
Wider Industry Context
Over the last 12 months, the newscycle has been focusing on the impact of private equity (PE), REIT and other corporate investments into the assisted living and skilled nursing facility industries. The majority of these articles have been highly negative of this, with claims ranging from PE investors asset-stripping facilities leading to their collapse, decreased care quality across the board, and a rise in avoidable deaths.
What’s more, lawmakers are proposing a raft of legislation aimed at heavily regulating PE and other corporate investments into the industry. This includes:
- The Corporate Crimes Against Health Care Act of 2024 which is aiming to “root out corporate greed and private equity abuse” across the long term care industry. Among the proposals in the bill is a new criminal penalty of up to six years in prison for executives if their actions create a “triggering event” that results in someone’s injury or death.
- The Health Over Wealth Act which would require PE-owned healthcare facilities to publicly report on their debt and executive pay, lobbying and political spending, healthcare costs and any reductions in services, wages or benefits. PE-owned firms also would be required to set up escrow accounts to cover five years of expenses to ensure continuity of care in the event of a closure or service reduction.
Our Research Conclusions
These findings provide valuable context for policymakers considering new regulations around healthcare facility acquisitions. While oversight remains important, the data suggests that blanket assumptions about the negative impact of ownership changes may need to be reconsidered in favor of more targeted approaches to maintaining and improving care standards.
The study's findings highlight the importance of evidence-based policymaking and suggest that future regulations might be more effective if focused on specific risk factors rather than ownership changes alone.
