When private equity groups purchase large nursing home chains, they don’t do it because they want to get in the business of caring for the elderly. They do it so that they can cut costs, increase profits, and then resell them at a higher price. The Carlyle Group’s $6.3 billion acquisition of HCR ManorCare is an example of this type of flipping opportunity, but because this involves the well-being of senior citizens and those who cannot otherwise care for themselves, the drastic measures that investment groups like Carlyle Group take to cut staff has drawn the attention of the government.
Most recently, two Congressional committees will be investigating the staffing practices of nursing homes recently acquired by private investment groups. The purpose of these committees would be to investigate the business practices of nursing homes taken private by these investment groups to see whether what they are doing to increase profits is putting seniors at risk.
This effort supplements concerns expressed by the Senate and the States. In response to allegations that the private equity firms’ pursuit of profits has lead them to cut staff to dangerously inadequate levels, Senators have already begun a two-pronged inquiry. They sent letters to the private investment groups asking them to explain the way that they manage the homes. The Senators also sent letters to the homes biggest customers, Medicare and Medicaid, so see what they are doing to oversee what the nursing homes are doing.
The States, too, have expressed concern about the fact that private investment groups have purchased nursing home chains. Legislators from States, including Illinois, have asked the federal government to further scrutinize what these private investment groups are doing.
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