NBER WORKING PAPER SERIES OWNER INCENTIVES AND PERFORMANCE IN HEALTHCARE: PRIVATE EQUITY INVESTMENT IN NURSING HOMES

Amid an aging population and a growing role for private equity (PE) in elder care, this paper studies how PE ownership affects U.S. nursing homes using patient-level Medicare data. We show that PE ownership leads to lower-risk patients and increases mortality. After instrumenting for the patient-nursing home match, we recover a local average treatment effect on mortality of 11%. Declines in measures of patient well-being, nurse staffing, and compliance with care standards help to explain the mortality effect. Overall, we conclude that PE has nuanced effects, with adverse outcomes for a subset of patients. Atul Gupta Wharton Health Care Management 3641 Locust Walk, CPC 306 Philadelphia, PA 19104 and NBER atulgup@wharton.upenn.edu Sabrina T. Howell NYU Stern School of Business KMC 9-93 44 West 4th Street New York, NY 10012 and NBER showell@stern.nyu.edu Constantine Yannelis Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 and NBER constantine.yannelis@chicagobooth.edu Abhinav Gupta UNC Chapel Hill abhinav_gupta@kenan-flagler.unc.edu

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