This article is part of your SHN+ subscription. Private equity’s role in health care has been a hot topic in 2024, notably due to the collapse of Steward Health Care. This week, private equity (PE) is top of mind as I discussed the issue with a researcher on private equity in assisted living. New data from NIC underscores the urgent need for increased senior living investments, while Focus Healthcare Partners recently closed on a $370 million fund. Private equity firms are now the target of two bills from Massachusetts senators Elizabeth Warren and Ed Markey. While the likelihood of these bills becoming law in the current divided state of Congress is slim, they reflect a growing skepticism among some lawmakers and the public regarding private equity ownership in U.S. health care businesses.
Private equity firms, such as Bain Capital, Apollo Global Management, TPG, and The Carlyle Group, have long been invested in the senior living industry. WTWH Media, our parent company, is also backed by a private equity company, Mountaingate Capital. A recent editorial on the “Health Affairs” policy blog, Forefront, detailed a four-year research effort on the impact of private equity investment in assisted living. According to John Bowblis, a professor of economics at Miami University and a researcher at the Scripps Gerontology Center, assisted living is fundamentally different from nursing homes and hospitals, making direct comparisons inappropriate. Despite some concerns, Bowblis suggests policymakers should proceed cautiously before targeting private equity players in the assisted living sector.
While concerns about private equity investments in senior living are valid given past issues in the health care industry, certain steps could be taken to alleviate fears. In this exclusive SHN+ Update, I delve into insights from the Health Affairs editorial and my discussion with Bowblis on private-equity investment in senior living, highlighting the following key takeaways:
- More evidence is needed to assess the impact of private equity
- Private equity’s history in other sectors is relevant
- Potential actions private equity firms could take to demonstrate commitment to senior living
Bowblis and his team have studied private equity in assisted living as part of a four-year NIH grant. They have identified critical distinctions between assisted living and other health care sectors that impact how private equity operates in the space. Bowblis emphasizes that assumptions drawn from hospitals or nursing homes may not directly apply to assisted living, and lawmakers should refrain from hasty legislation until the sector’s impact is better understood.
As the senior living industry faces a projected $275 billion “investment gap” by 2030, there is a growing interest from deep-pocketed entities like private equity firms and REITs to invest in the sector. Companies like SPHERE Investments are looking to deploy significant capital in senior living, signaling a potential shift in how ownership and management in the industry are approached.
While the history of private equity firms in health care may raise concerns, there are indications that their approach to senior living is evolving. With a focus on improving community outcomes, private equity could play a pivotal role in shaping the future of senior living. However, caution is warranted given past missteps in the industry, such as the case of HCR Manorcare. As the industry moves forward, it is essential to carefully assess the potential impact of private equity investments in senior living.
