Private Equity Expansion in Assisted Living: Implications for Dementia Care

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PROJECT SUMMARY Assisted living (AL) is a growing long-term care industry providing housing and supportive services to almost one million frail and functionally impaired older adults - 49% of whom are living with Alzheimer’s disease or a related dementia (ADRD). Demographic projections of increased demand for AL, and especially dementia care (also referred to as “memory care”), has attracted notice from private equity (PE) firms. PE ownership advocates argue that PE firms bring much needed capital, allowing providers to update facilities, invest in new technology, and gain economies of scale to enhance efficiency, increase profitability, and improve care quality. However, the growing concern is that some PE firms’ focus on short-term profits may compromise the quality of care of AL residents, particularly those living with dementia. Research findings on the effects of PE acquisitions of nursing homes are mixed: while some studies found negative effects (e.g., decreased staffing, increased mortality) others have found no change in staffing or quality outcomes. However, unlike nursing homes, there is no national framework of regulations, payment policies, or public reporting of care quality in AL to work as “guardrails” against the possible negative impacts of PE acquisitions as there are in nursing homes. Therefore, the objective of this application is to understand the types of AL that PE firms invest in and how PE acquisitions impact the composition of residents with ADRD and residents’ outcomes. Our working hypotheses are: 1) ALs that are part of a large chain, provide memory care, located in markets with more demand, and operating under licenses with less regulatory stringency are more likely to be purchased by PE firms; and 2) acquired ALs respond to new ownership by restructuring operations in ways that influence the composition of residents and ultimately residents’ outcomes. These hypotheses will be tested in an exploratory+explanatory sequential mixed methods study with three specific aims: 1) Explore stakeholders’ perceptions of PE firms’ decision-making and the impact of PE investment on AL communities; 2) Compare ALs that were acquired or divested by PE firms to those that were not; 3) Estimate the causal effect of PE acquisitions on the prevalence of residents with ADRD in AL and residents’ outcomes. Under the first aim, the research team will leverage their existing networks and interview stakeholders to elicit different perspectives on the motives and impacts of PE acquisitions. Under the second aim, the team will apply the methods they developed and data they previously collected to understand the characteristics of ALs that are PE targets. The third aim will examine the welfare effects of PE acquisition on residents with and without ADRD applying an instrumental variable method. The results from this study will provide the first evidence on PE acquisitions of AL and how it impacts care for residents with ADRD. As policymakers are urged to consider ownership reporting and monitoring in other sectors, it is important to have insight into the less regulated AL industry that provides supportive services to vulnerable older and disabled adults, almost half of whom are living with dementia.