Private equity, REITs, and nursing home ownership

When families picture a nursing home, they usually picture the building and the staff. Behind both sits an owner, and owners come in many forms. Some facilities are owned by a local family or a single operator who runs one or two buildings. Many belong to regional or national chains. Roughly a quarter are nonprofit, and a small share are run by government entities such as counties. And some are owned, in whole or in part, by investment firms.

Two investor models come up most often in news coverage and research: private equity firms and real estate investment trusts (REITs). Neither model is new, and neither is unique to nursing homes — both are common across American health care and real estate. But because nursing home care depends so heavily on staffing, and staffing is usually the largest expense an owner controls, researchers and federal agencies have paid close attention to how these ownership models relate to care. This guide explains the models in plain words, summarizes what studies have and have not found, and shows exactly which public records you can check for any facility.

Private equity (PE) firms pool money from investors — pension funds, endowments, wealthy individuals — and use it, usually combined with borrowed money, to buy companies. The typical goal is to improve the company's financial performance and sell it within roughly three to seven years at a profit. When a PE firm buys a nursing home chain, the debt used for the purchase often ends up on the books of the nursing home company itself, which then makes interest payments out of its operating revenue.

A REIT is a company that owns income-producing real estate and is required by tax law to pay out most of its profits to shareholders as dividends. In the nursing home world, a REIT typically owns the building and leases it to a separate operating company that runs the care. The REIT collects rent; the operator collects Medicare, Medicaid, and private payments and pays the rent, the staff, and everything else.

Both models separate the people financing a facility from the people running it, and both add fixed obligations — debt payments or rent — that the operator must cover before spending on anything else. That is not inherently good or bad. Plenty of well-run businesses carry debt and pay rent. The question researchers have asked is whether, on average, these structures are associated with differences in staffing and quality.

The research here is genuinely mixed, and it is important to describe it carefully. Studies measure averages across many facilities over specific time periods. They cannot tell you anything definitive about one facility, and they do not all agree.

• A widely cited 2021 National Bureau of Economic Research working paper by Atul Gupta, Sabrina Howell, Constantine Yannelis, and Abhinav Gupta examined private equity acquisitions of nursing homes from 2000 to 2017. It found associations between PE ownership and lower nurse staffing per resident, higher short-term mortality among Medicare residents, and a shift in spending toward monitoring fees and interest payments.
• Research summarized by the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) has estimated that private equity owns a fairly small minority of U.S. nursing homes, with REIT involvement somewhat more common, and has noted that ownership data historically made these stakes hard to identify — one reason findings differ between studies.
• The U.S. Government Accountability Office has issued reports over more than a decade on nursing home chains and ownership transparency, recommending that CMS make ownership information easier for the public to see and use.
• Other peer-reviewed studies have found smaller differences, no significant differences, or differences that depend on the time period, the type of acquisition, and how staffing is measured.

The honest summary: some studies have found associations between investor ownership and lower staffing or quality, while others have not, and none of this research is a verdict on any particular building. Two facilities with the same ownership model can deliver very different care. The research is a reason to check a specific facility's records — not a reason to rule a facility in or out by its ownership category alone.

For years, even researchers with full access to federal data struggled to figure out which nursing homes had private equity or REIT involvement, because ownership could sit behind layers of holding companies and the categories were not labeled.

In November 2023, CMS finalized a rule that pushes more of this into the open. Nursing homes enrolled in Medicare or Medicaid must now disclose more detail about their owners and about additional disclosable parties — entities that exercise financial control, lease or own the property, or provide management, administrative, or clinical consulting services. The rule also requires facilities to state whether any owner or one of these parties is a private equity company or a REIT, using definitions written into the regulation.

The practical effect for families is that ownership records on Medicare's Care Compare and in CMS's public data files have become more complete over time. They still take some patience to read — corporate names rarely match the name on the building's sign — but the raw information is public, free, and improving. Our guide on how to read ownership records walks through the records field by field.

Two terms appear constantly in reporting on nursing home finances, and both are simpler than they sound.

A sale-leaseback is when a company sells a building it owns — often to a REIT or other real estate investor — and then rents that same building back so it can keep operating there. The seller receives a large one-time payment and, in exchange, takes on rent payments for years to come. Companies across many industries do this to free up cash. In a nursing home, the effect is that a facility which once owned its building debt-free now has a permanent rent bill that must be paid before anything else.

A related-party transaction is when a nursing home pays for goods or services — management, therapy, staffing, pharmacy, rent — to another company that shares an owner with the facility. These arrangements are legal and common, and facilities must report them in their Medicare cost reports. They can be perfectly reasonable ways to run a chain efficiently. Researchers and government auditors pay attention to them because they can also move money from the care side of the business to affiliated companies in ways that are hard to see from the outside, and because a facility paying above-market rates to a sibling company has less left over for staff.

Neither structure tells you how good the care is. What they change is the financial cushion: how much room the operator has when costs rise or occupancy dips.

You are not choosing an investment; you are choosing a place where someone you love will live. Ownership structure matters to that choice for two concrete reasons.

First, staffing is the expense owners control most directly. Decades of research link nurse staffing levels to care quality, and payroll is typically a nursing home's largest cost. An operator carrying heavy debt or rent obligations has a tighter budget, and staffing is where tight budgets often show up. That is why the outcome to watch in the data is not the ownership label — it is the actual staffing hours and turnover the facility reports.

Second, ownership changes can bring operational change. A facility that was sold recently may be mid-transition: new management, new policies, sometimes new staff. Some transitions improve a struggling building; others disrupt a stable one. A recent change of ownership is not a warning sign by itself, but it is a reason to look at the most recent inspection and staffing data rather than relying on a facility's older reputation.

Instead of judging a facility by its ownership category, check four things in the official records. Every one of them is drawn from CMS data and shown on this site's facility pages.

1. Staffing versus the state average. Look at total nurse staffing hours per resident per day and RN hours, and compare them with the state average shown alongside. Payroll-based staffing data is the closest thing to a real-time measure of the resources going into care.
2. Staff turnover. High turnover among nurses and administrators is associated in research with weaker continuity of care. Compare the facility's turnover percentages with the state and national figures.
3. Recent ownership changes. Check whether the facility changed hands in the last couple of years. If it did, weight the most recent inspection results and staffing reports more heavily than anything older, since they reflect the current operator.
4. Chain and owner averages. If a facility belongs to a chain or shares owners with other facilities, look at how the related facilities rate as a group. A single building can be an outlier in either direction, but an owner's track record across many buildings is informative context.

If those four checks look solid, the ownership model matters far less. If staffing sits well below the state average and turnover is high, that matters regardless of who the owner is. The records let you judge the facility in front of you — which is exactly what they are for.