The role of financial performance on chain acquisition of independent nursing homes

Accounting for over 50% of the nursing homes in the United States, the role of corporate chains in the nursing home industry is long-standing. Since early 2000s, private equity firms began to enter the nursing home market by acquiring facilities. From year 2000 to 2010, each year, there were about 10% of the nursing homes experienced chain-related transactions such as acquisitions and divestitures. Having implications on the stability of nursing homes’ operation and quality of care, these chain transactions have raised the questions regarding oversight and accountability.

In this study, I investigate the predictors for chain acquisitions of independent nursing homes, focusing on the financial aspects of acquired targets. The purpose of this study is to understand the motivations behind chain acquisitions of independent nursing homes, with a focus on financial performance of the targeted facilities. I use a facility-year level discrete time logit model to predict the probability of an independent nursing home being acquired by a chain from 2000 to 2010. I find that chains were more likely to acquire nursing homes with worse financial performance. These findings raise important issues about the federal government’s efforts to make ownership information transparent and to set up an effective transaction monitoring mechanism for the nursing home industry.