Giving Compass' Take:
- Here are policy recommendations that could potentially strengthen resources for nursing homes and assisted living facilities to improve care for the long-term.
- How can employee ownership models be effective for nursing care?
- Learn more about helping the aging population.
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For decades, for-profit nursing homes and assisted living facilities have seen profit maximization overrun social mission. The result has been the neglect—or even abuse—of the frail and elderly, a situation that became patently clear amid the COVID-19 pandemic. Even though companies are funded through public Medicaid and Medicare dollars, patients receive little protection.
Fortunately, existing policy tools can address this. Specifically, we propose using federal tax credits, combined with Medicare and Medicaid dollars, to restructure the ownership and financing of the nursing care industry. By making federal payment contingent on partial employee and impact investor ownership, limiting the use of complex organizational structures, and sweetening the deal with tax credit incentives, we believe the federal government can restore the alignment of the nursing care and assisted living industries with a social mission of providing patients with top-quality care.
Numerous studies demonstrate that for-profit senior care facilities show higher rates of neglect and abuse when compared with similar nonprofit entities (Comondore et al. 2009). These statistics hold true across time and national boundaries (Brennan et al. 2012) and demonstrate the failure of government regulations to rein in abuses (Coskun 2022; Silver-Greenberg and Gebeloff 2021). Moreover, the for-profit service quality gap worsens when private equity intersects with complex corporate structures. A rigorous study shows that private equity ownership of long-term care facilities increases the short-term mortality of Medicare patients by 10 percent (Gupta et al. 2021).
Today, 70 percent of US nursing home providers are for-profit businesses (Goldstein, Silver-Greenbergand, and Gebeloff 2020; Lendon et al. 2019). While one approach might be to shift provision back to nonprofits entirely, we suggest a middle-of-the-road intervention that makes skilled caregivers co-owners and incentivizes for-profit providers to maximize their social mission through a tax credit mechanism.
US long-term care businesses (see Table 1) often operate under conditions where they have an extreme information advantage over their customers. This is because those who pay for services are not typically the people directly receiving the services (Chou 2002). As a result, the buyer often unknowingly purchases poor-quality services for a vulnerable individual who is typically unable to communicate service shortfalls. We posit that an antidote to this situation is to rein in profit maximization that benefits private investors.
Read the full article about nursing care by Janelle A. Kerlin, Meng Yeand Wendy Chen at Nonprofit Quarterly.