Graham, John RRobinson, David TUpadrashta, Prabhava2023-06-082023https://hdl.handle.net/10161/27583<p>This dissertation explores the effects of private equity (PE) investment on product quality among healthcare providers. In the first essay, I study the determinants of PE manager behavior, focusing on the role of product market competition. Using the nursing home setting as a backdrop, I consider the broader question of whether and how product market competition shapes the impact of PE acquisitions on consumers. By studying acquisitions of skilled nursing facilities by PE firms, I find that PE-owned providers exhibit greater competitive sensitivity—in that they compete more aggressively when competitive incentives are comparatively strong, and exploit market power more aggressively when competitive incentives are comparatively weak. </p><p>To investigate whether PE managers respond differently than non-PE managers to competition, I consider two sources of variation in competitive incentives facing nursing homes. First, I exploit the fact that nursing homes compete with one another in geographically segmented markets to contrast facilities according to the levels of local competition they face. I find significant heterogeneity in the effect of PE ownership according to levels of local market concentration. In highly competitive markets, PE owners increase staffing by $101,783 worth of care annually (enough to increase registered nurse (RN) hours by 20.8% of the mean), while actually reducing staffing in less competitive markets. Second, I show that PE-owned nursing homes respond more strongly to policies intended to spur competition. I study the introduction of the Five-Star Quality Rating System, a policy that increased the salience of staffing for consumers. Following its introduction, PE-owned facilities increased their staffing by an average of $39,118 worth of care more than their non-PE counterparts. Moreover, PE managers more aggressively shift their staffing composition towards RNs in response to the rating system's specific emphasis on RN staffing (RN expenditure increasing by 14.7% of the mean, with licensed practical nurse (LPN) expenditure decreasing by 4.9% of the mean): in total, the share of RN staffing increased by 1.9 percentage points (17.3% of the mean) more than non-PE facilities.</p><p>In the second essay, I assess how PE acquisitions influenced the readiness and outcomes of nursing facilities during the onset of the COVID-19 pandemic. With over 40% of U.S. COVID-19 deaths occurring in nursing homes, long-term care is a critical setting in which we must better understand the impact of PE ownership during the coronavirus pandemic. I find PE ownership to be associated with a mean decrease in the probability of confirmed COVID-19 cases among residents by 7.1 percentage points and confirmed staff cases by 5.4 percentage points. PE was also associated with a decreased probability of PPE shortages—including N95 masks, surgical masks, eyewear, gowns, gloves, and hand sanitizer. However, facilities previously (but not presently) owned by PE firms did not fare similarly well. I observe that prior PE ownership may result in increased PPE shortages and a potentially greater likelihood of resident outbreaks. This suggests that the contribution of PE ownership to improved COVID-19 outcomes is a result of active management during the pandemic, rather than the legacy of interventions undertaken beforehand.</p>FinanceEconomicsCompetitionCorporate financeHealth careNursingPrivate equityProduct qualityDissertation