Private Equity, Consumers, and Competition: Evidence from the Nursing Home Industry

This paper studies how product market competition shapes the impact of private equity (PE) acquisitions on consumers. We examine nursing home buyouts and observe that PE-owned facilities exhibit greater competitive sensitivity: competing more aggressively when competitive incentives are strong and exploiting market power more aggressively when competitive incentives are weak. We find that PE-owned facilities are more sensitive to local market competition—even when comparing effects only across facilities purchased as part of the same acquisition—and are more responsive to a pro-competitive policy helping consumers compare facilities. This suggests that regulators should attend to the competitive sensitivity of acquirers and the concentration of markets where acquisitions occur, as well as consider pro-competitive policies to mitigate or even reverse PE’s potentially adverse consequences. This paper was accepted by Carrie Chan, healthcare management. Funding: This work was supported by the UCLA Price Center for Entrepreneurship and Innovation and the UCLA Fink Center for Finance and Investment. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01486 .