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Chopra concerned about PE investment in nursing homes

Federal Issues CFPB Elder Financial Exploitation Consumer Finance Covid-19

Federal Issues

On December 7, CFPB Director Rohit Chopra spoke before the Elder Justice Coordinating Council Meeting and raised concerns regarding worsening fraud, neglect, and financial exploitation in nursing homes and other for-profit facilities. Chopra discussed that financial straits due to the pandemic would continue leading to increased nursing home closures or takeovers of nursing homes by private equity investors. He noted that typically, private equity investors purchase assets, often using significant amounts of debt financing, to increase profits prior to selling the asset in a short amount of time, and warned that, due to the short investment and need to escalate profitability, “this investment approach invites aggressive strategies that warrant regulatory scrutiny.”

Citing to a recent NYU study that found private equity investments in U.S. healthcare to be on the rise, Chopra inquired whether for-profit incentives are misaligned with serving seniors well. He specifically warned that for-profit nursing homes “disproportionately lag behind their nonprofit counterparts across a broad array of measures for quality” and that “private equity owners may also have the incentive to drain financial assets from residents or increase risks of other financial exploitation.”

In conclusion, Chopra noted that he had asked the Bureau’s Office of Financial Protection for Older Americans to “identify cross-cutting consumer protection issues, including when it comes to housing, as many older Americans with substantial financial assets are a target for bad actors,” and will be working “to find systemic fixes to emerging risks, such as the encroachment of private equity into facilities serving and housing America’s older adults.”

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