Challenges with fcousing on short-term profits

KFF Health News published an article detailing how the levels of service at various long-term care facilities have suffered under real estate investors, including the death of some residents due to inadequate care. Interestingly, "While one research study found REIT [real estate investment trust] investments were associated with higher spending on nursing wages, another concluded that after being bought by REITs, nursing homes frequently replaced registered nurses with less skilled nurses and aides. A third analysis concluded that health inspection results were worse after REIT investment." Tangentially, the article also notes that "Researchers also found that investor-owned hospital chains that sold buildings to REITs were more likely to close or go bankrupt," although it is possible that hospital chains that are more likely to sell to investors were already not doing well financially.

On paper, the REITs are only the owners of the facilities, not the operators. However, if there is a pattern of inadequate care at REIT-owned facilities, it raises the question of whether REITs apply unreasonable financial pressure on operators and whether they might not give quality of care sufficient consideration when selecting operators. Theoretically, fines and lawsuits would deter negligence, but patient families have complained about how long it has taken to enforce these actions. If these operators are the only ones who are negatively affected, then the structure provides REITs with a liability shield, allowing them to continue their practices for longer.