Toward a Preliminary Theory of Organizational Incentives: Addressing Incentive Misalignment in Private Equity-Owned Long-Term Care Facilities

Abstract

The COVID-19 pandemic brought critical debates regarding private equity ownership of long-term care facilities to the forefront of political, legal, and social landscapes. Like many of the historical concerns about long-term care, these debates center around low quality patient care. While the concerns present important challenges to overcome, this note theorizes the kinds of organizational incentives that may provide opportunities to align patient quality care with the financial goals of private equity investing. After a discussion of the historical context of long term care facilities and the more recent trends towards for-profit and private equity ownership of these facilities (Parts II and III), I engage with value-based models as a starting point to consider organizational level incentive possibilities (Part IV). In Part V, I consider an organizational-level pay for performance model, a time-bound incentive structure, and investor-specific incentives as three distinct possibilities for addressing the patient care issues identified.