Honourable Intentions? Analysing the Interests of Private Equity in the Aged Care Sector

Abstract

The Australian aged care industry was once dominated by non-profit organisations but recently ownership has changed significantly with the entry of for profit and, in particular, private equity investment vehicles. This paper provides an overview of the main players in the Australian aged care sector. The analysis is framed within the literature on the relationship between ownership type and the quality of community services. We then present results which suggest that a change of ownership from non-profit to private equity may have significant consequences for the quality of service provision. In this context, we argue that several potential issues arise as a result of this change in ownership. First, is that by creating attractive investment opportunities for investment funds looking for a low risk venture, government has come to heavily subsidise the private players in the aged care sector. Second, are the effects this private ownership may have on the quality of service provision with the likelihood that private business will value maximizing profit above investing in the quality of care. Third, are the implications for the access and cost of aged care if the industry becomes dominated by businesses with short term investment horizons and early exit strategies and that rely on highly volatile financial markets.

Keywords: Ownership and control, corporate governance, non-profits, private equity, aged care

JEL Classification: J14, L33, L52, M14