Profits over people: How private equity is disenfranchising children with disabilities

Published on
October 26, 2023

Children in psychiatric residential treatment facilities are among the most vulnerable people in the United States. These children suffer from intellectual and developmental disabilities, so severe that they have been sent away from their homes to these facilities. 

Yet in some of these facilities, there is very little public oversight. In some cases, even highly motivated parents find it difficult to get information. 

Even worse, there appears to be a trend where for-profit private companies backed by private equity groups buy these locations and squeeze Medicaid for every dollar possible. They seem to be employing some of the same tactics they used a decade ago when they acquired nursing homes, now turning their eyes toward vulnerable children.

While public oversight is limited, some does exist. In North Carolina, regulators do both regular and surprise inspections of facilities. These inspection reports are posted online. However, the filing system is clunky, and advocates, let alone reporters, find it difficult to navigate.

With enough time, however, I should be able to build out a more user-friendly database with these investigation reports, and file stories on the facilities with the least — and most — negative reports. 

However, because North Carolina has a larger need for these services than it has facilities providing services, it’s referred to as a “sending state.” This means it sends children out of state to facilities that are willing to accept them. When a child is sent out of state, oversight drops considerably, largely because the regulations fall to the state where the facility is located, not where the child is from.

Consider that in North Carolina, there are 1,234 children in psychiatric residential treatment facilities as tracked by the N.C. Department of Health and Human Services. But only 786 are within North Carolina's borders, or less than two-thirds. 

There appears to be a trend that private equity groups are exploiting: They buy psychiatric residential treatment facilities in states with lower regulatory oversight standards, and then seek to fill it with children from out of state, decreasing the level of oversight to the lowest point possible.

The biggest hurdle to reporting this story will be in getting children and families to speak out. Facilities are able to hide behind HIPAA laws that prevent a close examination of what happens behind closed doors. And even if parents or guardians fear the worst, they are in such dire circumstances that they will sometimes accept a bad solution over no solution at all.

But finding these families will be crucial to the success of the project, undertaken with support from the 2023 Data Fellowship. Without their voices, the project will have only a kind of academic success, while not reaching the very victims that the system fails to adequately protect.

The inspection reports will help guide my reporting to facilities that run afoul of regulations most often. That will hopefully lead to families who have nowhere else to turn, and who have been failed by a system that doesn't adequately protect them. Finally, that will lead to the question of ownership.

Although reporting this story will be difficult and daunting in some ways, there is a big payoff if the reporting is successful. There has been very little public attention on the plight of these disenfranchised children, and bringing attention to them could ultimately result in better oversight.