A number of news reports in the last few weeks have drawn attention to the involvement of private equity firms in health care companies, particularly nursing homes. Now comes news that Congress wants to look into the situation. Senator Hillary Clinton of New York, a Democrat, and Republican Senator Charles Grassley of Iowa have asked Congress to investigate the situation.

The source of the growing concern about care at for-profit nursing homes owned by private equity firms is an article in The New York Times published in September. The title of the article sums up the situation pretty well: "At Many Homes, More Profit and Less Nursing." It seems that when private equity gets involved in providing nursing care, more money goes toward making investors comfortable and less toward the elderly folks who actually live in the facilities.

I doubt that too many readers will find this claim surprising. Private equity funds search for return on investment. If a couple thousand old people live a little less comfortably, or die a little sooner -- well, too bad. Profits must be made, and the higher the better. What may come as a surprise, though, is the size of this market. For example, the Carlyle Group plans to buy Manor Care Inc. (NYSE: HCR), the largest U.S. nursing home owner, for $4.9 billion. That's an awful lot of bedpans.

And it turns out that private equity firms are ideally suited to run these operations -- assuming that what you want is the highest possible profit rather than, say, excellent care for the elderly. Private equity excels at wringing out costs, and so has no trouble firing many of those expensive nurses who take care of the patients. Private equity also loves to create debt and ownership structures so complex that no one can figure out who actually owns a business -- thus shielding the owners from lawsuits. And the nursing home business deals with a powerless group of consumers, many of whom are subsidized by government payments. No wonder private equity firms are jumping into the sector! Just hope that your elderly relatives stay healthy and strong.

MOST NOTEWORTHY: Caterpillar Inc (CAT), Movie Gallery (MOVI), Cache, Inc (CACH) and Manor Care, Inc (HCR) were today's noteworthy downgrades:

• UBS downgraded shares of Caterpillar (NYSE: CAT) to Reduce from Neutral and lowered their target to $70 from $78 to reflect decelerating revenues in the company's core businesses, global capacity additions in construction machinery, competitive concerns and valuation.

• Soleil downgraded Movie Gallery (NASDAQ: MOVI) to Sell from Hold following comments after yesterday's close about missing certain debt covenants.

• Suntrust downgraded shares of Cache (NASDAQ: CACH) to Neutral from Buy citing the company's attempt to reconstruct itself in a difficult economic period with tough comps and in a waning trend cycle.

• Manor Care (NYSE: HCR) was cut to Market Perform from Outperform at Wachovia, citing the acquisition by the Carlyle Group. Soleil cut Manor Care to Hold from Buy on the news...

• UBS downgraded BG Group (NYSE: BRG) to Neutral from Buy.

• Roth downgraded MRV Communications (NASDAQ: MRVC) to Hold from Buy.

• Matrix lowered Brown-Forman (NYSE: BF.B) to Hold from Buy.

• JP Morgan cut Liberty International (OTC: LBYIY) to Neutral from Overweight.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

This was an odd morning. I am not sure if the weird factor was that a senior care company was finally being acquired or that there was no real premium to the deal. The Carlyle Group is acquiring Manor Care (NYSE:HCR) in a $4.9 billion acquisition, or $6.3 billion if you include the debt assumption.

Shareholders will receive $67 per share, assuming shareholders approve it. "No-Premium" deals are harder for new shareholders to stomach, but older shareholders will be able to cash out since the stock jumped roughly 20% back in April after word of a deal had come to light when the company announced it was exploring strategic alternatives.

Manor Care employs almost 60,000 people and operates more than 500 facilities in nursing and rehabilitation centers, assisted living facilities, outpatient rehabilitation clinics, and hospice and home care agencies. If you consider the looming retirement of the baby boomers, all of these facilities offer a considerable value.

It sure seems like the price of poker, or bingo in this case, just went up. You expect more consolidation in a cottage industry that is about to become a secular group.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Manor Care Inc. (NYSE: HCR) is a major operator of short-term post-acute and long-term care facilities. It has more than 60,000 employees and 500 skilled nursing/rehabilitation centers, outpatient rehabilitation clinics, and hospice and home health care offices.

Well, now the company wants some privacy -- and has agreed to a $6.3 billion buyout. The suitor is the The Carlyle Group.

In the fiscal Q1 quarter, Manor posted a 10% increase in revenues to $959 million and net income was $30 million, or $0.39 per share. Something else that's important -- the company is a cash cow. In Q1, operating cash flows were a juicy $94 million.

The deal wasn't really a surprise though. Back in April, Manor retained JP Morgan Chase & Co. (NYSE: JPM) to review "strategic alternatives." In fact, on the news of the deal, Manor's stock price fell 1.21% to $64.50. The buyout offer is $67 per share.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.