The Ensign Group is pursuing a double-pronged expansion, building out relationships with managed care partners as it also plans to build up holdings in its newest market.
Leaders of the giant skilled nursing company on Friday outlined a successful fourth-quarter of 2023, in which the firm increased occupancy of existing buildings to 79.9% — up 240 basis points from the fourth-quarter of 2022. That was supported by a 12.3% quarterly increase in managed care volume when combining buildings held for a year or more and those just coming into the Ensign fold.
CEO Barry Port called that growth “a result of strengthened relationships with our managed care partners and quality outcomes.”
Port touted “extraordinary growth” over the last few years. In the last quarter, Ensign added four new holdings with a combined 528 beds in three operations and one real estate investment. Those transactions brought the company’s footprint to 299 healthcare facilities in 14 states.
The company added 6,000 new hires in 2023, even as the sector continued to deal with a 9% workforce loss since the start of the pandemic. Port said the company also had driven continued reduction in agency staff use, lowered its turnover rates and experienced slower wage inflation.
The company issued revised annual revenue guidance of $4.17 billion, up 13% from the end of 2023.
Company leaders also provided some insights into their approach to developing existing facilities and expanding into new markets.
Tennessee tango
In January, Ensign made a foray into its first new state in several years, an advance that Chief Investment Officer Chad A Keetch used to illustrate the company’s optimism about organic growth driven by its internal leaders.
“The foundational principle of our entire strategy is a recognition that post-acute care is a locally driven business, and the success or failure of any operation is largely determined by the quality of the leadership and the vision of the team leading each unique, multimillion dollar business,” Keech said, “Because we believe that so deeply, we take entering into a new state very seriously.”
Keech said it was a Southern California executive who pitched the Tennessee market, then replaced himself and moved east for a year to study the market conditions in the Volunteer State.
After rolling the acquired 116-bed TriState Health and Rehabilitation Center into the Ensign network, Keech said the Tennessee team would “build a cluster of facilities over the next few quarters.” That, he added, would likely be followed by other clusters in Tennessee to create a “sizeable” group, following Ensign’s model in South Carolina.
“We are now in 14 states and have significant bandwidth to grow in the other 36 states,” Keech added. “We continue to see evidence that many operators in this industry are struggling, and we expect that the operating environment will translate into many near and long-term opportunities to both lease and acquire.”
Building on basics
Also on Friday, President and Chief Operating Officer Spencer Burton outlined ways current buildings continue to improve census and revenues.
He said Ensign’s Healthcare Resort of Topeka, KS, with 94 beds split between a skilled nursing and senior living campus, had “consistently grown” since opening in 2016.
But in 2023, facility leaders focused on maximizing that “by leveraging their reputation and the stability in nurse staff to improve the skilled mix in the SNF and improve revenue quality in their senior living,” Burton said. They developed new programs to meet the needs of local hospitals and “strengthened partnerships with key managed care plans and conveners.”
That approach to partnering grew revenue by 13.4%, filling 100% of senior living beds for the entire year and driving the skilled mix up 17% — driven specifically by managed care days that increased by more than 40%, Burton said.
Meanwhile, at the Grove Healthcare and Wellness Center in California, with 38 skilled nursing beds and 90 senior living beds. In 2022, Ensign acquired the senior living share from Pennant Group, and a unified approach to running the campus has led to significant growth, Burton said. More integrated care is being provided in the senior living buildings, giving less needy patients a place to go after a SNF stay. That means more through-put from the SNF and more referrals to open beds, increasing the skilled mix by 14%.
Over the past year, community partners, including managed care plans, have taken note, Burton said. “Occupancy has frequently hit 100%, in large part due to an 88% increase in managed care census over prior year quarter,” he added.
Legal challenges
There was some negative news for the seemingly untouchable Ensign in late 2023.
The company acknowledged Friday it had settled a previously disclosed litigation matter that Port said had “stretched and stretched” since 2018.
During a question and answer session with investors, Port described the settlement as connected to a relator case in which the Department of Justice ultimately declined to intervene. Ensign’s 2021 Annual Report described a 2018 civil investigation into potential violations of the False Claims Act or the Anti-Kickback Statute connected to medical directors or other referral sources.
Port said Ensign brought in a mediator last year to resolve the ongoing civil case and save the firm from “additional defense costs and time and distraction.”
A caller also referenced a new Civil Investigative Demand letter from the Department to Justice potentially involving Texas Medicaid concerns. No additional information on that case was available Friday evening.
For additional coverage of the earnings call, see the McKnight’s Business Daily.
