Ensign Points to Managed Care Growth as Reason for Occupancy Gains

The Ensign Group (Nasdaq: ENSG) reported sunny skilled nursing stats during the first quarter of 2018, with strong gains in both revenue and occupancy.

The Mission Viejo, Calif.-based operator pulled in $46.2 million in income from its transitional and skilled services channel, a boost of 45.3% from the first quarter of 2017 and a 15.7% bump from the fourth quarter.

Occupancy at its “transitioning” skilled nursing facilities — categorized as buildings picked up in 2015 and 2016 — rose 415 basis points from the first quarter of 2017 to reach 76.0%, while same-store occupancy increased to 79.2%, a gain of 82 basis points.


Speaking to investors and analysts on a conference call Thursday afternoon, CEO Christopher Christensen positioned the results as proof of Ensign’s model of picking up and turning around lower-performing skilled nursing assets.

“With that said, over the period of 18 years and 234 acquisitions, we’ve proven this pathway to progress over and over again,” Christensen said.

When pressed by an analyst, Christensen admitted that some of the occupancy improvement came from correcting certain “self-induced” issues, particularly surrounding the company’s portfolio of former Legend Healthcare properties in Texas, which Ensign initially acquired in May 2016.


But he also pointed to Ensign’s willingness to embrace managed care plans as a reason for capturing greater market share.

“I know we’ve talked about this a lot, but it really does have a bigger impact than people realize,” Christensen said of managed care partnerships. “Just embracing the whole managed care direction of the industry, and partnering with them…instead of trying to steer people away from managed care, I think that’s helped us, too.”

Managed care revenues for the “transitioning” skilled properties rose 16.0% from the first quarter of 2017, while same-store managed care skilled revenues grew by 5.9% over that span.

The news wasn’t all positive, as Christensen acknowledged that a recent adjustment to the Centers for Medicare & Medicaid Services’ (CMS) Five-Star Quality Care system resulted in a drop-off in the company’s star ratings — though he largely blamed it on transitional growing paints.

“Some of the new things that were introduced required timely submission of certain information, which is a little different than it was in the past…We think that as we get better at communicating that documentation, that we’ll get back on the track that we’ve been on forever,” he said.

Ensign’s stock rose in Thursday’s trading, climbing by $2.96 or 10.3% to close at $31.60 per share.

Written by Alex Spanko

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