Earlier this year, skilled nursing heavyweight The Ensign Group (Nasdaq: ENSG) raised eyebrows when it announced the return of about $110 million in federal coronavirus relief, citing record earnings in the second quarter despite the then-new pandemic.
But the San Juan Capistrano, Calif.-based operator wasn’t done, setting another record in the third quarter and on Wednesday disclosing the coming return of $23 million more in CARES Act support.
Ensign logged adjusted net income of $43.7 million in the third quarter of 2020, a 94.5% gain over the same period in 2019. That came along with an 18.5% boost in same-store skilled revenue, and a 26.8% bump in transitioning skilled revenue, according to the company’s earnings release.
“With the second surge of COVID-19 that occurred during the third quarter in some of our largest states, including Texas, Arizona, and California, our local teams were faced with an incredible challenge and have again demonstrated incredible agility and responsiveness to the evolving landscape,” CEO Barry Port said in the earnings release.
As of mid-October, the company had a total of 207 confirmed COVID-19 positives across its portfolio of 217 facilities in 13 states, with 161 coronavirus-free buildings. Eight Ensign facilities had more than 20 COVID cases, while 48 had less than 20.
Port did cite some other forms of government help in explaining the solid performance, including the suspension of an across-the-board sequestration cut on Medicare rates, Medicaid payment boosts in several states, and better access to testing.
Ensign has also received $104 million in advance Medicare payments, which must eventually be repaid over the coming years.
The CEO again pointed to the operator’s decentralized model, which prioritizes the autonomy of local leaders over a more top-down structure, as a key driver of its success.
“Our local leadership teams continue to make clinical and operational improvements that are tailored to conditions they face in their local market and, with the continued support of a world-class Service Center, we remind you again that our local leaders and dedicated front-line staff are the reason we were able to report such a strong quarter,” Port said.
In addition, the company observed increases in skilled mix that helped to offset the effects of lower occupancy, two trends that Ensign says follow community coronavirus spikes; health care systems have worked with the provider to place higher-acuity patients, including those with COVID-19, according to the company.
“If there is another surge in COVID during [the] fourth quarter or in 2021, we are confident that lower occupancies will be offset by higher skilled mix, highlighting the pivotal role that our post-acute operations play in the fluctuating healthcare landscape,” Port said.
All of the provider relief cash has either been repaid or is tabbed for return; Port again emphasized that the record results were independent of federal aid, echoing a statement he made back in August.
“These funds were meant to cover lost revenue and increased expenses tied to the COVID-19 pandemic,” Port said at the time. “And we want to underline that our results do not include any benefits related to those distributions. As you all know, most of our revenue comes to us from sources that are funded by taxpayer money, and as stewards of those funds, we know that there’s a high degree of responsibility that accompanies government reimbursement.”
Ensign will host an earnings call with investors and analysts Thursday. ENSG shares closed Wednesday’s trading at $56.60, down $1.48 or about 2.6%.
