The Ensign Group (Nasdaq: ENSG) is in conversation with small and mid-sized operators at the local and regional level, as the nursing home giant uses its strong capital position and service center resources to scale operations.
Ensign executives mentioned such plans at this week’s National Investment Center for Seniors Housing & Care (NIC) Fall Conference in a conversation with Stifel analysts — summarized in a note published Wednesday — while assuring financial strength in the face of an eventual expiration of the public health emergency (PHE).
The PHE is expected to be extended through mid-January, as the U.S. Department of Health & Human Services (HHS) did not give operators a 60-day courtesy notice prior to the current expiration on Oct. 15.
Growth talk echoes the group’s latest earnings call in early August. Leadership at that time said occupancy continued to improve while labor challenges have subsided for their facilities. Now, Ensign has a $15 million upside in the Q4 of 2022 and Q1 2023, since the group planned for a PHE sunset next month.
While many in the sector believed Medicaid funding would “fall off a cliff” once the PHE ended, that worry isn’t necessarily the case any more depending on the state.
California, Ensign’s second-largest market, will keep its 10% add-on payments to providers through the end of 2023. Arizona, the group’s third-biggest market, will be bumping up its base Medicaid rate by 11% starting next month.
“In reality, state budgets are flush and legislators are supportive of maintaining funding support in the near future,” Stifel analysts wrote. “We think the favorable Medicaid funding landscape will be sustainable in 2023 as the industry further claws back COVID losses.”
The sentiment was echoed in other recent earnings calls – Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros said more permanent relief is coming, in the form of 2023 state budgets. Meanwhile, the temporary 6.2% increase in Federal Medical Assistance Percentages (FMAP) is retroactive to Jan. 1, 2020 and will continue through the end of the year.
Coupled with a positive Medicaid landscape, Stifel analysts and Ensign leaders agreed nursing home sale prices are getting more attractive to buyers, furthering acquisition momentum.
While talking of potential acquisitions, Ensign executives said its service center is a “great value-add,” as operators leverage the group’s back office and system support to scale their own businesses.
“The operating expertise sets the company apart from other capital providers in the market,” Stifel analyst added.
Ensign’s portfolio consists of 259 health care operations across 13 states.
Ensign signed off on 11 acquisitions during the second quarter of 2022 and after, including one SNF in Nevada and six in Texas. Other acquisitions included two senior living operations in California, one in Washington and a “health care campus” in Arizona.
Its real estate investment trust (REIT) Standard Bearer acquired six new skilled nursing assets during the same timeframe.
Companies featured in this article:
Sabra Health Care REIT, Standard Bearer Healthcare REIT, The Ensign Group
