As one of, if not the largest nursing home operator in the country, The Ensign Group (Nasdaq: ENSG) has quickly filled turnaround properties with a robust talent pipeline – including having 30 to 40 administrators-in-training at all times – despite a historic staffing shortage.
Leadership also delved into why the Texas Medicaid rate is such a hot topic for SNF operators during the Stephens Annual Investment Conference on Wednesday, and how higher acuity and Covid admissions inform sector outlook on occupancy recovery moving ahead.
The San Juan Capistrano, Calif.-based company additionally expressed relief in the likely extension of the public health emergency (PHE).
Ensign CEO Barry Port said he expects demand to continue through a “very busy season” in the hospitals, with Respiratory Syncytial Virus (RSV), Covid and the flu potentially sending a surge of new admissions to skilled nursing. Just during Q3 of this year, Ensign saw an 80% surge in both patient and employee Covid cases.
Currently, Ensign’s skilled mix baseline is higher than it would have been pre-pandemic thanks to higher acuity patients. It’s the other half of the Covid story, so to speak, with Ensign accepting Covid patients in the early years of the pandemic as part of its higher acuity strategy.
That strategy has carried over – and borne fruitful relationships – as its facilities become increasingly specialized to accommodate patients with more and more comorbidities.
“A side effect of all that is, our market partners and acute care providers, managed care providers, [they] recognized the resource that we became for them during the pandemic,” Port said during the event. “It’s only done more to enhance our pace in taking and seeing higher volumes in our skilled mix.”
PHE as a moving target and planning ahead
Port feels the extension of the PHE serves as the perfect stopgap for a lot of states that haven’t made Medicaid rate increases permanent. Texas yet again was a topic of conversation, with the state’s legislature not convening until mid-2023 and any sort of update not due to be implemented until September.
“The reality is, it’s super helpful because, whether you want to call it a public health emergency or not, the aftereffects of it are still lingering,” noted Port. “It was really hard to plan for 2023 until probably a couple of months ago, and most of the states have given us a little more clarity on how they’ll bridge the gap on the existing FMAP funding. We’re feeling better about how the outlook is for us, especially given that we get an extra quarter of it.”
Uncertainty surrounding the PHE was one of the reasons why Ensigin didn’t release guidance during earnings calls, CFO Suzanne Snapper said, as the operator wanted a little more visibility into what’s ahead.
“While we feel like maybe Covid is not as new, not changing how we act in a facility where people are already really sick, the impact that [Covid] has on a facility is substantial still,” said Snapper. “Making sure that we have the right funding to take care of [these residents] is important.”
Opportunistic acquisition strategy
Ensign’s current acquisition strategy is “opportunistic,” according to Ensign Chief Investment Officer Chad Keetch, as the company keeps an eye out for the right price while ensuring they have the right people to bring in and staff oftentimes turnaround properties.
Keetch said Ensign has 30 to 40 administrators-in-training at all times to helm new acquisitions, along with creating nursing and certified nursing assistant (CNA) programs across its footprint so the group is ready to staff up new buildings.
“They’re learning how to be an Ensign leader, and oftentimes, they don’t come from a health care background,” said Keetch. “They’re folks that have a desire to take their talents and their leadership skills that they’ve developed in other walks of life and bring it to the health care industry.”
As prices normalize in the market, Ensign has stepped up its purchases from “onesies and twosies,” to larger portfolio acquisitions.
During Q3 2022 alone, Ensign acquired 17 new SNFs with 12 in Texas, two in South Carolina, two in Arizona and one in Nevada, marking one of the biggest acquisition quarters in years.
Most recently, Sabra Health Care REIT (Nasdaq: SBRA) said it plans to divvy up a 24-property portfolio previously leased to North American Health Care Inc. to The Ensign Group and Avamere Family of Companies.
In terms of the Sabra deal, Keetch said the team is excited to build that relationship in a market where Ensign’s foundation is strong.
“All of those are fantastic opportunities, with prices that we’re excited about and spread out [between] South Carolina, Texas, Arizona … backfilling within the geographies that we have, which is always our first priority,” said Keetch. “We love to grow where we exist, and there’s lots of room to continue to do that.”
A shift in occupancy mentality
Port said the Ensign team has shifted its census and occupancy mentality to focus more on what the future will look like, rather than trying to get back to a pre-pandemic number that doesn’t really take into account the unique challenges the sector faces now.
The operator continues to tailor its business to “move up the acuity chain,” Port said, which has contributed to occupancy growth for eight financial quarters in a row. The group has even bucked the “seasonality trend,” he said.
During Q2 and Q3 of 2022, a time in which the sector usually sees slowed admissions, Ensign saw one of its best sequential growth in occupancy, according to Snapper.
“Our expectation is that that trend will continue for us. As we take on new transitions, new acquisitions, that dilutes our overall occupancy growth path because most of the occupancy of the facilities we take are super low; most of them are turnarounds,” said Port. “But we are really encouraged by what we see, in terms of demand. It’s out there.”
Labor barriers have slowed Ensign from growing as fast as they have liked, he added, governing acquisitions and guiding the company to certain markets.
“Even there, we see encouraging trends in our labor fundamentals, we see encouraging trends with use of agency,” added Port.
A deep staffing pipeline tailored for the market
Ensign has been working on mapping out care pathways depending on comorbidities in existing facilities and newly acquired properties through technology programs like Epic, along with training nursing staff and coordinating with medical directors to make sure there are implementable programs ready to go.
A good example is making sure programs are in place for chronically ill behavioral health patients in certain markets, Port said.
“We try to have that menu of options available in terms of training and materials and protocols, so that they can pull from those and implement those to meet their local medical community’s needs,” he added.
One of Ensign’s facilities in Los Angeles, for example, shuttered its joint replacement program when those patients started being seen in the home — instead growing its cardiac services to include wearable devices.
The facility has highly specialized training in cardiac programs too, and coordinates with the nearby hospital and cardiologist.
“In most facilities, they adjust regularly with the expansion of programs, replacement of certain programs with others that are in higher need that may be a better fit for what the local medical community is demanding,” said Port.
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