Ensign Group (Nasdaq: ENSG) executives offered an optimistic outlook for the sector and the company’s future, driven by operational improvements, disciplined acquisitions, and the potential easing of regulations and steady reimbursement rates under President-elect Donald Trump, with the minimum staffing mandate likely never seeing the light of day.

“Our overall take on [the incoming administration] is that it’s both a regulatory and rate-friendly White House and Congress,” said Ensign CEO Barry Port. “I don’t expect that we’ll see anything draconian.”

The federal minimum staffing mandate is likely going to be reversed, he said.

“Our industry had some meetings with the Trump administration before the election, and we believe [reversing the staffing mandate] will be a relatively quick priority,” Port said, adding that if legal and legislative challenges don’t already derail it, an executive order by Trump is sure to do so.

Port, along with CFO Suzanne Snapper and COO Spencer Burton, discussed the impact of the recent presidential election on health care, particularly within the nursing home sector, during the Stephens Annual Investment Conference on Wednesday.

They also detailed Ensign’s own billing practices amid allegations that nursing home giant PACS Group (NYSE: PACS) engaged in fraudulent referral and reimbursement practices, which have drawn PACS into an internal audit and a federal investigation.  

Moreover, executives touted the California-based real estate investment trust’s (REIT) recent growth and operational efficiency, noting that Ensign had made significant strides in enhancing its local administrative leadership. 

“We have an organizational model that is not dependent on a really sharp, smart management team, thankfully, but one rather that is very operations driven, and it’s operations and field centric,” said Port.

What that means is relying on local leadership, which might vary from city to city and region to region, he said.

“We spend a lot of time obsessing over the talent we attract and train,” Port said, emphasizing the company’s focus on leadership at all levels.

Another key factor in Ensign’s growth is its disciplined acquisition strategy. Port pointed out that roughly one-third of Ensign’s portfolio was in a recently acquired or transitioning state, presenting substantial organic growth opportunities.

Meanwhile, the company’s relationships with managed care organizations (MCOs) also put it in a solid position, even as the industry faces some uncertainty from the reimbursement environment.

Despite potential risks, Port was confident that regulation under a Trump administration would be more favorable for the company.

“This shift [in administration] represents a significant positive for us,” Port said.

Staffing mandate reversal likely

For Ensign – and the nursing home industry at large – the staffing mandate, which was introduced as part of a broader push to improve care in long-term facilities, has been seen as burdensome, especially given its lack of funding and support. 

However, Ensign executives were confident that the incoming administration along with the Republican majority in the house and senate would act swiftly to undo this regulation.

Port revealed that discussions had already taken place with the Trump administration before the election, signaling that reversing the mandate through executive order was a priority. 

“We’re pretty certain this is not going to be an ongoing issue,” he said.

Moreover, Trump’s naming of Robert F. Kennedy Jr., as his pick for Secretary of Health and Human Services (HHS), and of Dr. Mehmet Oz, to head the Centers for Medicare & Medicaid Services (CMS) also bodes well for the sector, Ensign executives said.

Both individuals are seen as non-traditional picks, which may suggest a more balanced approach to health care policy compared to past Republican administrations.

“The fence around these [so-called] entitlement programs [is determined] by a little different mindset than the traditional Republican mindset, which is a good thing, obviously, for us,” Port said.

Medicaid rates for 2025

Ensign executives also discussed Medicaid expansion, particularly the supplemental payments that many skilled nursing facilities rely on for reimbursement.

States will continue to expand the supplemental payment program for Medicaid based upon whether skilled nursing facilities are delivering on quality of care, Snapper.

“We get reimbursed based upon the quality of that product [and] states will continue to expand that,” said Snapper.

Despite challenges, Snapper expects Medicaid funding to remain stable in 2025, with growing influence of supplemental payments, which are tied to the quality of care delivered by facilities. Ensign stands to benefit from this greater emphasis on linking quality care to improved reimbursement.

Regarding state-level funding, Snapper shared that most rates for the first half of 2025 were already set, with Medicaid rate increases expected at 3% to 4% in the coming year, reflecting a more stable, if slow-growing, reimbursement environment. 

“There’s nothing indicating large increases or decreases,” she said. States like California were still finalizing their rates for 2024, but Snapper felt confident that the overall trend would remain consistent.

Snapper also provided insights into the variability between federal and state-level funding as well as Medicaid expansion. While Ensign did not see a major influx of patients during Medicaid expansion, Snapper noted that delays in processing Medicaid applications had caused slower reimbursement, which impacted cash flow in the short term for Ensign.

Wages and staffing trends

On staffing, COO Spencer Burton discussed how Ensign had proactively adjusted its operations in anticipation of the staffing mandate. While the company was careful not to hire additional staff in anticipation of possible change of administration, it focused on reducing its reliance on agency labor – a significant issue during the COVID-19 pandemic.

“We’ve reduced our agency spend to a quarter of what it was at the height of the pandemic,” Burton noted.

Despite ongoing concerns over wage inflation, Burton said wage growth had stabilized in recent months. While wages had risen 3% to 4% annually, this increase was in line with pre-pandemic trends, suggesting a return to a more normalized labor market.

That said, Burton acknowledged that labor costs still remained a key focus, although given Ensign’s reliance on agency use and improved retention efforts, the company was better positioned to control staffing expenses moving forward.

“We’re seeing incremental progress in turnover rates,” Burton added, pointing to quality programs that favor employee retention.

Ensign has also worked to improve its data transparency by aligning with CMS’ Payroll-Based Journal (PBJ) system, which provides a standardized way to report staffing levels, executives said.

Ensign’s billing practices amid PACS controversy

In response to concerns raised by a report from Hindenburg Research, an institutional short seller, regarding billing practices within PACS, Ensign executives shared their own process for billing of respiratory services under Medicare Part B.  Hindenburg’s report positively referenced Ensign for its operational integrity, in comparing PACS practices.

While Ensign executives refrained from commenting on PACS’ practices, they detailed their own internal protocols and compliance measures used to ensure accurate billing practices. The company has an extensive compliance department, with over 70 staff members auditing claims and making sure these meet necessary documentation and clinical justification standards. This rigorous internal auditing system helps prevent improper claims and facilitates proactive repayments when mistakes are found, executives noted.

Ensign executives clarified that they have not billed for Medicare Part B respiratory services at any of their facilities, emphasizing their commitment to complying with Medicare’s strict billing requirements. They explained that, while respiratory services are commonly provided in their SNFs, these are typically covered under Medicaid base rates, not billed separately under Medicare Part B.

The executives also shared that Medicare has not historically allowed billing for respiratory services under Part B in a way similar to other therapies like physical, occupational, or speech therapy. And while other organizations may be exploring billing for respiratory services under Part B, Ensign has rejected such practices due to the lack of clear guidelines and the novelty of the program, they said. 

“Respiratory is not something that, to my knowledge, has been billed under Part B historically. It’s not something we’ve certainly ever done,” said Burton, adding, “We have researched it extensively internally, because we want to know if it’s a service that can help patients. First of all, if it’s medically necessary, we want to provide it and bill for it if possible. We haven’t got to a point where … we’ve been able to do that yet. So, we haven’t billed for it.”