Ensign Group’s (Nasdaq: ENSG) third quarter was marked by solid occupancy and skilled-mix growth, with CEO Barry Port calling attention Wednesday to the nursing home giant’s outperformance among peers on new survey inspection results and other metrics.
Port said his company’s operating results were evidence that its clinical model and staffing practices were producing measurable improvements in care.
“We believe this clinical patient-centric model is a compounding competitive advantage that is uniquely perpetuated and refined through peer accountability in our cluster model,” Port said during the company’s conference call to discuss its quarterly earnings.
In revising guidance upwards, executives showcased strong earnings growth, improved clinical and occupancy metrics, and an accelerating acquisition strategy.
“In healthcare, trust is ultimately expressed through patient choice and referral behavior. Hospitals, physicians, managed care organizations, patients, and families make decisions every day about where care will be delivered,“ Port said. “Occupancy growth, therefore, is more than a financial metric. It’s one of the clearest validations that an operation consistently delivers the outcomes and experience that stakeholders value.”
Port’s emphasis on quality is noteworthy, especially amid scrutiny surrounding its staffing levels and a research report compiled by a media group affiliated with institutional short seller and hedge fund, Hunterbrook Capital, which alleged pervasive staffing shortfalls at Ensign in its June report. Despite these allegations, there are no known federal investigations or regulatory actions underway against Ensign.
In the third-quarter, Ensign’s same-store occupancy rose to 84.1%, while transitioning facilities reached 86.1%. Same store skilled nursing days increased 7.2% year over year, compared with 7.9% growth at transitioning facilities. And, Same store Medicare days rose 7.6%, with Medicare revenue increasing 11.1%, while managed-care revenue grew 9.1%. Skilled-mix revenue increased 10.7% at same-store facilities and 10.5% at transitioning facilities.
Ensign reported above-average Centers for Medicare and Medicaid (CMS) quality ratings, 21% above the average of the states in which it operates, Port shared.
“CMS cycle one survey inspection results outperformed the average of facilities in our operating states by 15% and exceeded county-level averages by 28%,” he added.
Short-stay residents achieved functional improvement rates 30% better than industry peers in Ensign’s operating states, while long-stay residents had antipsychotic medication rates 28% better than those peers, he said.
Ensign ended the quarter with more than 80% of its skilled nursing operations receiving a four- or five-star CMS quality measure rating, exceeding national averages in all 15 quality measurement categories, including all five claims-based measures, Port said. This despite many of the acquired facilities initially having a one- or two-star rating designation when Ensign took them over, he noted.
Investment outlook and 1B in dry powder
Deal flow has been abundant across all categories and conditions: larger portfolios, mid-sized transactions, individual facilities, nonprofit divestitures, real estate investment trusts (REITS) seeking replacement operators, and lease portfolios approaching renewal, Chief Investment Officer Chad Keetch said.
Ensign’s recent purchases have included assets from a large public REIT and family-owned portfolios as well as “turnarounds” facilities, he noted.
“We’re certainly encouraged by the frequent and constant stream of opportunities that come from us from all of those sources,” Keetch said.
Ensign is interested in higher-quality physical plants that cost more upfront but require less capital, and it also remains interested in traditional turnarounds.
As for the rate of acquisitions, 50 to 60 acquisitions annually, or potentially more, are “doable,” Keetch said, adding that Ensign does not set rigid growth targets. Leadership capacity, pricing, and underwriting discipline remain constraints, he said.
Currently, Ensign has more than $1 billion in combined cash and available credit capacity, according to Chief Financial Officer Suzanne.
Ensign announced 22 new acquisitions during the quarter and subsequent period: nine in Florida, seven in Colorado, four in Washington, and two in Texas. The additions included 19 leased operations and three real estate assets.
Ensign was slow to move into Florida prior to the third quarter, with Port describing the state as a natural market given its size and demographics while acknowledging the state’s litigation environment as a deterrent. That said, Port said Ensign would benefit from favorable reimbursement rates in Florida, a strong labor and not overtly difficult regulatory environment.
New CMS survey, staffing metric
These figures were central to management’s message: clinical performance, rather than simply financial growth, explains why hospitals, physicians, managed-care organizations, patients, and families increasingly choose Ensign facilities.
Ensign’s overall registered nursing (RN) retention rate was 11% better than the average across its 18-state footprint, based on CMS-reported data, Port said. Meanwhile, administrator turnover was 45% below the CMS-measured state average, and director of nursing (DON) turnover continued to improve.
On administrator succession, Keetch reported approximately 52 administrators-in-training (AITs) over the preceding year, with roughly 55 in the program currently.
In terms of the new CMS’ new risk-based survey program, 40 Ensign facilities across eight states – approximately 12% of Ensign’s eligible operations – received the new high-performing designation.
In Washington, 59% of eligible Ensign affiliates received the designation, which is nearly five times the state average, according to COO Spencer Burton.
Ensign reported earnings per share of $2.03, up 23.8% year over year, and revenue of $1.48 billion, up 14.5%. GAAP net income increased 24.4% to $104.3 million.
Ensign raised full-year 2026 adjusted EPS guidance to $7.94–$8.02, from $7.75–$7.85 and raised the lower end of revenue guidance to $5.89 billion while retaining the $5.92 billion upper end.
Ensign’s growing portfolio consists of 418 healthcare operations, 34 of which also include senior living operations, across 18 states. Ensign now owns 189 real estate assets, 150 of which are operated by an Ensign affiliate.
On Wednesday, shares of California-based Ensign closed at $184.11, up $14.61, or 8.62%.
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