The Ensign Group came out with its third quarter earnings on October 25, and the results were mostly positive. GAAP diluted earnings per share rose 12.1% over the previous third quarter to $1.11. However, that was off $0.01 compared with the second quarter. On an adjusted basis, EPS rose to $1.20 in Q3:23, up 15.4% from Q3:22 and up 3.4% from Q2:23. The company’s share price dropped by just 0.7% on a down day for the market.
Adjusted EBITDAR also increased to $158.4 million for the third quarter, or $633.6 million on an annualized basis. Revenues soared from $770 million in Q3:22 to $940.8 million in Q3:23 on the back of higher reimbursement, new acquisitions and increased census. Expenses also increased significantly, from $695 million to $860 million in the same period, with NOI ticking up $8 million to $64 million in Q3:23.
The same facility portfolio saw improvements in skilled services revenue, actual patient days and occupancy, as well. However, Ensign is dealing with an issue that is affecting most SNF providers today, which is the prevalence of managed care (Medicare Advantage) in its census. Those rates, averaging $546.36 per day for the same facility portfolio in Q3:23, fall well short of the $735.66 per day average for Medicare.
Yes, Medicaid pales in comparison (at $275.09 per day, on average), but most facilities rely on that Medicare rate to earn their profit. As a percentage of patient days, Medicare dropped from 13.6% in Q3:22 to 11.2% in Q3:23, and as a percentage of skilled nursing revenue, Medicare fell from 25.7% to 22.0% in the same period.
Meanwhile, in Ensign’s portfolio, Medicaid increased its share of skilled nursing revenue from 41.2% in Q3:22 to 43.6% in Q3:23, and the percentage of skilled nursing days jumped from 57.9% to 59.4%. Those are not good trends.
Ensign did see its occupancy rise, yet again, by 290 basis points over the prior year quarter to 79.5% for its same store portfolio. The same store portfolio census grew by 97 basis points sequentially, as well. Total facility occupancy currently stands at 78.9% based on operational beds.
Turning to acquisitions, the serial acquirer highlighted some recent acquisitions of the operations of three skilled nursing facilities in South Carolina and Kansas, plus the real estate acquisitions, through its REIT Standard Bearer, of four facilities in the western United States. Ensign’s CIO Chad Keetch added that “looking forward, we are poised to grow with over a billion dollars in dry powder for future investments,” as the company sees values drop amid the rise in capital costs. Keetch noted that Ensign’s overall strategy will continue to include both leasing and acquiring the real estate and that the company is actively looking for performing and underperforming operations in several states.
