The home health subsidiary of The Ensign Group dramatically increased earnings in the last year and demonstrated the value of home care in the increasingly integrated U.S. healthcare system, the company’s president and chief executive officer said Monday in announcing fourth-quarter results.
Cornerstone Healthcare Inc., the home health and hospice subsidiary of national post-acute provider Ensign, grew earnings by 97.8% year-over-year, reaching $10.2 million in the last quarter of 2014. This figure represents earnings before interest, taxes, depreciation and amortization.
Ensign recently has pursused an active acquisitions strategy, and in December finalized the purchase of a home health agency and private home care business from Shea Family Care in California.
Ensign did not disclose the purchase price of the deal, which also included assisted living facilities. But on Monday’s earnings call, President and Chief Executive Officer Christopher Christensen described the transaction as “one of our largest acquisitions to date.”
Christensen remarked that it has been about a decade since he has seen so many viable acquisition opportunities, and he said 2015 could be Ensign’s biggest year ever for purchases. If Christensen’s enthusiasm about the current home health operation is any indication, the company reasonably might be looking to expand further in this area.
“Even more important than the financial contribution, our home health, hospice and our other operations continue to strengthen our skilled nursing and assisted living operations in many ways that don’t show up in the financial statements, including helping us to seamlessly transition many of our residents into their homes and improving our organization’s reputation of quality in the healthcare community,” he said, according to a transcript of the earnings call posted by Seeking Alpha.
Christensen name-checked Puget Sound Home Health in Washington as a model. The provider grew earnings while hitting key quality measures, such as reducing rehospitalization rates. As a result, Puget Sound was chosen as a partner for an accountable care organization in the area—an important referral source.
Christensen’s statements support the idea that home health will continue to gain prominence as hospitals, physician groups and other provider types work together to hit quality targets tied to Medicare reimbursements under the Affordable Care Act.
The fourth quarter marked the first time that Ensign segmented its operations into discrete units: transitional, skilled nursing and assisted living, home health and hospice, and “all other.” This should provide greater transparency about results, Christensen said.
Overall, Ensign’s consolidated adjusted EBITDAR increased 8.5% year-over-year, to $44 million. Adjusted annual earnings per share was $2.18, at the midpoint of its guidance.
Written by Tim Mullaney