Ensign to Expand in Home Health by Repeating Skilled Nursing Strategy

As The Ensign Group (Nasdaq: ENSG) continues to expand in home health, the provider is planning to follow the same strategy that has proven successful in building up its skilled nursing portfolio.

That means vesting significant power in local operators to make decisions, and targeting underperforming businesses for turnaround, Executive Vice President Chad Keetch said during a Wednesday presentation at Oppenheimer & Co.’s Annual Healthcare Conference in New York City.

“Skilled nursing is obviously still our core business, but we’ve also been growing recently in these other lines of business,” Keetch said, referring to private-pay senior living as well as home health.


The Mission Viejo, California-based company now has 5,084 independent and assisted living units, along with 24 home health and home care agencies and 22 hospice agencies. Those businesses account for about 15% of Ensign’s annual revenues; for comparison, the operator has 18,870 skilled nursing beds.

As part of a record-setting fourth quarter of 2017, Ensign’s home health and hospice revenue was up 27.5% year-over-year, reaching $39.7 million. Ensign has been steadily building up its Cornerstone home health and hospice segment since 2011.

At the same time, Ensign has continued building its skilled nursing portfolio, which now stands at 181 facilities, refining a strategy that it plans to keep executing on the home health and senior living sides. The company acquires facilities with lower star ratings, then installs new leadership — sometimes looking outside of the long-term care industry.


“They come to us with that experience, we teach them the health care side of things, and then empower them to run these businesses the way they should be run,“ Keetch said.

Ensign gives its local leaders wide latitude in establishing vendor relationships, setting wages, and managing staffing levels, which both the company and landlord CareTrust REIT, Inc. (Nasdaq: CTRE) have said helps the large-scale operator adapt to regional trends.

Keetch specifically pointed to statistics showing gains in SNF occupancy, skilled mix revenue, and EBITDAR margins in the first five quarters following Ensign’s acquisition of a property; for instance, occupancy typically increases by about 303 basis points.

The approach has played well with investors. The company’s share price was at about $18 last March, and at the close of Wednesday trading it stood at $27.98. Meanwhile, other providers in the SNF realm have fared poorly, hit by challenges in reimbursement, labor, and other areas. Shares in Kennett Square, Pennsylvania-based Genesis HealthCare (NYSE: GEN) have dropped from about $2.45 in March 2017 to around $1.60 currently. And Toledo, Ohio-based HCR ManorCare, another SNF giant, has entered Chapter 11 bankruptcy.

Keetch noted that pure-play assisted living and home health operators tend to trade at higher prices than players in the embattled SNF space — including Ensign. To combat that and potentially boost value, the company has begun reporting assisted living and home health results separately.

“We think there’s a lot of value there that we’re not getting,” he said.

Should the market not respond to those statistics, Keetch said the company is willing to “look at other strategic alternatives — that don’t include selling those businesses, by the way.”

Written by Alex Spanko and Tim Mullaney

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